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Automobile March 2015
Automobile March 2015
Third-largest automobile
industry by 2016E
5%
8%
4%
0%
2010
2020
2010
2020
40
CAGR: 8%
30
20
28.8
16.9
10
0
FY14
FY21
FY14
FY21
15
CAGR: 18%
10
10.0
3.1
0
FY14
FY14
FY21
FY21
Source: IHS, (National Electric Mobility Mission Plan) NEMMP 2020, ACMA, Aranca Research;
Note: E Estimate
Growing
demand
Growing demand
FY13
Market
size:
USD67.7
billion
Innovation opportunities
FY16E
Market
size:
USD145
billion
Advantage
India
Rising investments
Policy support
21.5 million
units (FY14)
11 million
units (2007)
0.6 million
units (1992)
2008 onwards
19932007
0.4 million
units (1982)
198392
Before 1982
Closed market
Five players
Long waiting
periods and
outdated models
Sellers market
Sector de-licensed in
1993
Major Original
Equipment
Manufacturers (OEMs)
started assembly
operations in India
Imports permitted from
April 2001
Introduction of valueadded tax in 2005
Source: Tata Motors, Society of Indian Automobile Manufacturers (SIAM), Aranca Research
Notes: JV Joint Venture, GST: Goods and Service Tax
Automobiles
Two-wheelers
Mopeds
Scooters
Passenger vehicles
Passenger cars
Commercial vehicles
Light
commercial
vehicles
Utility vehicles
Electric twowheelers
Multi-purpose
vehicles
Passenger carriers
Goods carriers
Medium
and heavy
commercial
vehicles
Motorcycles
Three-wheelers
The gross turnover of automobile manufacturers in India expanded at a CAGR of 14.2 per cent over FY07-13
Excluding three wheelers, trucks accounted for the largest share of revenues (47.8 per cent in 2011)
80.0
66.3
70.0
50.0
40.0
20.4%
58.6
CAGR: 14.2%
60.0
67.6
Trucks
43.3
36.6
47.8%
33.3
30.5
Cars
30.0
Two Wheelers
20.0
31.8%
10.0
0.0
2007
2008
2009
2010
2011
2012
2013
15.7
15.5
18
13.4
16
16.9
10.5
14
6.5
8.4
7.6
8.5
10
8.0
12
Passenger Vehicle
Commercial Vehicle
Three Wheelers
3.1
3.2
FY12
FY13
0.7
0.8
FY11
0.8
0.8
FY10
0.8
0.8
0.8
FY09
0.8
0.6
0.6
3.1
2.4
FY08
1.8
FY07
0.4
0.5
1.3
1.6
0.6
0.5
FY06
1.3
0.5
0.6
FY05
0.4
0.4
0.4
0.4
1.2
3.0
FY14
Two Wheelers
Source: SIAM, Aranca Research
Note: CAGR Compound Annual Growth Rate
3.0%
3.0%
14.0%
Passenger Vehicles
Commercial Vehicles
80.0%
Three Wheelers
19.3%
29.4%
Passenger cars
Utility vehicle
LCV
70.6%
80.7%
15.3%
18.3%
5.9%
Mopeds
Goods Carrier
Motocycles
Passenger carrier
Scooters
81.7%
78.7%
Automobile export volumes increased at a CAGR of 17.5 per cent over FY0514
Two-wheeler segment reported the fastest growth (20.1 per cent) followed by three-wheelers (15.1 per cent) over FY0514
2.1
2.0
2.0
2.5
1.5
2.0
FY10
FY11
FY12
0.6
0.4
0.4
0.1
FY09
0.3
0.6
0.3
0.1
FY08
FY13
FY14
0.1
0.0
0.2
0.5
0.3
0.0
0.2
0.5
0.1
0.1
0.2
0.6
0.1
0.1
0.2
0.5
0.2
0.0
0.1
0.4
0.2
0.0
0.1
0.5
0.5
0.8
1.0
0.1
1.0
1.1
1.5
0.0
FY05
FY06
Passenger Vehicle
FY07
Commercial Vehicle
Three Wheelers
Two Wheelers
3%
Two Wheelers
11%
Passenger Vehicle
19%
Three Wheelers
67%
Commercial Vehicle
28%
30%
27%
25%
20%
12%
15%
10%
5%
4%
3%
4%
FY13
FY14
0%
FY09
FY10
FY11
FY12
FY09
Passenger Vehicle
7%
-6%
-20%
-11%
FY13
3%
16%
33%
28%
50%
33%
20%
25%
FY12
-20%
-40%
2%
-2%
5%
0%
3%
0%
0%
20%
0%
5%
40%
13%
60%
-33%
25%
33%
FY10
FY11
Commercial Vehicle
Three Wheelers
FY14
Two Wheelers
15.0
10.0
10.0
5.0
CAGR: 18%
5.1
3.1
FY14
FY14
FY16
FY16
FY21
FY21
3.0
2.4
CAGR: 19%
2.0
1.0
1.4
0.7
FY14
FY14
40.0
20.0
FY21
FY21
30.2
CAGR: 8%
30.0
FY16
FY16
21.0
17.7
10.0
FY14
FY14
FY16
FY16
FY21
FY21
Scenario
The Indian luxury car market expanded at a CAGR of 30 per cent, with 23,000 units in
2011 (about 1 per cent of the passenger vehicle market in India). The market is
dominated by players such as BMW, Mercedes, Audi, Jaguar. Audi sold 10,126 units in
2013-14, remaining the biggest luxury car seller over Mercedes-Benz which sold around
9,003 cars in in calendar year 2013
Key drivers
India has the worlds 12th-largest HNI population, with a growth of 20.8 per cent (highest
among the top 12 countries)
With expansion in the education and realty sectors, and increasing wealth of IT
professionals, more consumers aspire to own luxury cars
Affluent class of the country is driving the demand of the luxury cars
Notable
trends
The Indian luxury car market is estimated to expand at a CAGR of 25 per cent during
201220 and reach 150,000 units by 2020 (accounting for 4 per cent of the estimated 6.8million-unit domestic car market)
The luxury SUV segment is growing at about 50 per cent, while luxury sedans are
increasing 2530 per cent
Audi to launch A3 sedan later in the year
Source: World Wealth Report (2011) of Merrill Lynch Wealth Management and Capgemini, Aranca Research, News articles
Note: HNI - High Networth Individuals
The automotives industry is concentrated with leaders in each segment commanding a share of over 40 per cent
Market leader
Others
Passenger vehicles
45%
20%
10%
4%
63%
23%
7%
LCVs
59%
30%
4%
Three wheelers
41%
40%
10%
Motorcycles
59%
24%
7%
6%
Scooters
51%
21%
14%
10%
4%
Improving productdevelopment
capabilities
Large number of products available to consumers across various segments; this has
gathered pace with the entry of a number of foreign players
Reduced overall product lifecycle have forced players to employ quick product launches
Increasing R&D investments from both the government and the private sector
Private sector innovation has been a key determinant of growth in the sector; two good
examples are Tata Nano and Tata Pixel; while the former has been a success in India, the
latter is intended for foreign markets
Alternative fuels
In FY11, the CNG market was worth more than USD330 million; CNG cars and taxis are
expected to register a CAGR of 28 per cent over FY11FY14
The CNG distribution network in India is expected to increase to 250 cities by 2018 from
30 cities in 2009
Carmakers such as BMW, Audi, Toyota, Skoda, Volkswagen and Mercedes-Benz have
started providing customised finance to customers through NBFCs
Major MNC and Indian corporate houses are moving towards taking cars on operating
lease instead of buying them
Note: NBFCs - Non-Banking Finance Companies
Competitive Rivalry
Threat of New
Entrants
(Low)
Substitute Products
The threat from substitute products
continues to be low, with public
transportation
being
under
developed even in cities
Changing travel patterns and the
convenience give it an edge
Bargaining
Power of
Customers
(High)
Competitive
Rivalry
(High)
Bargaining
Power of
Suppliers
(Low)
Substitute
Products
(Low)
Capacity addition
Most of the big auto names in the World have their presence in the country, industry today
Every company wants to increase its capacity addition with Nissan and Mercedes to
increase their capacity in Chennai and Chakan respectively
Most of the companies eyeing India as an outsourcing hub. Cheap labor in India is giving
them an edge
Mahindra & Mahindra launched Verito Refresh, Quanto and Rexton in 2013
Tata unveiled three new models (including Zest and Bolt) after a span of nearly four years
Maruti unveiled Ciaz (Keeping India and Chinese markets in mind) and SX4 S-Cross
Marketing &
advertisement
Each and every firm is now focusing on shelling out a chunk of their profits on
advertisement
The idea is to make the customers more brand conscious and increasing brand
positioning
This is giving the firms differential advantage. Success today lies in structuring and
restructuring strategies
Growing demand
demand
Growing
Increasing
investments
Policy
support
Strong
government
support
Rising
investments from
domestic and
foreign players
Goal of
establishing India
as an automanufacturing hub
Rising income,
young population
Inviting
Resulting in
Greater
availability of
credit and
financing options
Strong growth in
exports
Greater product
innovation; market
segmentation
Demand projected
to remain strong,
making returns
attractive
60
273
222
26
80
50
15
32
40
40
29
35
25
20
0
322
12
2
1
2008
Globals (>18412.8)
Seekers (3682.5 - 9206.4)
6
3
2020
17
7
2030
Strivers (9206.4-18412.8)
Aspirers (1657-3682.5)
Deprived (<1657)
13.2
BMW, Audi, Toyota, Skoda, Volkswagen and MercedesBenz have started providing customized finance to
customers, dealers and suppliers through dedicated
Non-Banking Finance Companies (NBFCs)
11.7
9.3
7.7
9.0
12.9
12.0
6.0
3.0
2.5
2.6
2.7
1.9
1.5
0.0
FY09
FY10
FY11
FY12
FY13
Design and
engineering skills
Manufacturing
skills
Manpower
costs
Supplier
base
Raw
materials
Korea
China
East Asia
Thailand
Indonesia
Vietnam
Czech Republic
Romania
Poland
Central &
Eastern Europe
Slovakia
Russia
Hungary
Turkey
Brazil
Latin America
Mexico
Automatic approval for foreign equity investment up to 100 per cent; no minimum
investment criteria
Encourage R&D by offering rebates on R&D expenditure
AMPs vision is to make India a preferred destination for designing and manufacturing of
automobiles and achieve a market size of USD154 billion by 2016
Setting up of a technology modernisation fund focused on SMEs
Establishment of automotive training institutes, auto design centers and special auto parks
Automotive Mission
Plan (AMP) 200616
NATRiPs
Dept. of Heavy
Industries & Public
Enterprises
Set up at a total cost of USD388.5 million to enable the industry to be on par with global
standards
Nine R&D centers of excellence with focus on low-cost manufacturing and product
development solutions
Worked towards reduction of excise duty on small cars and increase budgetary allocation
for R&D
Weighted increase in R&D expenditure to 200 per cent from 150 per cent (in-house) and
175 per cent from 125 per cent (outsourced)
Proposal to allocate USD2.7 billion for JNNURM to bolster sales volumes of Medium and
Heavy Commercial Vehicles (MHCV). Relaxation of excise duty on small cars from 12 to 8
per cent bound to help the sector in the long run
Notes: SME Small and Medium Enterprises, R&D - Research and Development, NATRiP National Automotive Testing and R&D
Infrastructure Project, AMP - Automotive Mission, JNNURM - Jawaharlal Nehru National Urban Renewal Mission
Business description
Vehicles Research & Development
Establishment (VRDE), Ahmednagar
List of companies
North
DelhiGurgaon
Faridabad
West
MumbaiPune
Nashik
Aurangabad
Kolkata
Jamshedpur
East
Chennai Bengaluru
Hosur
South
Ashok
Leyland
Force
Motors
Piaggio
Ashok
Leyland
Bajaj Auto
FIAT
GM
Swaraj
Mazda
Amtek Auto
Eicher
Honda SIEL
Maruti
Suzuki
Tata Motors
Bajaj Auto
Hero Group
M&M
Eicher
Skoda
Bharat
Forge
Tata Motors
Volkswagen
RenaultNissan
M&M
Tata Motors
Hindustan
Motors
Simpson &
Co
International
Auto
Forgings
JMT
Exide
Ashok
Leyland
Ford
M&M
Toyota
Kirloskar
Volvo
Sundaram
Fasteners
Enfield
Hyundai
BMW
Bosch
TVS Motor
Company
RenaultNissan
FDI inflows in the automotives sector aggregated USD9.8billion (5 per cent of the total FDI) over April 2000 March 2014
DelhiGurgaon
Faridabad
1.4
1.2
1.2
1.5
FY13
FY14
1.2
0.9
1.0
Ahmedabad
1.5
1.3
0.8
MumbaiPune
Nashik
Aurangabad
0.6
0.4
Kolkata
Jamshedpur
0.2
FY09
FY10
FY11
FY12
Chennai Bengaluru
Hosur
Global car majors have been ramping up investments in India to cater to the growing domestic demand. Also, these
manufacturers plan to leverage Indias competitive advantage to set up export-oriented production hubs
Planning to double its current investment level of about USD2.5 billion over the next five years
Aims to raise its market share from 1.5 per cent in FY13 to 10 per cent by FY19
To increase the Chennai Plant capacity to 400,000 units a year in a few years time
Investing in Chennai and Sanand plants to raise capacity to 0.44 million cars & 0.61 million engines by FY14.
Bought 130 acres of land in Sanand, Gujarat
Long term strategy to export 25 per cent of vehicles and to make India compact car global production base
Is in the process of expanding its dealer network from 33 in January 2013 to 50 by 2014 end
Plans to raise the number of car offerings in the sub USD46,000 category
Plans to launch up to eight models over the next 56 years
Aims to invest USD460 million in Rajasthan plant by 2014 to build a new assembly line for cars
This will include a new diesel engine component production and a forging plant
Expects to invest another USD163 million at Bidadi plant near Bengaluru
Plans to increase capacity to 310,000 units by 2013 with an investment of USD187 million
Plans to invest USD552-737 million over the next two to three years to develop new products
Plans to infuse USD46 million to double India capacity to 20,000 vehicles by the end of CY13
Expansion of MIDC and MoU, and to invest USD244 mn for capacity expansion in Chakan, Pune
Source: Respective company websites, News articles, Aranca Research
government; setting up of
NATRiP centres
Private players, such as
Hyundai, Suzuki, GM, keen to
set up R&D base in India
Strong education base, large
skilled English-speaking
manpower
Comparative advantage in
terms of cost
Firms both National and
Foreign are increasing their
footprints with over 1,031
centers
Continuing market
leadership
Accounted for 45
per cent share in
the Indian car
market
Product portfolio
expansion
2013-14
Total sales
crossed 1.15
million units
Product portfolio
comprising 16
passenger vehicle
models
Increased
productivity
Enhanced R&D
capability
Capacity
expansion
Roll-out of peoples
car (Maruti 800)
1983
1994
1997
2001
2011
Roll-out of 10
millionth car
In the process of
establishing
Suzukis largest
R&D facility
outside Japan
1994
Production of
1 millionth car
2004
2006
2007
Plans to setup
two facilities
in Gujarat
2008
2009
2010
2011
2012
2013
2014
Production of
first
indigenously
designed LCV
JV with
Daimler AG
Disruptive innovation
Market expansion
Launch of the
first
indigenous
CV
Product portfolio
expansion
Establishment
of Tata
Engineering &
Locomotives
Introduction
of
Megapixel,
an electric
vehicle
Acquisition
of Jaguar
and
Landrover
Launched
Indica, India's
first fully
indigenous
passenger car
Enhancing
R&D capability
Acquisitions
Acquired
stake in
Hipo
Carrocera
SA
Unveiled
three new
models in
2014
Launched
Tata Nano
Joint Ventures
1945
1954
1961
1977
1982
1986
1991
1998
2005
2008
2010
2012
2013
2014
200405
44.81
200506
44.14
200607
45.14
2005
45.55
2006
44.34
2007
39.45
2008
49.21
2009
46.76
200708
40.27
200809
46.14
2010
45.32
200910
47.42
2011
45.64
201011
45.62
2012
54.69
2013
58.44
201112
46.88
Q12014
61.58
201213
54.31
Q22014
59.74
201314
60.28
Q32014
60.53
India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared
This presentation is for information purposes only. While due care has been taken during the compilation of this
presentation to ensure that the information is accurate to the best of Aranca and IBEFs knowledge and belief, the
content is not to be construed in any manner whatsoever as a substitute for professional advice.
Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in
this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of