India's Automotive

Industry
Necessary steps on our way to global
excellence

February 4, 2014
About ASSOCHAM (1/3)

The knowledge architect of corporate India

Evolution of value creator
ASSOCHAM initiated its endeavor of value creation for Indian industry in 1920. Having in its fold more than
400 chambers and trade associations, and serving more than 4,50,000 members from all over India, it has
witnessed upswings as well as upheavals in the Indian economy, and has played a catalytic role in shaping
the trade, commerce and industrial environment of the country.
Today, ASSOCHAM has emerged as the fountainhead of knowledge for Indian industry, which is all set to
redefine the dynamics of growth and development in the technology driven cyber age of the knowledge
based economy. ASSOCHAM is seen as a forceful, proactive, forward-looking institution equipping itself to
meet the aspirations of corporate India in the new world of business. It is working towards creating an
environment conducive for India business to compete globally.
ASSOCHAM derives its strength from its promoter chambers and other industry and regional chambers and
associations spread all over the country.
Vision
Empower Indian enterprises by inculcating knowledge that will be the catalyst of growth in the barrierless
technology driven global market and help them upscale, align and emerge as formidable players in their
respective business segments.
20140204_AssoCham_final.pptx 2
About ASSOCHAM (2/3)

Mission
As a representative organ of corporate India, ASSOCHAM articulates the genuine, legitimate needs and
interests of its members. Its mission is to impact the policy and legislative environment so as to foster
balanced economic, industrial and social development. We believe education, IT, BT, health, corporate social
responsibility and environment to be the critical success factors.
Members: Our strength
ASSOCHAM represents the interests of more than 4, 50,000 direct and indirect members across the country.
Through its heterogeneous membership, ASSOCHAM combines the entrepreneurial spirit and business
acumen of owners with management skills and expertise of professionals to set itself apart as a chamber
with a difference.
Currently, ASSOCHAM has more than 100 national councils covering the entire gamut of economic activities
in India. It has been especially acknowledged as a significant voice of Indian industry in the field of corporate
social responsibility, environment and safety, HR and labour affairs, corporate governance, information
technology, biotechnology, telecom, banking and finance, company law, corporate finance, economic and
international affairs, mergers and acquisitions, tourism, civil aviation, infrastructure, energy and power,
education, legal reforms, real estate and rural development, competency building and skill development to
mention a few.

20140204_AssoCham_final.pptx 3
About ASSOCHAM (3/3)

Insight into new business models

ASSOCHAM has been a significant contributory factor in the emergence of new-age Indian corporates,
characterised by a new mindset and global ambition for dominating international business. The Chamber has
addressed itself to key areas such as India as an investment destination, achieving international
competitiveness, promoting international trade, corporate strategies for enhancing stakeholder value,
government policies in sustaining India's development, infrastructure development for enhancing India's
competitiveness, building Indian MNCs and the role of the financial sector as the catalyst for India's
transformation. ASSOCHAM derives its strengths from the following promoter chambers: Bombay Chamber
of Commerce and Industry, Mumbai; Cochin Chambers of Commerce and Industry, Cochin; Indian
Merchant's Chamber, Mumbai; Madras Chamber of Commerce and Industry, Chennai; PHD Chamber of
Commerce and Industry, New Delhi and has over 4 lakh direct and indirect members. Together, we can make
a significant difference to the burden that our nation carries and bring in a bright, new tomorrow for our
nation.

20140204_AssoCham_final.pptx 4
About Roland Berger

Company profile
Roland Berger Strategy Consultants, founded in 1967, is one of the world's leading strategy consultancies.
With around 2,700 employees working in 53 offices in 36 countries worldwide, we have successful
operations in all major international markets.
Roland Berger Strategy Consultants advises major international industry and service companies as well as
public institutions. Our services cover all issues of strategic management – from strategy alignment and new
business models, processes and organizational structures, to technology strategies.
At Roland Berger, we develop customized, creative strategies together with our clients. Providing support in
the implementation phase is particularly important to us, because that's how we create real value for our
clients. Our approach is based on the entrepreneurial character and individuality of our consultants – "It's
character that creates impact".
In India, Roland Berger operates from offices in Mumbai, Delhi-NCR and Pune.

Office Mumbai Office Delhi-NCR Office Pune

VIBGYOR Tower, 7th Floor, Level 18, DLF Cyber City, 402, Alaina Building, 4th Floor
Plot No. C-62, BKC, Bandra (E) Building No 5, Tower A, DLF Phase III Lane 8, Koregaon Park
Mumbai – 400 051 Gurgaon – 122 002 Pune – 411 001

20140204_AssoCham_final.pptx 5
Message from Secretary General, ASSOCHAM

The present poor state of Indian automotive industry is a huge concern to not only the industry, policy makers but also to
the nation as a whole. Given the extensive forward and backward linkages that this sector enjoys, it is necessary for all
the stakeholders to seriously apply themselves to meet the challenge. ASSOCHAM, India's Apex Knowledge Chamber,
responds to this challenge by forming an exclusive 'ASSOCHAM National Council' on Automotive Industry'.
The National Council, with the inputs of stakeholders, has prepared a pragmatic roadmap. The Apex Chamber is pleased
to inform that a 'World Auto Congress' is being organised by it to deliberate on the theme of 'Automotive Industry:
Developing an Indian Model for Excellence'.
In this endeavor, ASSOCHAM has received good support from the Government. The Apex Chamber would like to place
on record its appreciation and regard for particularly, Dr. Sutanu Behuria, IAS, Secretary, Ministry of Heavy Industry &
Public Enterprises, Government of India.
The Apex Chamber would like to thank Dr. Wilfried Aulbur, Managing Partner, Roland Berger Strategy Consultants for his
support in bringing out a very relevant publication at this juncture.
I, on behalf of ASSOCHAM, take pleasure in inviting the inputs and active participation of all the concerned members in
finding out appropriate solutions and taking them up with the Government from time to time.

D. S. Rawat
Secretary General
Email: d.s.rawat@assocham.com ; Website: www.assocham.org
The Associated Chambers of Commerce & Industry of India
ASSOCHAM Corporate Office: 5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021
Tel: 011-46550555 (Hunting Line) Fax: 011-23017008 / 9
20140204_AssoCham_final.pptx 6
Message from Secretary, Ministry of Heavy Industries
and Public Enterprises
I am very happy to note that The Associated Chambers of Commerce and Industry of India (ASSOCHAM)
is organizing the WORLD AUTO CONGRESS to identify the challenges and emerging opportunities in the
Automobile sector on Tuesday February 4, 2014 in New Delhi.
While most of the leading global Auto companies have their presence in the Indian market, the Industry is
currently facing some challenges, yet is poised for higher growth in the coming years. Indian OEMs also
need to gear up to tackle challenges of stringent emission norms, skilled manpower, safety norms in
vehicles etc. I strongly believe that Indian Automobile Sector is one of the examples of successful
manufacturing success story in the country and ultimately becoming an export hub for the Automobile and
Auto Component sector.
I deeply appreciate the initiative taken by ASSOCHAM to promote the Automobile Sector. I am sure that the
ASSOCHAM will continue to engage in providing an effective forum to facilitate dialogue between
Government, the Auto Industry and other Stakeholders for ensuring resurgence and growth of Auto sector
as a whole.
I convey my good wishes for the success of World Auto Congress.
Dr. Sutanu Behuria
Secretary
Ministry of Heavy Industries and Public Enterprises
Department of Heavy Industry, Government of India

20140204_AssoCham_final.pptx 7
Message from Managing Partner, Roland Berger Strategy
Consultants
The automotive industry plays a key role in terms of employment and knowledge creation around the world.
Time and again, the automotive industry has generated a virtuous cycle, enabling more and more people to
buy the products that they themselves produce.
It is hardly surprising that key industrial nations such as Germany, Japan or Korea have taken active steps
in enabling their national automotive industry to succeed on a global scale. Infrastructure that was put in
place helped automotive exports as well as the countries at large. Knowledge partnerships drive innovation
and leverage co-operation with universities. Labor flexibility safeguards jobs for many even in the face of
manufacturing competition from China.
Many emerging countries realize the potential that the industry holds. Brazil focuses on innovation and
local value addition via tax-based incentives. South Africa upgrades its port infrastructure to become a
global vehicle export hub. The list of examples is long and growing.
In the light of these developments, it is imperative that the Indian government develops a long-term,
sustainable policy for the automotive industry that is diligently and fully executed. This is an area where
ASSOCHAM and its National Automotive Council aim to work with the government to create sustainable
and positive change.

Dr. Wilfried G. Aulbur, Managing Partner

Roland Berger Strategy Consultants Pvt. Ltd.
Mobile: +91 99 206 30131
Email: wilfried.aulbur@rolandberger.com
20140204_AssoCham_final.pptx 8
Contents Page

A. The Global Automotive Industry – Zooming Ahead 10

B. Reforms, Commitment and Social Cohesion Matter 23

C. Hyundai Motors – Leveraging "Buy Korean" 35

D. India's Automotive Industry is at a Crossroad 41

E. Roland Berger Strategy Consultants 45

This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation. It may
not be passed on and/or may not be made available to third parties without prior written consent from Roland Berger Strategy Consultants. RBSC does not assume any responsibility for the completeness
and accuracy of the statements made in this document.

© Roland Berger Strategy Consultants 20140204_AssoCham_final.pptx 9

A. The Global
Automotive Industry
– Zooming Ahead

20140204_AssoCham_final.pptx 10
The global automotive industry: A growth story lasting more than
125 years! Much cooler than IT!
Global sales of passenger vehicles1) [million vehicles]
FORECAST

96.2
92.0 +4.6%
86.9 +5.9%
79.5 +3.0% 81.9 +6.0%

72.5 +4.4% 75.6 +5.2%

69.5 -5.0% +4.5% 47.3
H2 (Jul-Dec)

66.0 -3.3% 63.8 +13.5%

+5.8% 45.3
+5.7% 42.8
40.5
37.7 +4.1% 39.2 +3.1%
36.5 +3.4%
34.4 -11.7% 30.3
+10.3% 33.5 +9.0%
H1 (Jan-Jun)

+5.9% 46.7 +4.7% 48.9

37.9 +6.2% 40.3 +3.0% 41.5 +6.3% 44.1
35.2 +1.6% 35.7 -14.9% 30.4 +18.5% 36.0 +5.3%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1) Including light commercial vehicles

Source: IHS; Roland Berger 20140204_AssoCham_final.pptx 11

Global light vehicle sales recovered after the crisis –
Much faster than expected! The jobs are back in key economies!
Global light vehicle sales [m units]

SAAR

79.5 82.0
80
75 69.5
70 64.1 63.8
65
60
55
50
2005 2006 2007 2008 2009 2010 2011 2012 2013e

Source: IHS, Roland Berger 20140204_AssoCham_final.pptx 12

Most regions have bottomed out – And are expected to
grow further. India's future depends on the election
Light vehicle sales by region [m units]
SAAR
22 20.5 May '13
20.4 Jan '13
20 18.6
18 17.0
16.2 15.3 May '13
16 14.5 15.1 Jan '13
14 12.9

12
6.3 May '13
10 8.0 10.4 6.2 Jan '13
6.8 6.7
8 6.0
6.4 5.9 May '13
6 5.4 5.8 5.9 Jan '13
4.3 4.3
4 2.6
2.9 1.5 1.6 2.7 Mar'13
2
1.1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013e
Note: For India the volume is for financial year ending in March of the year indicated
Source: IHS, OICA, SIAM, Roland Berger 20140204_AssoCham_final.pptx 13
Regional growth rates: Western Europe will see another weak year
in 2013
Global sales of passenger vehicles1)2)
NAFTA Western Europe China

12% 11%
9% 4% 6% 7% 9% 9% 7%
5% 3% 4%
3% 3% 2% 0%

-3%
-9%
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016

South America
World 19% Japan/Korea

10% 1%
5% 6% 6% 6% 5% 6% 6% 5% 0%
4% 3%
0%
-2%
-8%
-12%

2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016

Forecast
1) Incl. light commercial vehicles 2) Year-on-year growth rate

Source: IHS; Roland Berger 20140204_AssoCham_final.pptx 14

Europe as only exemption: Continuous decline since 2007 to lowest
sales level for almost 20 years. Strong North-South divide
European light vehicle sales1) [m units]

19 18.3
17.7 -23%
18
17
16
15 SAAR
14.0
14 13.8 Jan '13
Going back to 1994… 13.7 Mar '13
13 Lowest volume with 13.5 May '13
12 13.5 m
11
10
2005 2006 2007 2008 2009 2010 2011 2012 2013e

1) EU-27 plus Norway, Switzerland, Iceland

Source: IHS, Roland Berger 20140204_AssoCham_final.pptx 15

Indicators point towards a recovery potential of the automotive
market in Europe… A good investment option for Indian players
Recovery trends
The average vehicle age in the top-5 European countries has grown from 7.9 years in
1 2009 to 8.7 years in 2012
Market runs about 1.6 m units below replacement as consumers scrap cars without
2 replacing them, creating pent-up demand

3 Inventory reduction is slowing down and expected to come to an end in Q2 2013

Truck order intake has historically proven as leading indicator for European car production and
4 has risen in Q1 2013
Consumer confidence in Europe increased for the sixth consecutive month in May
5 to its strongest level since the middle of last year

Interest rates to Euro area households have steadily declined since January, following
6 interest rate cuts by the ECB – Loan volumes have risen by 15.4% in the same time frame

Source: HIS, ECB, KBA, ANFIA, SMMT, CCFA, Roland Berger 20140204_AssoCham_final.pptx 16
Supplier profitability: After the all-time high in 2010, the profitability
of the global auto supplier industry is now declining again
Key performance indicators of automotive suppliers
Revenue growth [2000=100] EBIT margin [%]

~180 6.9
180 ~175 7 6.6 6.6
167 6.1 6.1 6.1 ~6.0
170 5.8
6
5.2 5.0
160 154 ~5.5-6.0
148 150 5
150
141 4
140
129 3
130 125 3.3
120 117 2
2.3
110 106 1.8
100 1

0 0
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '121) 131) '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '121)131)
1) Estimate – Calculation of final 2012 data currently in progress

Source: Roland Berger/Lazard Global Automotive Supplier Database 20140204_AssoCham_final.pptx 17

Regional differences: The main drivers of this decline are suppliers
headquartered in Europe
EBIT margins in the automotive supply industry by HQ location1) [%]
Europe NAFTA Japan China Korea

12
10.3
~9-10 ~9-10
10
9.8
8 7.1 9.3
7.0
6.3 ~6 6.5 6.5
~6
5.6
6 ~5-6 5.1

'07 '11'122) '07 '11'122) '07 '11'122) '07 '11'122) '07 '11'122)
Trend 2012 vs. 2011
1) n = approx. 600 suppliers, 2012 estimated 2) Estimate – Calculation of final 2012 data currently in progress

Source: Roland Berger/Lazard Global Automotive Supplier Database 20140204_AssoCham_final.pptx 18

Indian auto suppliers have outperformed global suppliers; however in re-
cent years rising costs and slowing growth have impacted performance
Key supplier performance indicators 2001-2011 (Global ≈600 & India ≈22 suppliers)
EBITDA Margin [%] ROCE [%]
India supplier performance
15 28 some factors

14 1 Higher revenue growth rate in

24 India (PV and CV industry vs
west)
13
20
2 Lower manpower costs (direct &
12 indirect)
16
11 3 Optimal capital spending (driven
by frugal manufacturing, higher
12 cost of capital)
10
8 4 Lower spending on R&D (driven
9 by build to print nature of
suppliers)
8 4
5 Lower number of large scale
suppliers in India (ability of large
7 0
scale suppliers to win high
2000 2002 2004 2006 2008 2010 2012 2000 2002 2004 2006 2008 2010 2012 number of critical orders across
OEMs)
Global India

Source: Company information; Roland Berger analysis 20140204_AssoCham_final.pptx 19

There is significant difference between the top and low performing
suppliers globally
Global auto supplier industry performance 2001-2011
Revenue growth [2001 = 100] EBITDA Margin [%] ROCE [%]

CAGR
13 25
800 23%

700 12 20
600
11
500 15
16% 10
400
10
300 9
200
5
8
100
0 7 0
2000 2002 2004 2006 2008 2010 2012 2002 2004 2006 2008 2010 2012 2002 2004 2006 2008 2010 2012
-5
Top Low

Source: Company information; Roland Berger analysis 20140204_AssoCham_final.pptx 20

In India too, there is significant difference between the top and low
performing suppliers; low performers may not survive
Indian auto supplier industry performance 2001-2011
Revenue growth [2001 = 100] EBITDA Margin [%] ROCE [%]

4,000 20 30

3,500 18
25
3,000 16

2,500 14 20
2,000 12

10 15
1,500

1,000 8
10
500 6

0 4 5
2001 2004 2007 2010 2002 2004 2006 2008 2010 2012 2002 2004 2006 2008 2010 2012

Top Low

Source: Company information; Roland Berger analysis 20140204_AssoCham_final.pptx 21

Facing fear: Two different strategies to cope with the economic
challenges and uncertainties of today

20140204_AssoCham_final.pptx 22
B. Reforms,
Commitment and
Social Cohesion
Matter
German Competitiveness 1995 -
2011: A Case Study

20140204_AssoCham_final.pptx 23
Several key factors contributed to Germany's success in recent
years

A Germany's economic turnaround

B Thanks to courageous political/economic reforms

C Seven success factors/cohesion of politics, labor and business

D The impact for the automotive industry

Source: Roland Berger 20140204_AssoCham_final.pptx 24

 A1

The German problem 1995 – 2005: "The Sick Man of Europe"

Average GDP growth 1995-2005 [%] Unemployment [Index 1995=100]

3.3
130 Germany

2.3 120
2.2
110
1.5 100
1.3 USA
90 France
80 EU15
70 Italy

France Germany Italy EU15 USA 1995 2000 2005

> Poor competitiveness – low growth – rising unemployment – declining wealth (GDP per capita: #
3 in EU 1995 ➔ # 11 2005)

Source: EIU 20140204_AssoCham_final.pptx 25

 A2

Courageous reforms turn Germany into "The High Growth

Economy" among the larger industrialized countries

Average GDP growth 2010-2011 [%] Unemployment [Index 2005=100]

3.3 Average of industrialized 200
economies1) 2.2 USA
2.4 UK
150
1.7 EU15
1.5 Italy
0.9 100 EU27
France
Germany
50
France Germany Italy Eurozone USA 2005 2010 2015

> High competitiveness – high growth – structural decline of unemployment – highest employment
ever – growing wealth (GDP p.c.: # 11 in EU '05 ➔ # 9 '11)
1) Eurozone, USA, Japan, UK, Switzerland, Norway, Sweden, Denmark, Canada, Australia, New Zealand

Source: EIU 20140204_AssoCham_final.pptx 26

B

Germany's "economic miracle" a result of…

1 Structural political reforms 2000-2005

2 Productivity oriented labor agreements

3 Technological product/process innovation with "right" industry

portfolio

4 Relative devaluation of the D-Euro

> within Eurozone
> vis-a-vis RoW

20140204_AssoCham_final.pptx 27
B1

The German reform agenda 1999 – 2005…

1 Social security system: unemployment benefits –

pensions – minimum welfare benefits

2 Labor market: flexibility – dismissal protection – low

wage labor market – no minimum wages "It is important for everyone
that other countries now
3 Taxes: corporate and income taxes down – indirect tax
moderately up
manage to do what Germany
and a few other member
states have already
4 Healthcare: contribution decoupled from labor cost –
out-of-pocket payments – cut in benefits
managed in past years."
Olli Rehn, EU Commissioner

5 Red tape reduction for Economics and Monetary

Affairs, February 2011

… created a political framework for superior competitiveness of German business and for growth,
employment and wealth creation/distribution

20140204_AssoCham_final.pptx 28
B2

Productivity oriented labor agreements between responsible unions

and employers in Germany…
Real unit labor costs [Index 2000=100]
Italy: +32.5%
130
Spain: +28.6%
125
EU27: +24.0%
120 France: +20.8%
115 Eurozone: +18.0%
110
USA: +8.7%
105
Germany: +3.9%
100
95
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

… increased global and intra EU competitiveness of German business/economy

Source: OECD 20140204_AssoCham_final.pptx 29

 B3

Superior innovation through state sponsored science, basic and

applied research and R&D oriented business culture…
Share of research- and knowledge-intensive industries and services of gross value
added 2007 [%]
49 Manufacturing & construction
45 share of GDP 2010:
40 38 Germany 28%
34
Main industries:
> Construction
> Machinery & plant engineering
> Automotive
> Chemicals
> Electrics & electronics
> Infrastructure goods
Germany USA Japan EU-141) France

… and an industry portfolio that meets the demand of emerging markets

> Germany the only European country among Top 10 import countries for China
1) European Union without Eastern European accession states and Germany

Source: DIW Berlin, German Federal Employment Agency, European Commission, Eurostat, ECB, OECD, German Federal Statistical Office 20140204_AssoCham_final.pptx 30
 B4

Devaluation of the D-Euro against USD and within Eurozone…

Price development1) in selected Euro countries 1995-2010 [%]

Greece 70
Spain 58
Portugal 49
Ireland 47
Italy 45
Netherlands 37
Eurozone 28
Belgium 27 German devaluation2) against other
France 25 Eurozone countries by 18%
Finland 21 and against world by 21%
Austria 19
Germany 12

… as a result of cost containing political reforms and business transformation

… lead to huge trade and current account surpluses of Germany
1) GDP deflator 2) Trade-weighted

Source: Eurostat, UNCTAD, calculations of ifo institute 20140204_AssoCham_final.pptx 31

C

Seven success factors and cohesion of politics, labor & business

1 Courageous reform policy of government

2 Reduction of public-sector share of gdp (2010: FRA 56.5%, ger 45.8%)

3 Public and private financial discipline

4 Responsible labor relations

5 Technological innovation and industry base

6 Sound corporate management

7 Diversified globalization

> Competitiveness, growth, employment and wealth and social peace!

20140204_AssoCham_final.pptx 32
 D1

Reform policy also impacts on automotive industry…

Market share Unit labor costs Productivity Domestic light Employees car Employees
Europe 2000 vs. 2008 [cars/employee] vehicle production manufacturing suppliers
2000 vs. 2011 2000 vs. 2011 2000 vs. 2011 2000 vs. 2010 2000 vs. 2010

+44% 14 5.7 m units

+20% (191 tds) (411 tds) (94 tds) (298 tds)

28% +19%
-1% -5% -3%
25% +2,5+3% -10% -8%
16 398 tds
-28% 274 tds
-32%
-39%
+1
Germany
137 tds
France 2.2 m units
57 tds
> Attractiveness of home markets for manufacturing differs:
31%1) of global output of OEMs are manufactured in FRA in 2011, 40% in GER
1) Excluding Nissan, Infiniti, Lada

Source: LMC Automotive, VDA 20140204_AssoCham_final.pptx 33

 D2

… with a happy end for all automotive stakeholders in GER

Ø EBIT 2011 ∑ EBIT 2011 Premium per worker Premium per worker
[% of revenue] [EUR bn] 2011 [EUR] 2011 [EUR]

8.4 28.2 8,251

7,600 7,500 7,500

4,100 5,000
2.5 3,000
1,500
2.6 600

French German French German Audi Porsche VW BMW Daimler Suppliers

Groups groups Groups groups

> All stakeholders gain from growing competitiveness and business cycle
> VW's premium for workers correspond dividends of € 42.3 bn share value
> Flexibility of labor costs keeps value added and employment in the country
1) Excluding Nissan

Source: Annual reports, company information 20140204_AssoCham_final.pptx 34

C. Hyundai Motors –
Leveraging "Buy
Korean"
A Case Study

20140204_AssoCham_final.pptx 35
Hyundai Group today – #3 car producer in the world, high
profitability, broad product portfolio and geographical reach
Overview Hyundai Group today

Key facts Product portfolio coverage, 20131)

> 2 brands: Hyundai and Kia Body style

> #3 passenger car maker in the Segment Sedan Hatch Wagon SUV MPV/Van Coupé Total
world (6.8 m units in 2012)
A 2% 10% 0% 12%
> Revenues: EUR 59.1 bn2)
> Operating Income: EUR 5.9 bn2)
B 4% 5% 1% 10%

> # of covered countries: 2002) C 26% 11% 2% 12% 1% 1% 52%

> # of plants: 102) D 13% 0% 8% 2% 0% 23%

> # of people employed: 98,3482) E 2% 0% 2%

> Market cap.: EUR 39.3 bn3) 47% 26% 2% 20% 4% 1% 100%

1) In % of segment/body style combination within total global sales 2) At 31st December 2012 3) At 29th November 2013

Source: Hyundai; IHS; Bloomberg; Roland Berger analysis 20140204_AssoCham_final.pptx 36

Hyundai started its growth story in 1980s – And required
ca. 25 years to become competitive with other leading OEMs
Milestones of Hyundai development
Introduction of first Launch of sales First plant Launch of R&D Temporary #2 in
own developed operations in Europe outside of Korea centre in Europe passenger car sales
model (based on
Mitsubishi
technology),
Hyundai Pony

1967 1976 1986 1991 1994 1997 1998 2003 2008 2011

> Inauguration of the Export to USA Annual production > Acquisition of Kia Became #5 in
company by Chung exceeds 1 m units > Completion of passenger car sales
Ju-yung (private India plant
entrepreneur)
> License production
of Ford Taunus as
first model

Source: Hyundai; IHS 20140204_AssoCham_final.pptx 37

Today, Hyundai shows stronger performance vs. Toyota in India and
Western Europe, and is catching up in the US
Development of market shares for Hyundai and Toyota in selected markets1)
Home market2) India China
80% 15% 8%
3.3 18.6
60% 6%
10%
40% 4%
5%
20% KR 1.5 JP 5.2 2%
0% 0% 0%
1992 1997 2002 2007 2012 1992 1997 2002 2007 2012 2000 2005 2010 2012

USA/Canada Western Europe South Africa

20% 6% 30% 0.6
16.17 13.2
15%
4% 20%
10%
2% 10%
5%
0% 0% 0%
1992 1997 2002 2007 2012 1992 1997 2002 2007 2012 2000 2005 2010 2012
Hyundai Toyota Sales Volumes 2012 , light duty vehicles [m units]
1) Hyundai and Kia brands cumulated as "Hyundai"; Toyota, Daihatsu, Lexus and Scion brands as "Toyota" 2) Korea for Hyundai, Japan for Toyota

Source: Hyundai; IHS; Roland Berger analysis 20140204_AssoCham_final.pptx 38

Four key success factors identified for Hyundai – Support from the
local market and government, competition, and financial strength
Key success factors for Hyundai
Backwind from the local market
> Growing, protected market with high barriers to enter
for non-Korean OEMs
> Practically no competition on the domestic market,
thus strong profit pool
> Local market share continuously kept at ~80%
KEY SUCCESS FACTORS OF HYUNDAI
> Limited competition in the "value-for-money compact
car segment" since 1990s for more than a decade:
– Japanese OEMs upgraded their product and price
positioning, leaving the segment to Hyundai
– No competition from other emerging market OEMs
– Not in focus of large, global OEMs
Positive competitive environment
Source: Hyundai; expert interviews; Roland Berger analysis
Governmental support
> Creation and preservation of barriers for the local
market in Korea (WTO entry in 1995 only)
> Influence on the exchange rate to facilitate exports of
Hyundai
> Political support for the internationalization strategy
> Investment-saving approach in the initial development
stage(licensing from Ford and Mitsubishi)
> Positive cash flow and earnings right from the start
and during the majority of time since inauguration
> Strong margins – EBIT margin 2012 of 10%, 6% even
in 1999 (after the 1997/1998 crisis at Hyundai)
Financial strength
20140204_AssoCham_final.pptx 39
These success factors do not apply for India

Application of Hyundai's key success factors for India

Backwind from the local market
> India is one of the most difficult markets in the world:
– Very low price levels and high price sensitivity
– Low customer loyalty, novelty driven market
– Stiff competition in car and UV segments
Governmental support
> Limited ability to support domestic players due to
WTO membership
> Volatility of key macroeconomic indicators, such as
inflationary pressures, exchange rate, etc.
> Woeful lack of infrastructure (roads, ports, …)
> Difficult business environment

KEY SUCCESS FACTORS OF HYUNDAI DON'T APPLY IN INDIA

> "Budget" car market in focus of majority of OEMs: > Strong investment needed to catch up with other
– Renault-Nissan with Dacia, Lada & Datsun brands OEMs and improve position
– Chinese OEMs, e.g. Chery, Geely, Great Wall
– Other global OEMs, e.g. VW, Hyundai, Toyota
> High level of competition, no "obvious niche"
available

Positive competitive environment Financial strength

Source: Roland Berger analysis 20140204_AssoCham_final.pptx 40

D. India's Automotive
Industry is at a
Crossroad

20140204_AssoCham_final.pptx 41
The impact of a major crisis on India is comparatively minor, it is
time to focus on the root causes of India's recent performance
Impact of Eurozone and US Crisis on 2012 GDP Growth
(deviation from baseline forecast in percentage points)

Indonesia
Malaysia
Philippines
Thailand
Hong Kong, China
Korea, Republic of
Singapore
Taipei, China
China, People's Republic of
India
Japan
Asia
-4.00 -3.50 -3.00 -2.50 -2.00 -1.50 -1.00 -0.50 0
New global crisis Severe recession Eurozone recession

Source: Asian Development Bank 20140204_AssoCham_final.pptx 42

It's the economy, stupid – Germany's success factors also apply to
India
1 Courageous reform policy of government

2 Reduction of public-sector share of gdp (2010: FRA 56.5%, ger 45.8%)

3 Public and private financial discipline

4 Responsible labor relations

5 Technological innovation and industry base

6 Sound corporate management

7 Diversified globalization

> Competitiveness, growth, employment and wealth and social peace!

20140204_AssoCham_final.pptx 43
In addition, several basic challenges need to be addressed

1 Develop and execute long-term, growth-oriented, stable policy roadmap across all industries

2 Invest significantly and consistently in infrastructure development

3 Restart stalled projects and carefully monitor their implementation

4 Invest in institution-building where there are problems of governance, transparency, conflict

or corruption

5 Communicate a clear long-term roadmap for vehicle emissions, fuel efficiency and safety
standards to enable investment planning by industry

6 Push reforms and regulations for fleet and vehicle modernization

7 Strengthen road safety infrastructure and enforcement

> Competitiveness, growth, employment and wealth and social peace!

20140204_AssoCham_final.pptx 44
Roland Berger
Strategy Consultants

20140204_AssoCham_final.pptx 45
Roland Berger Strategy Consultants is a truly global firm –
We provide strategic advice to the world's top decision makers
Roland Berger Strategy Consultants – Key facts

The only strategy Founded in 1967 in Germany by Roland Berger

consultancy of
European origin 53 offices in 36 countries of the globe
playing in the top
league of
international 240 partners 2,700 employees worldwide
consulting
companies Over 1,000 international customers

Amsterdam I Barcelona I Beijing I Beirut l Berlin I Brussels I Bucharest I Budapest I Casablanca I Chicago I Detroit I Doha l Dubai l Düsseldorf
I Frankfurt I Göteborg I Hamburg I Hong Kong I Istanbul l Jakarta I Kuala-Lumpur I Kyiv l Lagos l Lisbon I London I Madrid I Manama I Milano I
Moscow I Munich I Mumbai I New York I New Delhi NCR I Paris I Prague I Pune I Riga I Roma I Sao Paulo I Shanghai I Singapore I
Stockholm I Stuttgart I Tokyo I Vienna I Warsaw I Zagreb I Zurich

Source: Roland Berger 20140204_AssoCham_final.pptx 46

The Roland Berger Automotive Competence Center has a truly
global footprint
More than 300 consultants worldwide

Western Russia China/ > A global team of 300+

Europe 2 Partners Hong Kong dedicated automotive
17 Partners 20 consultants 3 Partners consultants
150 consultants Eastern
40 consultants
USA > Over 300 clients in the
4 Partners Europe
25 consultants automotive industry
2 Partners Korea
20 consultants Japan
3 Partners 4 Partners > More than 2,000
20 consultants 30 consultants successful projects
South since 2000
America
2 Partners India Singapore > Proven cutting-edge
10 consultants MENA 1 Partner 1 Partner tools and methodologies
1 Partner 40 consultants 5 consultants
10 consultants > Thought leadership in
the form of highly
regarded studies and
research
Source: Roland Berger 20140204_AssoCham_final.pptx 47
We have successfully advised a broad client portfolio from different
industries in various strategic projects in India (1/3)
Selected automotive OEM references in India
Selected customers
Typical projects
> Turn around concept for major Indian automotive player covering all
aspects of the value chain
> Restructure India business for European CV OEM
> India strategy 2020 for European OEM
> LCC sourcing for international automotive & construction OEMs
> Market entry strategy for Japanese luxury OEM
> Market entry strategy for European PV OEM
> Global KD template for a European PV OEM
> Product portfolio positioning for global luxury OEM
> Market entry strategy in Bangladesh/Myanmar for a Japanese 2-
wheeler OEM
> Alliance strategy for Asian CV OEM
> JV optimization for Indian 2-wheeler OEM
> M&A Target identification for the world's largest 2-wheeler
manufacturer
> Market approach Korea for an international CV manufacturer

20140204_AssoCham_final.pptx 48
We have successfully advised a broad client portfolio from different
industries in various strategic projects in India (2/3)
Selected industrial references in India
Selected customers
Typical projects
> Product portfolio optimization & export strategy for major Indian supplier
> Lean manufacturing for India's largest foundry
> Indian market studies for European automotive supplier
> Location strategy for a global auto component player
> M&A and due diligence support for a leading Indian engineering services player
> India growth strategy for a Japanese supplier
> India growth strategy for a business unit of a leading Indian automotive
conglomerate
> Commercial due diligence for an Indian engine and transmission manufacturer
> M&A target identification in Europe & SEA for leading Indian supplier
> Off-sett strategy for globally leading aerospace and defence players
> Logistics study for automotive industry association
> Creation of off-set toolbox for Government of India
> Definition of Engineering Export strategy for the Government of India
> Definition of Manufacturing Codes for Electronics for the Government of India
> M&A search in Europe & SEA for an Indian automotive supplier

20140204_AssoCham_final.pptx 49
We have successfully advised a broad client portfolio from different
industries in various strategic projects in India (3/3)
Selected other references in India
Selected customers
Typical projects
> Accelerated Zero Base Budgeting for a major global bank
> Customer satisfaction assessment for a global Re-Insurer
> Market overview for a global insurance player
> Market potential and entry study for a global specialty chemicals
player
> Growth initiative for a global chemicals player
> Mining services entry strategy for a diversified Indian agro-chemicals
business
> Renewable energy foot-print for a global chemical player
> Lean Manufacturing for a major global renewable energy player
> Renewable energy roadmap 2020 for a leading industry association
> Market entry strategy for major CGR companies
> Due diligence of potential take over target for a Brazilian CGR player
(India part)

20140204_AssoCham_final.pptx 50
Further, through numerous research studies and close work with
industry associations we gained a profound knowledge about the
Indian market

India chem Green energy Power sector reforms India automotive SIAM India auto- India's Aerospace &
(2010) blueprint for India – task force committee study (2012) motive logistics Defence Sector
report for CII (2010) (2010) (2013) perspectives (2013)
and solutions

Draft Security Manual European Car crisis Thermo Processing – Achieving Theme Paper: SIAM Theme Paper: CII
for Private Industry – and implications for Key market trends Manufacturing Contribution of auto Manufacturing
Key issues and suppliers (2013) (2013) Excellence (2013) industry to economic Excellence Conclave
approach (2013) development (2013) (2013)

Source: Roland Berger 20140204_AssoCham_final.pptx 51

We look forward to working with you; please contact us in person if
you have any questions
Your contact at Roland Berger Strategy Consultants

Dr. Wilfried Aulbur Mobile India: +91 99 206 30131

Managing Partner Mobile Germany: +49 160 744 8282
E-mail: wilfried.aulbur@rolandberger.com

Rajiv Bajaj Mobile India: +91 99 100 34445

Principal E-mail: rajiv.bajaj@rolandberger.com

Rahul Gangal Mobile India: +91 81 308 31818

Principal E-mail: rahul.gangal@rolandberger.com

20140204_AssoCham_final.pptx 52