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Automotive
September 2006
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Contents
• Market Overview
• Government regulations & policy
• India Advantage
and business opportunities
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Market
Overview
• Market Overview
• Government regulations & policy
• India Advantage and business opportunities
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Market Overview

Profile: Indian Automotive Industry

• The industry has grown at a CAGR of 14% p.a over the last 5 years,
with sales of 9 million vehicles in 2005-06
• With the potential to emerge as one of the largest in the world. Presently, India is
• 2nd largest two wheeler market in the world
• 4th largest commercial vehicle market in the world
• 11th largest passenger car in the world and is expected to be the 7th largest market by 2016
• The industry has emerged as a key contributor to the Indian economy

Vehicle sales in India in 2005 - 06 ( in mil)

Size of around
0.36
US$ 34 billion
7.05 in 2006
0.35
1.14

0 2 4 6 8
Cars CVs Two wheelers Three Wheelers

Source : SIAM
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Market Overview

Auto components industry has

also grown at a rapid pace ...
• The Indian auto components
Size of Component Industry (US$ mn) industry has grown at 17%
CAGR over the last few years
10000 to reach a size of around
8700
17% US$ 10 billion in 2005-06
6730
5430 • Market breakup: OEM demand
3849 3965
4470 ~ 54%, replacement market
~30%, exports ~16%

FY00 FY01 FY02 FY03 FY04 FY05 FY 06

FY refers to Financial Year – April to March

Source : ACMA
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Market Overview

Players: Indian auto industry

Indian
• GM Auto • Tata Motors
• Toyota Industry • Mahindra & Mahindra
• Ford • Bajaj Auto
• Hyundai • TVS Motors
• Maruti Suzuki Global Indian • Hero Honda
• Honda OEM OEM • Bajaj Tempo
• Skoda • Ashok Leyland
• Volvo
• Mercedes

• Delphi • Bharat Forge

• Visteon Global Indian • Sundram Fasteners
• Bosch Suppliers Suppliers • Rane Group
• Denso • Shriram Pistons
• Valeo • RICO Auto
• Thyssen Krupp Engineering & • Sono Koyo Steering
Development
Companies

The Indian auto industry is highly competitive

with a number of global and Indian auto companies present
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Market Overview

Automotive clusters in India

North / Central South

Delhi-Gurgaon-Noida- Ashok Leyland Eicher Ashok Leyland Enfield
Ghaziabad Force Motors Hero Honda Ford Greaves
Ludhiana Haridwar Hindustan Motors Honda Hindustan Motors Hyundai
Honda SIEL ICML Mahindra & Mahindra Tatra
Kinetic LML Toyota Kirloskar TVS Motors
Majestic Maruti Suzuki Volvo
Pitampur
Piaggio Yamaha
Swaraj Mazda Tata Motors
Jamshedpur
Rajkot-Halol Kolkata
East West
Hindustan Motors Ashok Leyland Atul Auto
Tata Motors Bajaj Auto Daimler Chrysler
FIAT Force Motors
Mumbai-Pune-Nasik GM Greaves Kinetic
Aurangabad Hyderabad M&M Premier
Skoda Tata Motors

Chennai Bangalore Hosur

Major automotive clusters - Mumbai-Pune-Nasik-
Aurangabad (West), Chennai -Bangalore-Hosur (South) and
Delhi-Gurgaon-Faridabad (North)

Source: SIAM, IMaCS analysis

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Market Overview

Exports are rising - India has the potential

to become the global outsourcing hub
Vehicle Exports from India

600000 60

Export of auto components

500000 50
(USD million )
400000 40 1,800
1400
300000 30 %
25% 1020
Units 625 760
456 578
200000 20

100000 10
FY00 FY01 FY02 FY03 FY04 FY05 FY06
0 0
CV Cars 2 Wheelers 3 Wheelers

Exports (2005-06) Growth rate ( 4 year CAGR)

Indian vehicle exports have grown at a scorching rate of over 40 % over the last few years, while
component exports have grown at around 25 % per annum. Key exporters include:
• Maruti, Tata Motors, M & M and Hyundai for Passenger Cars and MUVs
• Tata Motors and Ashok Leyland for LCV / M & HCVs
• Bajaj, TVS Motors and Hero Honda for 2 wheelers
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Market Overview

Growth drivers for the

Indian automotive industry
 Overall economic
Government growth
Policies  Lower duties & taxes

New Increasing
 Contemporary  Growth in
products product Indian Automotive consumer
Income levels
launches Industry demand  Easier financing
 Shorter life cycle

 Export
Competitiveness
 Reduced cost Cost Competitiveness
to consumer
 India emerging as a
manufacturing hub
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Market Overview

Growth potential of the

Indian automotive industry
Projected size of Auto Components industry - 2015 Potential Vehicle sales in India in 2015 - 06 ( in mn)

0.87
27.8
Domestic USD 13 - 15 bn 2015-16
Components 0.64
2.65
Components USD 20 - 25 bn
Exports

0 10 20 30
0 5 10 15 20 25
$ Billion Cars CVs Two wheelers Three Wheelers

• The Indian auto component industry is
well positioned to capitalise on the growth
in outsourcing to low cost countries
• Exports would lead the growth in the
component industry, which is expected to
be around USD 33- 40 bn by 2015
• The size of the Indian automotive industry is
expected to grow at 13% p.a over the next
decade to reach around USD 120 - 159 bn
by 2016.
• The total investments required to support the
growth is estimated at around USD 35 - 40 bn

Source: AMP Vision, ACMA Vision

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Government
regulations and policy
• Market Overview
• Government regulations & policy
• India Advantage and business opportunities
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Government regulations & policy

Policies relating to the sector:

Auto Policy
• In 2002, the Indian government formulated an auto policy that aimed at promoting
integrated, phased, enduring and self-sustained growth of the Indian automotive industry

• allows automatic approval for foreign equity investment upto 100%

in the automotive sector and does not lay down any minimum investment criteria.

• lays emphasis on R & D activities carried out by companies in India

• Weighted tax deduction of upto 150% for in-house research and R & D activities

• Formulation of an appropriate auto fuel policy to ensure availability of adequate amount

of appropriate fuel to meet emission norms

• confirms the government’s intention on harmonising the regulatory standards

with the rest of the world
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Government regulations & policy

Automotive regulations in India

Indian automotive regulations are closely aligned to the ECE regulations. The table below shows the
level of alignment of the Indian regulations with the ECE regulations

Number of
Status of Indian Regulation
regulations

Fully / Partially aligned 43

In process of being aligned 32

Items / Regulations to be covered 39

Total 114

The key regulations that are likely to impact the auto industry in the future are:
• Crash Related Regulations
• Introduction of Bharat Stage IV norms

Source: IMaCS Analysis

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Government regulations & policy
Trends in future regulations –
Safety and Emission related
Regulation Road Map Targets
• Industry challenges to development
• Better vehicles: safer and more
environment friendly
2 2
2004
005 006
• Crash requirements aligned with EU
• Mandatory Airbags
• Bharat Stage IV in Metros and Bharat
Stage III in rest of the country
AUTOMOTIVE
Approach
• Harmonization with ECE standards
• Homologation and Certification
testing agencies and centres
200 2 2 2
009 010
7 008
• India is expected to align its crash requirements and emission
standards with European standards in the 2008 / 09
timeframe
• Presently Bharat Stage III ( Equivalent to Euro III) is
mandated in Metros and other large cities and Bharat Stage II
( Equivalent to Euro II) for the rest of the country
• Bharat Stage IV ( equivalent to Euro IV) is expected
to be introduced in the large Indian metros around 2009
and Bharat Stage III in the rest of the country
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Government regulations & policy

State-of-the-art test facilities will support

the growth of the auto industry
• The Government of India is promoting
National Automotive Testing and R&D New testing &
homologation center
Infrastructure Project (NATRIP) to support at MANESAR
the growth of the auto industry in India Hill Area driving
New testing center training center and
• NATRIP envisages setting up of five for tractors & off-road
vehicles, accident
Regional In-Use
vehicle
independent and up gradation of existing data analysis and
specialised driving
management
center at
test centres training at RAE SILCHAR
BAREILLY
• Testing centres at Manesar (Haryana),
Chennai (Tamil Nadu), Pune (Maharashtra) Up-gradation of
VRDE at
• Proving ground at Indore (MP) AHMEDNAGAR
New complete
• Tractor testing facility at Rae Bareilly (UP) proving ground at
Up-gradation of INDORE
• Hill Driving Training Centre at Silchar (Assam) ARAI at PUNE

New test &

homologation
center near
CHENNAI
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India Advantage and

business opportunities
• Market Overview
• Government regulations & policy
• India Advantage and business opportunities
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India Advantage and business opportunities

Attractiveness of the Indian

automotive industry
Large and growing domestic demand Export Potential
• Demand growth expected to be around • Increased outsourcing has led to
10 % CAGR making India one of the fastest a large potential to export
growing markets components and vehicles
to other markets

Proven product Development

capabilities High quality standards
• 12 Indian component
• Capabilities to develop complete vehicles manufacturers have won the
and systems Indian Deming Prize for quality
• More than 125 Fortune 500 (including large Auto • Most leading component
auto companies) have R&D centres in India manufacturers are QS and
Industry
• Companies can leverage India’s ISO certified
acknowledged leadership in the IT industry

Competitive
manufacturing cost
Stable economic policies •Implementation of VAT, has
• Continuity in reforms and policies positioned India as one of the
• India targets to emerge as the leading low cost
“manufacturing hub” manufacturing sources
for small cars
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India Advantage and business opportunities

Opportunities in the Indian

automotive sector

Domestic Opportunities Global outsourcing

Opportunities
• Participate in domestic growth Indian
• Exports of vehicles
opportunities Automotive
• Exports of components
Sector • Engineering and Design
Services

• Potential investors can capitalise on opportunities both in the domestic

and export oriented segments
• Investment potential of upto USD 35 - 40 bn in this sector over the next 10 years
• Investments in the Indian automotive industry can be in various forms
• 100 % subsidiary - 100 % FDI through automatic route allowed in this sector
• JVs with local firms
• Technology support or sharing agreements
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India Advantage and business opportunities

Key players in the Indian auto industry -

Passenger Cars and CVs
The largest player in the Indian industry. Plans to launch new and exciting
products in the Indian markets, including the ‘100,000’ car

Suzuki’s JV in India and the largest passenger car manufacturer in India

The third largest passenger car manufacturer in India and one of the
largest exporters of vehicles. Has established India as one of its manufacturing
bases in the world. Is planning to invest heavily to boost exports from India

Has vision of capturing 10 % share of the Indian passenger car market by 2010

One of the leading players in the Indian premium cars segment

One of the leading players in the Indian premium cars segment

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India Advantage and business opportunities

Key players in the Indian auto

industry - Passenger Cars and CVs

One of the leading players in the Indian premium cars segment.

Plans to enter the small car segment by re-launching the Matiz

One of the largest players in the UV / MUV segment

The 2nd largest CV manufacturer in India

Other global players who are in India / have plans for India include -
Volvo, Daimler Chrysler, BMW and Nissan Motors
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India Advantage and business opportunities

Key players in the Indian auto

industry - Two wheelers
The largest 2 wheeler manufacturer in the world

The 2nd largest 2- wheeler manufacturer in India and the largest

3 wheeler manufacturer. Has plans for establishing a manufacturing
facility in Indonesia

The third largest 2 wheeler manufacturer in India. Has plans

for establishing a manufacturing facility in Indonesia

Has recently entered the Indian market through its direct subsidiary
( in addition to its JV – Hero Honda)

Has recently entered the Indian market through its direct subsidiary
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