Market Outlook For Commercial Vehicles

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 Table of Contents

Introduction
Drivers, Challenges and Restraints
The Commercial Vehicles Market in India versus Rest of World
Medium and Heavy Duty
Light Commercial
Industry Trends
Engine Suppliers
OEM Manufacturers
End Users
Conclusion
Q&A

2
 Introductions to the Power Systems
Research Team

3
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5
 Market Forces Influencing Commercial
Vehicles Growth in India

6
 Forces Influencing Production and Demand
Drivers
Economic Situation GDP, Capital Spending, Consumer Confidence, Capacity Utilization
Increased Urbanization
Infrastructure Spending
Freight, Transportation & Technology Improvements
Energy Demand Natural Gas
Emission Regulation
Challenges
Total Cost of Ownership
Fuel Economy
Pricing for a new truck
Resale value
Replacement Cycles
Manufacturing Capacity - Global OEMs
Restraints
Threat of Substitutes - Rail
Government Stability and Spending
Monitoring Compliance

7
 Drivers Economy
Annual Compound Gross Domestic Product (GDP)
India GDP 2011 2012 2013 2014 2015 2016 2017 2018
Country 2000 - 2007 2008 - 2012 2013 - 2018
% 6.3 3.2 3.8 5.1 6.3 6.5 6.7 6.7
India 7.2% 6.5% 5.8%
World 4.2% 2.9% 3.8% Source IMF

USA 2.7% 0.8% 2.9%

Canada 2.8% 1.2% 2.2% India Purchasing Managers Index

European Union 2.7% -0.1% 1.4% 80.0

70.0
Asia Pacific (Rest) 8.5% 7.8% 6.6% 60.0
Japan 1.5% -0.1% 1.3% 50.0
China 10.5% 9.3% 7.1% 40.0
CIS 7.6% 2.4% 3.4% 30.0
20.0
Latin America and 10.0
the Caribbean 3.6% 3.3% 3.4% 0.0

Dec-05

Aug-06
Dec-06

Aug-07
Dec-07

Aug-08
Dec-08

Aug-09
Dec-09

Aug-10
Dec-10

Aug-11
Dec-11

Aug-12
Dec-12

Aug-13
Dec-13
Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Apr-12

Apr-13
Middle East and
North Africa 5.8% 4.4% 3.8%
Sub-Saharan New Export Orders Index New Orders Index
Africa 5.9% 4.9% 5.6%
Source: Markit / Economics Limited / HSBC India
Source: IMF Manufacturing PMI

India GDP growth is forecast to grow at a 5.8% CAGR up to 2018

This is well above the world average over that period
However recovery is weak and uneven in the short term when we look at the most recent PMI survey,
export and the new orders index fluctuated throughout 2013.
The market remains cautious.
In the next five years, Indian GDP growth is unlikely to reach pre-2008 rates.
8
 Drivers - Emissions Regulation
Segment 2005 2010 2013 2014 2015 2016 2017 2018 2019
India BS III BS IV BS IV BS V

China NS IV NS V

Proconve P7
Proconve/ Euro IV not
Brazil Euro V
Euro 3 (2006) implemented
(2012)
CO2
US EPA 10 EPA 16 EPA 2017
standard

Europe Euro VI GHG

As in the other key markets, implementation and monitoring of regulations will drive
growth. India lags behind China but will catch up in 2018 or 2019

USA & Europe are at the Euro VI stage. The first ever fuel standards to reduce Green
House gases and improve fuel economy will be implemented

BS IV (Euro IV) norms implemented in October 2010 in thirteen cities and plans to expand
to 50 cities by 2015. The Indian Foundation of Transport Research and Training claims
more than 99% of trucks and buses are violating BS-IV norms.

BS IV fuel requirements have been implemented by all oil companies. Now the focus will
be on logistics.

BS V implementation will probably beyond 2020.

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 Drivers - Natural Gas Prices ($/MMBtu)

13.4

8.0 8.4

5.6
4.4 4.2
3.5

Europe US India India 2015 Brazil Russia China

Today natural gas pricing in India is competitive versus other key markets
India natural gas prices are due to double in 2015 and increase to US$8.4 by 2016/2017
Natural gas will be increasingly significant in the fuel mix as Indian demand for energy grows
Advantages: there are available resources, proven compliant technology to meet emission
standards
Disadvantages: power is lower compared to diesel, pricing policy remains uncertain, lack of
infrastructure outside urban areas
10
 Drivers - Infrastructure

Infrastructure Investment and development

remain positive in the short, medium and
long term

Indias 12th Five Year Plan targets

infrastructure investment to 9% of GDP

In November 2013, the World Bank

approved a US$500 million loan for the
National Highway Interconnectivity Project
in three states

The National Highways and Development

Projects initiatives is in seven phases

Availability of infrastructure provides good

prospects for growth in commercial vehicles
across the country

The risk is delays in projects, lack of

investment and political uncertainties

11 Source : NHAI
 Drivers Infrastructure Progress
Number NHDP Phase Length (km) Status Start Completion
NHDP Projects divided into
5,846 km
1 Phase I Fully complete Dec-00 Dec-06 seven phases
(3,633 mi)
7,300 km
Yellow Highlighted Still in
2 Phase II Award in progress Dec-03 Dec-09 progress versus schedule.
(4,500 mi)
4,000 km
3 Phase III A Already identified Mar-05 Dec-09
(2,500 mi)
6,500 km 5700 km of GQ + 800 km to be
4 Phase V Nov-05 Dec-12
(4,000 mi) identified
6,000 km
5 Phase III B Already identified Mar-06 Dec-12
(3,700 mi)
6 Phase VII A 700 km (430 mi) Ring roads to be identified Dec-06 Dec-12
5,000 km
7 Phase IV A To be identified Dec-06 Dec-12
(3,100 mi)
8 Phase VII B Ring roads to be identified Dec-07 Dec-13
5,000 km
9 Phase IV B To be identified Dec-07 Dec-13
(3,100 mi)
10 Phase VI A 400 km (250 mi) Already identified Dec-07 Dec-14

11 Phase VII C Ring roads to be identified Dec-08 Dec-14

5,000 km
12 Phase IV C To be identified Dec-08 Dec-14
(3,100 mi)
13 Phase VI B 600 km (370 mi) To be identified Dec-08 Dec-15
5,000 km
14 Phase IV D To be identified Dec-09 Dec-15
(3,100 mi)

12
Source : NHAI and WIKI
 Challenges Total Cost of Ownership
Fuel Prices (INR) Freight

Indian Road Freight Cost Index

90
80 190 175 176 177 178
70 180 171 172 174
165 167
60 170
50 160
40 150 140
30 140 127
20 130 123
10 114
120 107 110
110
100

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Petrol Diesel CNG
Source : TCIL and PSR assumptions

The Indian Road Freight Cost Index has been creeping up year on year and this trend is expected
to continue into 2014/15.
The Index is a composite which includes fixed and variable costs including fuel cost per trip
per tonne, toll tax, max tonnage and minor repair eg. puncture costs.
Increases in fuel prices and road freight cost explain the cautious outlook in the short term.
In the medium term, introduction of emissions regulated trucks will increase new truck prices.
These factors are increasing total cost of ownership.

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 Drivers Summary
Manufacturers, Fleet Operators, Owner drivers continue to focus on reducing cost of ownership

Manufacturers Fleet Owners

Improve Vehicle Price of a New

Profit Margins Truck and Resale
Value

Extended Service Emissions

Intervals Regulations Driver Cost Fuel Cost

Low Cost
Fuel Technology Repair,
Components Warranty
Diesel, Natural Gas, Maintenance
Design for Fuel Other Alternatives
Economy

In summary, the key drivers which will shift the dynamics and composition of the India commercial
vehicles market are - improved infrastructure, better road regulation, tightening emissions norms
and improved cost of ownership.
Like the regulated markets of Europe, USA, BSV compliant product will be designed to improve
fuel economy.
14
 Global Truck Market Outlook

15
 Global Medium-Heavy Vehicles Production Outlook
000s units 7,000 Global Production
India Rest of World
6,000

5,000

4,000

3,000

2,000

1,000

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: OE LinkTM 2014

Global Medium and Heavy Vehicles Production is expected to grow in line with
economic conditions at a 5 Year Compounded Growth Rate of 3%.
Production will increase from 5.6 million units in 2014 to 6.4 million units in 2019.
India represents 6% of global truck production today and will increase to 9% of total
global production by 2019.
16
 Global Medium and Heavy Truck Production
2014 Production 5 YR Compound Annual Growth Rate
Brazil
4% 2009 2014 2019
Rest of
World
27% Global 3% 8% 3%

India -2% 6% 11%

China
38% China 24% 2% 2%

India Brazil 5% 9% 1%
6%
Russia and
-9% 19% 5%
Belarus
Western
Europe Indonesia
10% United Russia 3%
States 2%
10%
Source: OE LinkTM 2014

China dominates global market share and represents 38% of global production.
The pace of growth will remain uneven across all markets. USA and Western Europe
will be lower versus India, Indonesia and Russia.
The prospects for India amongst the BRICS are optimistic.
Overall the future Medium and Heavy production prospects look bright for India. We
are forecasting growth to expand from a 6% CAGR to 11% in the next five years.
17
 India Truck Production By Gross Vehicle Weight
GVW as % of total production
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

3.51-6.0 tonnes (Class 3) 6.01-10.0 tonnes (Class 4 & 5) 10.01-12.0 tonnes (Class 6)
Source: OE LinkTM 2014
12.01-16.0 tonnes (Class 7) 16.0+ tonnes (Class 8) Bus and Motor Home Chassis

The 16t+ segment is forecast to grow to 279K units by 2019.

We are expecting some shifts in demand from 3.5 6 tonnes to less than 3.5t ie. into the
Light Commercial Vehicles segment.
Exports represent 10% of total truck production today and are forecast to double in the
next five years.
Key export markets include Sri Lanka, Bangladesh, Uzbekistan, Middle East and Africa
and others where unregulated product can be sold.
18
 Light Commercial Production in India (0-3.5t)

Light Commercial Vehicles 000s Units 2014 2019 5 YR CAGR

0-3.5 tonnes
800000 LCV (Light
700000 Commercial 560 687 4%
600000 Vehicles)
500000
400000 Minivans 315 372 3%
300000
200000
Sports Utility
100000 664 850 5%
0
Vehicles
2009 2014 2019
Source: OE LinkTM 2014

The Light Commercial Vehicles segment is forecast to grow to 687K units by 2019.
Other light duty segments such as Minivans an SUVs are also expected to remain
strong.
Customers will increasingly shift from Medium Duty to Light Commercial Vehicles.
The key drivers are increased urbanization, hub and spoke type logistics, competitive
pricing and driver regulations.

19
 Production By Fuel Type
Production By Fuel Type and Segment - 2014
100% 3% 0.01%
90%
80%
70%
60%
50%
40% 2%
30%
20%
10%
0%
Medium and Heavy Duty Light Commercial Vehicles Minivans and SUVs

Diesel Natural Gas Gasoline LPG

Source: OE LinkTM 2014
97% of Truck Production is Diesel
Diesel fueled engines dominate medium and heavy truck and light commercial
production.
Within the Minivans and SUV segment both diesel and gasoline are popular.
In 2014, natural gas engines represent around 3% of total Medium and Heavy
Truck production.
Most of this growth is in transit buses. We expect natural gas penetration to
increase by 5% for buses and trucks.
Increases are highly dependent on the availability of natural gas fuel at a
competitive price and in line with infrastructure development. Currently only
20 available in major cities.
 Medium and Heavy Truck Production By OEM Parent
OEM Parent Name OEM Brand
Tata Group
47% Asia Motor Works AMW
Beiqi Foton Motor Company Beiqi Foton
Volvo AB Bharat Benz
21% Daimler AG Mercedes-Benz
Mitsubishi Fuso
Force Motors LTD Force
Ashok Leyland
Hinduja Group
Nissan
Force Motors LTD Kamaz, Incorporated KAMAZ
0.56%
Mahindra Group Mahindra
Sumitomo Corporation Swaraj
Tata Group Tata
Others (Ros Roca, Hinduja Group MAN
Nissan, DRB, 21% Volkswagen AG.
Scania
Daewoo, Severnaya)
1% Eicher
Mahindra Group Volvo AB
Sumitomo Volvo
Asia Motor Works Daimler AG Corporation 3%
2% 2% 3%

The market is concentrated with the top three players Tata, Volvo, Hinduja making up 89% of total
production
Mahindra, Sumitomo, Daimler and Asia Motor Works each have 2-3% share.
Double digit compounded growth rates are projected for Tata, Daimler, Asia Motor Works and the
Hinduja Group.
Volvo, Mahindra, Ros Roco and Sumitomo are also expected to strengthen in the next five years
21
 Medium and Heavy Truck Production Capacity

Since 2012 we have seen OEMs and

Engine Suppliers expanding
manufacturing capacity across all on-
highway segments

22
 Global OEMS Expansion Plans In India
First manufacturing facility in Naraspura, Bangalore. Two manufacturing units one for truck assembly and another for
buses. Truck production began in June 2013, rolling out two trucks per day and 30 trucks per month. Bus production expected
to start mid 2014. Currently employs 190 with plans to expand workforce to over 800 people over the next five years.
Heavy truck segment focus 16 to 49 tonnes
Presence since 2008 but local production started in 2012. Bharat Benz vehicles are manufactured at the Chennai production
facility in Southern India, opened in April of 2012. By 2014, they aim to launch a total of 17 truck models between 7 and 49t.
Bharat Benz 3123 won the "Best Rigid Haulage Truck of the Year" the brand won the "CV of the Year" award.

Volvo-Eicher, announced further expansion of their Bangalore bus plant and Pithampur truck plant.. This is to double both truck
and bus capacity in the next few years. Current truck production capacity is 48,000 units per year and geared up to produce
Euro 3, 4, 5 & t4 engines. Plans are to export 60% of the medium duty engines from the Pithampur plant into rest of Asia,
Middle East and Africa.

Volvo is also bringing in the UD Truck. This will be for on and off highway applications. The final production of these trucks is
under development in Thailand, India and China

Present since 2006, fully owned from 2012 as MAN Trucks India Pvt. Ltd. The company has a manufacturing facility in Pithampur,
Madhya Pradesh, installed capacity of 24,000 trucks per year. Manufacture of heavy MAN CLA Trucks for the Indian Market and
for export to Asian, African and CIS. The range of products manufactured includes Mining & Construction Tippers, Haulage
Tractors and Multi Axle Trucks, from 16 t GVW to 49 t GCW as well as 16 tonne bus chassis for left hand and right hand drive.

In May 2011, Beiqi Foton announced plans to manufacture trucks in Pune, India. However since theres been limited news.
The first vehicle should be rolled off the line from April 2015. These products are primarily targeted for the India, Srilanka
and Bangladesh markets.

KVML is a joint venture company between Kamaz Inc. and Vectra Group (Tatra Trucks Limited). Established the
operation in Bangalore in 2010. There is limited manufacturing of heavy trucks although capacity to produce up to
5000 trucks. The product is traditional Kamaz design which includes the 8x4 and 6x4 construction trucks.

SML Isuzu Limited (Formerly Swaraj Mazda Ltd.) established since 1983. is a joint venture between Japans Mazda Motor
Corporation and Sumitomo Corporation. Product range above engine displacement 3.45 litres mainly buses, ambulances, and
customized vehicles. The company employs over 1,500 people. Planning on investing Rs 3,000 crore at its manufacturing plant
in Andhra Pradesh over the next five years.

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 Local OEMs Expansion Plans
Tata Motors is the market leader. Total India production above 3.5t is around to 167,000 trucks per year.
Their commercial vehicle market with a 60% share. The Tata-Cummins Ltd .joint-venture produces 100,000
Euro 3-compliant B-Series engines annually which are supplied to Tata Motors.
The new Prima platform vehicles are fitted with 200 to 500hp Euro 3-compliant engines competes with Daimler,
Volvo and MAN emissionized products. Their existing platforms will be discontinued as Euro IV is implemented
Two key manufacturing hubs in India Jamshedpur and Pune.
Launching new global platforms
.
Ashok Leyland produce around 130,000 trucks and buses above 3.5 tonnes in Hosur or Uttarkhand. They are
the market leader n the bus chassis segment. In major Indian cities, 80% of all public transportation buses carry
the Ashok Leyland badge.
In January 2008, they announced its development of India's first compressed natural gas (CNG) bus engine that
met Euro 4 emission requirements.
In March 2009, Ashok Leyland announced the development of a BS-4 hythane engine, which is a combination of
natural gas and hydrogen for initial usage on bus applications.

Mahindra and Mahindra produce trucks and buses above 3.5 tonnes in Chakan, Pune. In December 2012, M&M
purchased their joint venture partner- Navistars stake from two joint ventures Mahindra Navistar Automotive Ltd
(MNAL) and Mahindra Navistar Engines Ltd (MNEPL) for Rs 175 crore. MNAL forecasts truck and bus
production will get to 40,000 trucks by 2014.
Mahindra's current market share in LCV is 10% and HCV is 3%.

AMW Motors (AMW) is India's third largest fastest growing manufacturer of heavy commercial
vehicles. Located in Bhuj, Gujarat, they produce trucks ranging from 16 to 49 tons and has pioneered
several segments in the Indian CV market and in India with an annual volume growth of over 100% for
the last three years. Around 5200 trucks produced in 2013.

24
 Top Engine Suppliers By GVW (tonnes)
0-3.5 (LCV only) 3.51-6.0 6.01-10.0 10.01-12.0 16.0+
Tata Motors Tata Motors Tata Motors Eicher Motors Tata Cummins
Mahindra & Mahindra Ltd Mahindra & Mahindra Ltd Eicher Motors Ashok Leyland Tata Cummins Ashok Leyland
Beiqi Foton Cummins
Ashok Leyland Engine Co. Ltd SML Isuzu Limited Tata Motors Doosan Infracore Co. Ltd Eicher Motors
Beiqi Foton
Cummins Engine
Force Motors LTD Force Motors LTD Co. Ltd Mitsubishi Motors Mercedes

Mahindra & Beiqi Foton Mahindra Navistar Engines

Greaves Cotton Limited Eicher Motors Mahindra Ltd Cummins Engine Co. Ltd Ltd.

Ford Motors FPT Industrial Tata Cummins SML Isuzu Limited MAN Truck & Bus AG

Hindustan Motors Nissan Motor Tata Cummins Cummins Engine Company

SML Isuzu Limited Volvo
Kamaz Inc.
Scania
FPT Industrial

000s unit

Tata and Tata-Cummins dominate engine 200 16t+ Production By Engine Supplier
supply for light, medium and heavy trucks 150
2014 2019

in India.
100
Many global players now have product
50
available in the 16t+ segment. Their
presence is expected to increase due to 0

emissions advanced technology

requirements in the next five years

25
 Engine Trends

26
 Engine Trends
Low Cost Production and Sourcing
Global OEMs with emissions compliant products are strengthening their presence.
This has improved vehicle quality and increased competition with traditional Indian
OEMs.
Locally manufactured engine blocks are being exported globally or finished in
regional markets.

The market shift is two pronged:- there is a shift to higher tonnage tractors with four
axles and to lower tonnage light commercial.
Transition toward tractor trailer combinations.
Higher power-to-weight ratio vehicles.
Tipper market will account for a larger portion of demand.
Automated Manual Transmissions (AMT) will play a key role moving forward.

Adoption of natural gas engines will continue to increase.

Fueling infrastructure needs to expand.
Best opportunity is in the bus and light commercial vehicle segments (near
refueling terminals).
Higher up-front engine cost but lower fuel cost.
No after treatment required for compliance.

27
 Natural Gas Prospects: Six Stars Alignment

PROVEN TECHNOLOGY

OPERATIONAL COST INFRASTRUCTURE

GLOBAL TRENDS

LEGISLATION GOVERNMENT INCENTIVES

If all these stars align the prospects for natural

28
gas product uptake will be even higher
 Major Engine Models launched

Ashok Leyland Daimler

Introduced the 5 and 8 The 6.4 litre OM906
litre Neptune engine assembled and
in 2012. installed on Bharat-
Benz trucks.
Tata Cummins
Volvo
Produce 5.9 litre B
series engines. Global medium engine
platforms.
Will likely upgrade to
the ISB 6.7 litre during Produce the 5 and 8
the next few years. litre engines.

29
 In Summary
The outlook for the Indian Commercial Vehicles market remains optimistic in the next
five years with a 11% CAGR forecasted until 2019.
By the end of 2019, the market will have evolved significantly in line with improved
infrastructure, tightening emissions and improved total cost of ownership
Products will be designed to improve fuel economy
Product will be manufactured for both the domestic and lagging regulated export
markets of Africa, Middle East, Sri Lanka, Uzbekistan and Bangladesh.
The market dynamics are expected to shift to the 16t+ and Light Commercial vehicles
segments.
Global and local manufacturers have increased capacity to fulfil market expansion.
Natural gas penetration will continue in line with infrastructure development but
primarily in bus and urban related applications.
Implementation and enforcement of regulations will have an impact on new product
pricing which will put further pressure on fleet owners.
Expect competition to increase as global OEMs launch products and establish
distribution particularly in the 16t+ segment.
Improving the cost of ownership through low cost product technology advancements
and after sales service will remain critical factors to success.

30
 Q&A

31
 Kamini PATEL
Sunil KULKARNI
Chris FISHER
Carlos BRIGANTI
www.powersys.com
infoin@powersys.com

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