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The Indian Automotive Industry

A Perspective

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
2

Organization Structure TATA Motors


Senior Management Team
R N Tata
R N Tata
(Chairman
(ChairmanTata
TataMotors)
Motors)
Ravi
RaviKant
Kant

(Managing Director)
(Managing Director)

A P Arya
A P Arya
(President Heavy and Medium
(President Heavy and Medium
Commercial Vehicles
Commercial Vehicles

PPMMTelang
Telang
(President

(President Light
Lightand
and
Small
SmallCommercial
Commercial
Vehicles)
Vehicles)

P P Kadle
P P Kadle
(ED Finance &
(ED Finance &
Corporate Affairs)
Corporate Affairs)
Rajiv Dube
Rajiv Dube
(Sr Vice President Passenger
(Sr Vice President Passenger
Cars)
Cars)

Engineering
Engineering
Research Centre
Research Centre

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
4

World Vehicle Production Trends (in '000s)


Asias share of the
world vehicle
production is growing
significantly..

70000

60000

50000

40000

30000

20000

10000

0
1997

1998

1999

2000

2001

2002

2003

2004

Year

Source : OICA.net

North America

South America

European Union

Other Europe

Japan

Asia-other than Japan

Data excludes 2-wheelers where Asia is not only the largest producer, but is also the largest market

State of the Global Automotive Industry

Stagnant Sales except in Asia


Over Capacity in most Regions
Intense Product & Price Competition
Industry Margins Under Pressure
Most of Industry EVA negative
Global Focus to Asia for growth

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
7

INDIA : An Introduction
India

USA

Population

1080 million

296 million

States

28

50

(+ 7 Union Territories)

(+14 dependent areas)

Geographical Area

3.3 mn sq km

9.6 mn sq kms

GDP - Nominal

US $ 0.67 trillion

US $ 11.73 trillion

US $622
US $ 3080

US $39,935
US $ 39,496

Per Capita Income - Nominal:


Per Capita Income
:
(at Purchasing Power Parity)
Estimates for 2004

Current Exchange Rate: 1 USD = INR 45

Sources: IMF Data, The World Factbook, CIA

Exchange Rate (PPP) : 1 USD = INR 10 (approximately)


8

Real GDP (USD Billion)


600

6.9%
5.4%

After decades of
indifferent
growth, Indias
economy is
accelerating in
the new
millenium..

500
400

586

548

473
5.8%

300
279

3.0%
200
100
0

3.2%
159

4.2%
60
1950

86
1960

118

1970

1980

1990

2000

2003

2004

Year
1950

1960

1970

1980

1990

2000

2003

2004

Per capita GDP (USD)


600

6.9%
3.6%

Rapid increase in
population in the
last fifty years
have negated the
impact of
economic growth
in the past

500
400
300

546
511

466
3.6%
328

0.7%
0.8%

200

2.2%
199

216

231

1970

1980

164
100
0
1950

1960

1990

2000

2003

2004

Year
1950

1960

1970

1980

1990

2000

2003

2004

10

Goldman Sachs
predicts India to
be the third
largest economy
in the world in
absolute terms
by 2025

Indian Economy
already ranks 4th
in the world in
terms of GDP
adjusted for
Purchasing Power
Parity

%
RANK

COUNTRY

GDP
(Purchasing Power Parity)

1
2
3
4
5
6
7
8
9
10

United States
China
Japan
India
Germany
United Kingdom
France
Italy
Brazil
Russia

11,750,000,000,000
7,262,000,000,000
3,745,000,000,000
3,319,000,000,000
2,362,000,000,000
1,782,000,000,000
1,737,000,000,000
1,609,000,000,000
1,492,000,000,000
1,408,000,000,000

GDP Growth Forecast

India
Brazil
China
Russia

(*) Estimates for 2004


Source : The World Factbook - CIA

11

Indias Demographic Dividend

India has one of the


youngest population
amongst all nations

Source: The World Factbook, CIA

Although it is the most populous country, because of Beijings long-standing one-child policy,
Chinas working age population will begin to decline in the next 10 years. Meanwhile, Indias
youthfulness - 350 million citizens are under age 15 - ensures its workforce will expand for decades,
potentially enabling it to outstrip Chinas economic pace through sheer weight of numbers.
Time Magazine, Issue dated Dec 05, 2005
12

India has transitioned from a predominantly agrarian to a service-based economy in


line with the growth trajectory followed by major developed economies..
The Indian Economy is
now more broad-based
and thus resilient..

Sources:
Statistical Outline of India 2004-05

13

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
14

Automobile production in India has doubled in 4 years, with growth seen across all
four major segments..
By numbers, two wheelers
are the dominant segment
of the Indian Automotive
market

15

In many ways, the Indian Automotive Market is unique


Harsher operating conditions pose unique challenges for product
conceptualization, design and development:
Road inadequacy and quality
High Traffic density
Poor Fuel quality & variety (Gasoline, Diesel, CNG & LPG)

Manufacturing complexity higher despite lower volumes compared to


global standards
Large product portfolios

Product obsolescence policies not articulated and enforced, entailing


longer product life.
Firms able to maintain profitability even at low volumes.

16

Personal Mobility is positively correlated to per capita GDP

17

India is expected to achieve mass motorization status in 2014

Inhabitants/Vehicle

Vehicle Density vs. GDP/capita


India in
2002
100

Developing Markets

Mature Markets
Inhabitants/Vehicle
02

China in 2002
India in 2014

50

China in 2014
10

Mexico
South Korea
Brazil
Poland
Argentina
Czech Spain
Republic

2
$1,000

15

India

100

China

82

Germany
Canada

Australia
Italy

20

Belgium
Austria
UK Sweden

Japan

USA

France

25

30

35

40

Per Capita Income (US$ 000)

Note:
The above includes both Passenger Vehicles and Commercial Vehicles
Sources: Wards Auto Yearbook 2002, EIU, Goldman Sachs BRICs report, DRI 2002, A.T. Kearney analysis
18

Key Challenges facing the industry


Increasingly Stringent Emission &
Safety Regulations
Technological capability
Cost

Increase in input prices


Ferrous & Non-Ferrous Metals
Crude oil & derivatives
Natural rubber

Transition of Emission & Safety Regulations for Vehicles


India

YEAR

Emission Regulation
Metro Cities
Rest of Country

2000

BS 2 (Euro II)

BS 1 (Euro I)

Underbody Protection Devices


Advance Warning Triangles

2005

BS 3 (Euro III)

BS 2 (Euro II)

Spray Suppression, Noise


Norms, Headlamp levellers

2009

BS 4 (Euro IV)

BS 3 (Euro III)

ABS, Pedestrian Protection


(Expected)

Rising Customer Expectations


Product features
Quality & reliability

Safety Regulation

Integration with Global Markets


Lowering product life cycles
Reducing time-to-market for new
products
Threat of new competition
19

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
20

2-Wheeler Production & Market Sub-Segments (Nos.)


CAGR 15%
8,000,000

Within 2-Wheelers, Motorcycles


contribute 80% of the segment size
1,209,654

7,000,000

989,560

6,000,000
723,330

935,279

5,000,000
669,719

986,208

848,434

4,000,000
640,934
3,000,000

937,506

879,759

5,193,752
4,355,168

3,876,175

2,000,000
2,906,323
2,183,785
1,000,000

0
2000-01

2001-02

Motorcycles

2002-03
Year

Scooters

2003-04

2004-05

Moped
21

Indian 2-Wheeler Market


Competitive Scenario

Motorcycle

50%

30%

13%

4%

1%

2%

<1%

<1%

15%

28%

2%

46%

9% <1%

82%

8% 10%

Figures denote Mkt Share (Apr-Oct 05)

India is now the second


largest two-wheeler
market in the world
22

The Indian 2-Wheeler Industry

Indian 2-wheeler Industry

Similarity with Global Industry

Characteristics

Large variety of products & choice for the customer


(9 manufacturers, 70+ Models)

Basic transportation necessity as against fun & fashion


orientation of the Western Markets. (Primary transportation
vehicle for entire families)

Dis-similarity with Global


Industry

Product design & execution driven by economy rather


performance and power
Presence of strong home-grown players competing against
Global majors.

23

Key Market Drivers


Increasing disposable incomes

Key Trends
Eclipse of scooter segment

Low operating cost


Higher fuel efficiency of Newgeneration motorcycles
Greater reliability resulting in low
maintenance cost

Emergence of new motorcycle subsegments


Economy

Low interest rates translating to low


financing and acquisition costs
hence greater affordability.
Inadequate urban & rural public
transportation infrastructure

Executive
Performance

Shrinking product life-cycles

Ease of use in congested city


centres
24

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
25

3-Wheeler Production (Nos.)


CAGR 17%
400,000

Predominantly used for commercial


purposes, for both Goods Transport
(40%) and Passenger Transport (60%).

350,000

300,000

250,000

200,000

356,223

150,000

100,000

374,414

276,719
203,234

212,748

50,000

0
2000-01

2001-02

2002-03
Year

2003-04

2004-05

Three Wheeler
26

Indian 3-Wheeler Market


Sub-segments and Competitive Scenario

Sub
Segments

60%

Scooters
India

68%

24%

2%

1%

3%

3%

23%

40%

12%

13%

7%

6%

Passenger

40%
Goods

Figures denote Mkt Share (Apr-Oct 05)

India is the largest threewheeler market in the world

27

The Indian 3-Wheeler Industry

Indian 3-wheeler Industry

Similarity with Global Industry

Characteristics

None.

Product unique to emerging markets in South / South-East


Asia & parts of Africa
Dis-similarity with Global
Industry

Product design & execution focus on technological


simplicity and ease of use.
Lesser competitive intensity as compared to other segments.

28

Key Market Drivers


Last Mile Transportation needs.
High product maneuverability &
driveability. Ideal for congested
Indian roads and tropical
conditions.

Key Trends
Goods segment growing at faster
clip.

Ability of product to meet


increasingly stringent emission &

Inadequate urban & rural public


transportation infrastructure
Low initial ownership cost
Self-employment opportunity for
large segment of urban youth

safety regulations is doubtful.

Market push building up for product


upgradation.

29

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
30

Passenger Vehicle Production & Market Sub-Segments (Nos.)


CAGR 17%
1,400,000

Unlike the USA, the Indian Passenger


Vehicle market is dominated by Cars
(79%)

1,200,000

67,371
181,778

1,000,000

60,673
146,325

800,000
51,441
600,000

0
127,519

63,751

114,479

105,667
960,505
782,562

400,000
513,415
200,000

500,301

557,410

(*)

0
2000-01

2001-02

(*) MPVs were part of Passenger Car segment till 2000-01

Passenger Cars

2002-03
Year

Utility Vehicles

2003-04

2004-05

Multi-Purpose Vehicles
31

Indian Passenger Vehicle Market Competitive Scenario

Passenger
Cars

52%

17%

19%

1%

5%

2%

2%

2%

1%

<1%

<1%

Utility
Vehicles

2%

18%

1%

42%

21%

1%

10%

1%

<1%

4%

<1%

Multi
Purpose
Vehicles

100%

<1%

Figures denote Mkt Share (Apr-Oct 05)

4th largest Passenger Vehicle Market


in Asia

32

The Indian Passenger vehicle Industry


Indian Passenger Vehicle
Industry
Similarity with Global Industry

Characteristics
Multiple segmentation across & within major segments
Cars (A, B, C, D & E segments) (Hatchbacks, Sedans, Notchbacks, Station
Wagons & Saloons)
Utility Vehicles (Multi- & Sports Utility)

Large variety of products & choice for the customer


(13 manufacturers, 50+ Models)
Market dominated by Mini Cars & Hatchbacks (>80%)
High incidence of taxes in Car Prices.
(24% Excise Duty, 12.5% VAT, Local Taxes as applicable)

Dis-similarity with Global


Industry

Customer preference driven by value for money and cost of


ownership considerations rather than image, performance and
power.
(80% of cars sold are priced below USD 12000)
Large proportion of chauffer driven cars. Rear Passenger comfort
is a critical influence in purchasing decisions.
Emergence of strong domestic players (TATA, Mahindra).
Strong demand pull for Utility vehicles from Private Taxi segment.

33

Cars per thousand population

Passenger Car Penetration is low in India

The low penetration


presents an opportunity
for industry players to
offer an affordable fourwheeled alternative to
the mass of 2-wheeler
customers

34

Key Market Drivers


Increasing disposable incomes
Rising aspirational levels
Low interest rates.
Wide variety and easy
availability of Financing options.
High sensitivity to Fuel prices
Lack of urban & rural public
transportation infrastructure

Key Trends
Market evolution from Mini
cars to Hatchbacks to
Compact Sedans now evident

Increasing customer emphasis


on aesthetics and comfort.

Shrinking product life-cycles

Flourishing Service Sector


35

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
36

Commercial Vehicle Production & Market Sub-Segments (Nos.)


CAGR 22%
400,000

Unlike most developed markets,


Indian Market has seen dominance
by Medium Commercial vehicles

350,000

300,000

138,890

250,000
108,917
200,000
83,195
150,000
68,922

65,756
211,143

100,000

50,000

166,123
87,784

96,752

120,502

0
2000-01

2001-02

2002-03
Year

Medium & Heavy Commercial Vehicles

2003-04

2004-05

Light Commercial Vehicles


37

Indian Commercial Vehicle Market Competitive Scenario

Medium &
Heavy CV Trucks

64%

24%

8%

3%

<1%

<1%

Buses L, M
& HCV

40%

30%

7%

5%

10%

6%

1%

1%

Light & Small


Comm Veh
Trucks

59%

<1%

32%

4%

3%

3%

<1%

Figures denote Mkt Share (Apr-Oct 05)

TATA Motors dominates over 60% of the Indian Commercial Vehicle


Market. It is also the Worlds fifth largest Medium & Heavy commercial
vehicle manufacturer.

38

The Indian CV Industry

Indian CV
Industry
Similar with Global
CV Industry

Characteristics
Indian CV Industry
Cyclical

250
200

Dis-similar to
Global CV Industry

Secular long term growth trend


Lower Power to Weight Ratios
Early stage of road development
Less degree of product
sophistication.
Strong price entry barriers created
by domestic players

Nosin'000

150
100

CAGR: 5%

50
0

39

Key Market Drivers


Growth in Economic Activity

Road Network Development

Low interest rates.


Wide variety and easy availability of Financing options.

High sensitivity to Fuel prices

40

Indian CV Industry: Trucks


The growth of the Commercial vehicle industry is critically dependent on Infrastructure
development & economic activity
Impact of Road development
Dramatic impact
in initial stage of
road development

1000
900

Impact of GDP Growth.

900
Germany

800

Stage
Germany

800

Truck penetration
MHCV / m population

France

700
Truck penetration
MHCV / m population

Gradual
impact

1000

Stage

UK

600

Turkey

Spain

500

400

Australia
Russia
Argentina

300

Portugal

Brazil

200
India

100

China
South Africa
(AL)

Indonesia
India

1
0.5

1.5

France
UK

600
500

Portugal

400

Argentina

300

Hungary

Mexico
Romania

100

Spain

Brazil

200

0
0

700

China
South Africa

Indonesia
India

0
0

Road Density
Paved Highway (km) / Area (km2)

10

15

20

25

GDP per capita


1000 US$ / head

Source: VDA (German Automotive Association), Worldbank, DRI Automotive report


41

Road network development in India

Between 2003-04 to 2007-08 each year ~2000 Kms of 4-laned highways will be added
Golden
Quadrilateral

Year-wise completion schedule of NHDP


Planned length 14,000 km
2003
12%

NSEW
Corridors

Feeder
Roads

Completed
15%

2004
21%

2005-07
52%

Source: CrisInfac, NHAI

Impact on Domestic CV Industry


Faster turnaround
Increased freight movement
Lower operating cost of vehicles
Replacement demand

Between 1997 - 2002, Highway length in China increased by around 15,000 km and CV
volumes nearly doubled from 1.2 mn to 2.1mn
.. Indicative of future likely directions in Indian market
42

Key Trends
Migration from erstwhile Basic
MCV Workhorse to Hub &
Spoke Model

Average Power To Weight Ratios


Of Selected Countries

Europe

Increasing Power to weight


ratio
Increasing customer emphasis
on aesthetics and comfort.

Japan

Brazil
China
India

et n
k
ar i o
m cat
k ti
uc his
r
T p
so

Arrival of Global Players


Divergence in Truck and Bus
Technology
Focus on Fully Built Transport
Solutions
43

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
44

Automobile Component Business - India


(In USD Million)
CAGR 22%
9,000

The growth rate in Auto Components


business has kept pace with OEM
growth

8,000

1,400

7,000
1,020
6,000
760

5,000
578
4,000

625

7,300
5,710

3,000
4,670
2,000

3,340

3,892

1,000
0
2000-01

2001-02

2002-03
Year

Domestic

2003-04

2004-05

Export
45

Key Market Drivers


Linked to growth of OEM Industry

Key Trends
Indias emergence as low cost
global sourcing destination.

Highly sensitive to input cost


escalation.

Indian ancillary manufacturers are


shifting focus from global after-

Competitiveness driven by
Manpower Large pool of
qualified engineers & skilled
technicians at lower cost
Lower investment cost Through
appropriate, low cost automation.

market to global OEM supplies.


Firms focus on operational
excellence to improve quality &
reliability of products.
(8 Deming Award winners)

Increasing relevance of Global Tier


1 suppliers (Bosch, Denso, Visteon,
Delphi)

46

Rotating Auto
Electricals
Tyres & Tubes

Heavy Forgings
Wheel Rims

Small Castings &


Forgings

Medium
Low

Product Complexity

High

The Indian Auto component industry is now transitioning from


being a supplier for the global aftermarket to becoming a fullscale global Tier 1 supplier

Hand Tools
Metal bonded &
Moulded Rubber Parts

Aftermarket

itio
s
n
Tra

Plastic Components

ath
P
n

Tier 2-n supplier

Tier 1 supplier

Customer complexity
47

Indian Component suppliers are adopting different approaches


for Global expansion & growth

Exports from India


Suppliers of:
Castings
Forgings
Machined Items

Greenfield Overseas Locations

Rubber Items
Wheel Rims

Sundaram Fasteners: China


Minda Group: Indonesia

Overseas Acquisitions
Bharat Forge
(CDP-Germany; Federal ForgeUSA)

Sundaram Fasteners
(Cramlington Precision, UK;
Peiner-Germany)

48

TATA Motors Organisation Structure

Global Auto Industry An Analysis

Overview of Indian Economy

Indian Auto Industry


Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles

Indian Auto Component Industry

Emerging Opportunities
49

Automobile Exports from India (Nos.)

CAGR
Overall 22%
Passenger Veh 57%
2-Wheelers 35%

700,000

International Business
growth presents a huge
opportunity, as well as
a challenge for the
Indian Automotive
Industry

600,000

500,000

29,949

17,432

129,291

400,000
12,255
300,000

200,000

166,413

66,801

68,144

72,005

13,770
27,112
16,263

11,870

366,724

53,165
15,462

100,000
111,138

43,366
265,052
179,682

104,183

0
2000-01

Two Wheelers

2001-02

Three Wheelers

2002-03
Year

2003-04

Passenger Vehicles

2004-05

Commercial Vehicles
50

Opportunities for the industry are emerging both in the areas of Automotive
Manufacturing and Engineering Services

Manufacturing:
Emerging World hub:
Small Cars (Suzuki, Hyundai)
Castings & Forgings

Regional Sourcing base


Aggregates for Entire Vehicle Programs
(e.g. Transmissions for Toyota IMV)

Globalisation opportunities for Indian


Manufacturers
Increasing exports of Made In India
vehicles
Establishing manufacturing facilities at
foreign locations (e.g. TVS Indonesia)
Contract Manufacturing (e.g. Sub-150cc
Bajaj motor cycles for Kawasaki)
Growth through Mergers & Acquisitions
(TATA Motors acquisition of Daewoo
Commercial Veh, Korea & Hispano, Spain

Engineering Services:
Indian IT Majors offering on-shore and
off-shore engineering services to Global
IT players.
(e.g. TCS, TATA Technologies, Infosys,
Satyam)

Global Auto & Auto component majors


putting up Development Centres in
India, either on their own or in
partnership with local players
(e.g. General Motors, Daimler Chyrsler,
Johnson Controls, Delphi, Bosch)

Independent Indian OEMs focusing on


upgrading their design & engineering
capabilities.
(e.g. TATA Motors European Development
Centre & Acquisition of INCAT plc, UK)

51

Thank You

52