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Opportunities

Road development
Continued improvement in road infrastructure is expected to have a positive effect on automobile sales. The Golden

Quadrilateral Project was 99.72% complete as on January 31 , 2012 . The 2nd phase of NS EW road corridors are 81.44% complete by January 2012. Rural connectivity is expected to correspondingly improve which would expand significantl y th e population/markets/supply sources participating in the overall economic growth. These improvements would facilitate faster transportation of goods and passengers, and would in turn create demand for safer, reliable and faster vehicles. The Company is poised to benefit from the same as it has a wide range of goods and passenger transportation vehicles ranging from 0.7 Ton load carrier to large haulage tractors(49T) for goods movement, buses and coaches for public transportation and passenger cars and utility vehicles for personal transportation .

Car penetration in India


The low car penetration of cars in the country 7 per 1,000 people as compared to a higher penetration level in developed and developing markets, e.g. Germany 550, France 495, Malaysia 253, Brazil 96 and Thailand 51 cars per 1000 people , which makes it a highly attractive market for the global automotive industry. Due to growth in urbanization and expansion of cities, the outlook for growth in passenger car sales remains positive.

Increase in Income levels


A growing middle income level population, rise in their average income levels, moderation in income tax rates augur well for the automotive industry, both in terms of personal transportation requirements as well as freight movement.

Large two wheeler market


India has an annual sale of over 13 million two wheelers. We believe that the gap between two wheeler prices and the current entry level car prices offer a huge opportunity for an affordable, safe and comfortable small car with appealing design and features. It is hoped that the Tata Nano would address this huge potential in demand.

International business
India continues to be a cost effective source for the automotive industry globally, both for vehicles and components. Indias manufacturing base will benefit from these scale economies and technology/quality improvements. Tata Motors exports currently constitute 11.07% of the total sales value and have opportunities to increase significantly, particularly with the new and contemporary product offerings in commercial vehicles and passenger cars. The Company is also setting up/exploring manufacturing footprint overseas that would combine these advantages with local operations and sourcing in these markets.

Growing consumer culture


The demand for a better lifestyle has enhanced consumption levels and rapid growth in several areas like retail chains, cellular
phones and cable and satellite television. The Company, with its wide portfolio is expected to benefit from improvement in lifestyle and higher aspiration levels in passenger cars and potential growth in freight movement.

Threats
Budget 2012
The budget hit a major body blow on the struggling passenger car industry with a 2% increase in excise duty, from 10% to 12%. The government has also increased the excise duty on large cars from 22% to 24% and has done away with additional special duty of Rs. 15,450, but replaced the same with a 3% tax which will take the overall excise duty on large cars to 27%. The body building of commercial vehicles has now got an ad valorem duty of 3% instead of a specific duty of Rs. 10,000 which is likely to be an additional burden on truck makers.

Interest rates hardening and other inflationary trends


Hardening of consumer interest rates could have an adverse impact on the automotive industry. Increase in inflation could also have a negative impact on automobile sales in the domestic market.

Credit unavailability
The tightened liquidity position and reduction in exposure to vehicle financing by banks/NBFCs would have an adverse impact on the automotive industry. Though in-house vehicle financing has been strengthened by the Company, it would be a challenge for the Company to fully offset the decrease in credit availability from outside sources.

Fuel Prices
T he international crude prices has witnessed steep increase adversely impacting the automotive sales.

Input Costs
Indias rubber and steel industries likely to be affected with the 2% increase in excise duty as the rise in levy is expected to affect the car demand.

Government Regulations
Stringent emission norms and safety regulations could bring new complexities and cost increases for automotive industry, impacting the Companys business. WTO, Free Trade Agreements and other similar policies could make the market more competitive for local manufacturers.

Global Competition
India continues to be an attractive destination for the global automotive players. The global automotive manufacturers present in India have been expanding their product portfolio and enhancing their production capacities.

Growth in Mass Transit Systems


The domestic passenger vehicle demand could be impacted by the growth of road and rail based mass transit systems.