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AUTOMOTIVEINDUSTRYSeptember20092ContentGrowthpotentialofIndianautomotiveindustryIndiaasamanufacturinghubProfileofIndianautomotiveindustryAUTOMOTIVEINDUSTRYSeptember20093India—theglobalmanufacturinghubBefore19831983–19931993–2009EvolutionofIndiaasaglobalmanufacturinghubClosedmarketGrowthofmarketlimitedbysupplyOutdatedmodelsPlayersHindustanMotorsPremierTelcoAshokLeylandMahindra&MahindraGovernmentofIndia(GoI)-Suzukijointventure(JV)toformMarutiUdyogJVwithcompaniesincommercialvehiclesandcomponentsPlayersMarutiUdyogHindustanMotorsPremierTelcoAshokLeylandDelicensingofsectorin1993Globalmajororiginalequipmentmanufacturers(OEM)startassemblyinIndia(Toyota,GM,Ford,Honda,Hyundai)ImportsallowedfromApril2001;alignmentofdutyoncomponentsandpartstoAssociationofSoutheastAsianNations(ASEAN)*levelsImplementationofvalue-addedtax(VAT)Emergingsmallandmediumenterprises(SMEs)inIndiaMoreglobalplayers,suchasVolkswagen,BMW,Nissan,etc.
,setupmanufacturingbasesinIndiaHighlevelsofcompetenceindesignandprocesses,highproductivityandlowcostaretheforteofIndianauto-makers.
*ASEANmembercountriesincludeMalaysia,thePhilippines,Singapore,Thailand,BruneiDarussalam,Vietnam,LaoPDR,Myanmar,IndonesiaandCambodiaAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY4Indianautomobileindustrystandsat11millionvehiclesatpresentThelargesttwo-wheelermanufacturerintheworld.
Thelargestthree-wheelermarketintheworld.
Thesecondlargesttwo-wheelermarketintheworld.
Thefourth-largestcommercialvehiclemarketintheworld.
TheIndianautoindustryhasthepotentialtoemergeasoneofthelargestintheworld.
Presently,Indiais:*CompoundAnnualGrowthRate(CAGR)SegmentShareintotal5-yearCAGR*Two-wheelers75.
4%8.
8%Passengervehicles16.
4%16.
7%Three-wheelers4.
5%10.
4%Commercialvehicles3.
7%12.
6%Source:SocietyofIndianAutomobileManufacturers(SIAM)/IMACSAnalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY7.
248.
479.
7411.
0910.
8511.
180369122003-042004-052005-062006-072007-082008-09CAGR9.
08%Automotiveproduction(millionunits)Shareofautomotivesegments(2008-09)5AlllargeglobalplayersarepresentinIndiaGMToyotaFordHyundaiMarutiSuzukiHondaSkodaVolvoMercedesBenzBMWVolkswagenSuzukiMotorcycleTataMotorsMahindra&MahindraBajajAutoTVSMotorsHeroHondaForceMotorsAshokLeylandEicherSwarajMazdaDelphiVisteonBoschDensoValeoThyssenKruppBharatForgeSundramFastenersRaneGroupShriramPistonsRICOAutoSonoKoyoSteeringExideGlobalOEMsGlobalsuppliersIndianOEMsIndiansuppliersAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY6TheOEMaswellasthecomponentindustryishighlycompetitiveTheIndianautoindustryishighlycompetitivewithanumberofglobalandIndianauto-companiespresent.
ThesupplierindustryisequallycompetitivewithamixofglobalandIndianplayers.
Two-thirdsofautocomponentproductionisconsumeddirectlybyOEMs.
ThemajoradvantageoftheIndianautomotiveindustryisaneducatedandskilled,English-speakingworkforce.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY7MostautomotiveplayersarepresentinmorethanonesegmentManufacturerSegmentsAshokLeylandLCVs,M&HCVs,busesAsianMotorWorksM&HCVsAtulAutoThree-wheelersBajajAutoTwo-andthree-wheelersBMWIndiaCarsandMUVs,high-endbikesDaimlerChryslerIndiaCars,commercialvehiclesEicherMotorsLCVs,M&HCVs,buses,bikesElectrothermIndiaElectrictwo-wheelersFiatIndiaCarsForceMotorsThree-wheelers,MUVsandLCVsFordIndiaCarsandMUVsGeneralMotorsIndiaCarsandMUVsHeroHondaMotorsTwo-wheelersHindustanMotorsCars,MUVsandLCVsHondaTwo-wheelers,carsandMUVSHyundaiMotorsCarsandMUVsManufacturerSegmentsMahindra&MahindraThree-wheelers,two-wheelers,cars,MUVs,LCVsMajesticAutoThree-wheelersMarutiSuzukiCars,MUVs,MPVsPiaggioThree-wheelers,LCVsRevaElectricCarCo.
ElectriccarsScootersIndiaThree-wheelersVolkswagen,SkodaCarsSuzukiMotorcyclesTwo-wheelersSwarajMazdaLtd.
LCVs,M&HCVSs,busesTataMotorsCars,MUVs,LCVs,M&HCVs,busesTatraVectraMotorsM&HCVsToyotaKirloskarCars,MUVsTVSMotorCo.
Two-wheelersVolvoIndiaM&HCVs,busesYamahaMotorIndiaTwo-wheelersMUVs:Multi-utilityvehicles;MPVs:Multi-purposevehicles;LCVs:Lightcommercialvehicles;M&HCVs:MediumandheavycommercialvehiclesAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY8Two-wheelersegmentisdominatedbymotorcycles4.
24.
815.
366.
217.
057.
867.
257.
430246820022003200420052006200720082009(millionunits)Domestictwo-wheelerindustry81%14%5%Breakupoftheindustrybysegment(2009)MotorcyclesScootersMopedsSource:SIAM,IMaCSanalysisScooter/scooterette:Wheelsizelessthanorequalto12inchesMotorcycle:Wheelsizemorethan12inchesMopeds:Enginecapacitylessthan75ccwithfixedtransmission,wheelsizemorethan12inchesElectrictwo-wheelers:ElectricallydrivenAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY9Two-wheelersegmentisdominatedbymotorcyclesThedomestictwo-wheelerindustryhasgrownsteadilyataCAGRof8.
5percentfrom4.
2millionin2001to7.
43millionin2009.
Themotorcyclesegmentcontinuestodominatethemarket.
Entry-levelbikes(enginepowerbelow125ccandpriceintherangeofUS$850–1,000)accountforaround80percentofsales.
Thecostofownershipandeconomicsofoperationsarekeypurchasecriteria.
Thepremium-bikesegment(enginepowerabove150ccandpriceintherangeofUS$1,200–2,000)isgrowingatafasterpacethanentry-levelvehicles;thisisanindicationoftheincreasingaffluenceofcustomers.
Recenttrendsindicatethat100ccbikesarebeingpreferredover125ccbikesbythemarket.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY10Whilethemotorcyclesegmentisgrowing,thescootersegmentisshrinkingThescootersegment,excepttheA2segment,isshrinking.
Bikesinthe75ccto125ccrangecornerthemajorshareofthetwo-wheelersegment.
TheB3segmentisthefastest-growingsegmentintheIndiantwo-wheelermarket.
TheC1segmentcontinuestofallowingtolowerdemandformopeds.
SegmentDescriptionSharein2001–02Sharein2007–08Sharein2008–09A1Scooterwithenginecapacitylessthan75cc5%0.
5%0.
2%A2Scooterwithenginecapacitybetween75ccand125cc5%13%13%A3Scooterwithenginecapacitybetween125ccand250cc12%1%0.
5%B2Motorcyclewithenginecapacitybetween75ccand125cc62%58%56%B3Motorcyclewithenginecapacitybetween125ccand250cc5%21%25%B4Motorcyclewithenginecapacityabove250cc1%0.
5%0.
5%C1Mopeds10%6%5%Segment-wiseanalysisoftwo-wheelermarketSource:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY11Thedomestictwo-wheelermarketisdominatedbyIndianplayers…(1/3)HeroHonda:Largesttwo-wheelermanufacturerintheworldBajajAuto:Second-largesttwo-wheelermanufacturerandlargestthree-wheelermanufacturerinIndiaTVSMotorCo.
:Third-largesttwo-wheelermanufacturerinIndia;hasestablishedamanufacturingfacilityinIndonesiaHondaMotorcycle&ScooterIndia(Pvt)Ltd.
(HMSIL):HasrecentlyenteredtheIndianmarketthroughitsownsubsidiary(inadditiontoitsjointventureHeroHonda)SuzukiMotorcycleIndiaPvt.
Ltd.
:ThecompanystarteditsIndiaoperationsinFebruary2006throughthisfully-ownedsubsidiaryAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY12Thedomestictwo-wheelermarketisdominatedbyIndianplayers…(2/3)Inthetwo-wheelermarketinIndia,competitionisintensewitharound10playerscompetingforashareoftheindustry.
TheplayersincludeglobalgiantssuchasHonda,SuzukiandYamaha,aswellasIndianplayerssuchasBajajandTVS.
ThemarketleaderisHeroHondaMotors,closelyfollowedbyBajajAuto.
Thesegmentischaracterisedbyfrequentnewproductlaunches,withover22modelslaunchedin2007–08,andcloseto16modelsandvariantslaunchedin2008–09.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY49%17%15%14%5%HerohondamotorsltdBajajautoltdTVSmotorcompanyltdHMSILOthersMarketshareofkeyplayersin2008–09Source:SIAM,IMaCSanalysisHeroHondaMotorsLtdBajajAutoLtdTVSMotorCompanyLtdHMSILOthers13Thedomestictwo-wheelermarketisdominatedbyIndianplayers…(3/3)Mahindra&Mahindrahasrecentlymadeanentryintothetwo-wheelermarketwiththeacquisitionofKineticMotors.
Bikesfuelledbycompressednaturalgas(CNG)isarecentpromisingtechnologicaldevelopmentinthetwo-wheelermarket.
Severalforeignplayers,suchasBMWandHarleyDavidson,areenteringtheIndianmarketwitharangeofluxurybikes.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY14Two-wheelerexportshavegrownatanimpressiveCAGRofover38percent…(1/2)104.
2179.
7265.
1366.
4513.
2619.
2819.
81004.
20200400600800100020022003200420052006200720082009(thousandunits)Two-wheelerexportsfromIndiaCAGR38.
2%63%19%8%5%4%Marketshareofkeyplayersinexportsin2008-09BajajAutoLtdTVSMotorCompanyLtdHeroHondaMotorsLtdHondaMotorcycle&ScooterIndia(Pvt)LtdOthersSource:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYSource:SIAM,IMaCSanalysis15Two-wheelerexportshavegrownatanimpressiveCAGRofover38percent…(2/2)Two-wheelersexportshavegrownataCAGRofover38percentinthelastsevenyears.
ThemajorityoftheexportsweretoBangladesh,SriLanka,BhutanandNepal.
60percentofthebikesexportedwerethosewithanenginecapacitybelow125cc.
BajajAutoisthemarketleaderinexportswithashareof63percent.
BajajAutoisfurtherlookingtoexplorebikemarketsinAfricaandEurope.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY16PassengervehiclessegmentinIndiaisdominatedbycars…(1/2)DomesticpassengervehiclesindustryAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY675.
1707.
2902.
11061.
61143.
11379.
7154815520200400600800100012001400160020022003200420052006200720082009Source:SIAM,IMaCSanalysis(thousandunits)CAGR12.
6%78.
6%21.
4%PassengerscarsSUVs/MPVsDomesticpassengervehiclesindustry(2009)Source:SIAM,IMaCSanalysis17PassengervehiclessegmentinIndiaisdominatedbycars…(2/2)ThedomesticIndianpassengervehiclesmarkethasgrownataCAGRof12.
6percentoverthelastsevenyearstoreach1.
55millionunitsin2008-09.
Passengercars,whichaccountedfor78.
6percentofvolumes,grewataCAGRof15percent.
Theremainingsharewasaccountedforbymulti-utilityvehiclesandsports-utilityvehicles.
Domesticsalesin2008-09didnotincreasesignificantlyoversalesin2007–08;however,salesdidnotdropeither.
TheorganisedusedcarindustryisgainingsteadygroundintheIndianmarketwithsalesfastreachingthelevelsofnewcarsales.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY18AllmajorglobalplayersinpassengervehiclessegmenthaveapresenceinIndia…(1/3)Ford,GM,Toyota,MercedesandHyundaihavebeenpresentintheIndianmarketformorethanadecadeeachandhavesuccessfullyestablishedastrongfootholdinIndia.
AmongthenewerglobalplayersestablishingbasesinIndiaareVolkswagen,NissanandBMW.
MarutiSuzukiIndiaLtd.
isthelargestpassengercarmanufacturerinthecountry;Indiaisconsideredastrategicmarketbythecompany.
TataMotors,thelargestautomotiveplayerintheIndianindustry,launchedtheRs.
1lakh(US$2,500)carNano'inJune2009.
HyundaiMotorsisthethird-largestpassengercarmanufacturerinIndia;ithasoneofitsglobalmanufacturingbasesinIndia,nearChennai.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY19AllmajorglobalplayersinpassengervehiclessegmenthaveapresenceinIndia…(2/3)Source:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYMarketsharesofkeyplayersin2008–0947%16%15%7%4%12%MarutiSuzukiIndiaLtdHyundaiMotorIndiaLtdTataMotorsLtdMahindra&MahindraLtdGeneralMotorsIndiaLtdOthers20AllmajorglobalplayersinpassengervehiclessegmenthaveapresenceinIndia…(3/3)Mahindra&Mahindra:Amongstthelargestplayersinthemulti-utilityvehiclessegment,M&MhasatieupwithRenaultforthemanufacturingandmarketingoftheLoganbrandofcarsinIndia.
Toyota:Thecompanyenvisionscapturing10percentshareoftheIndianpassengercarmarketby2010.
HondaMotors:ItisoneoftheleadingplayersintheIndianpremiumcarsegment.
Ford:Thecompanyisaleadingplayerinthepremiumcarsegment.
GeneralMotors:Aleadingplayerinthepremiumcarsegment,GeneralMotorshasrecentlyenteredthecompactcarsegmentinIndia.
MostoftheleadingglobalplayershaveapresenceinIndiaintheformofjointventuresorsubsidiaries.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY21Indiaisincreasinglybecomingamanufacturinghubforpassengercars…(1/2)Thesubstantialgrowthincarexportsin2008-09isastrongindicatorofIndiamovingclosertobecomingamanufacturinghubforglobalplayers.
Source:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY53.
1772.
01129.
29166.
4175.
57198.
48217.
05331.
505010015020025030035020022003200420052006200720082009CarexportsfromIndia(thousandunits)21%76%2%MarutisuzukiindialtdHyundaimotorindialtdTatamotorsltdMarketsharesofkeyplayersin2008–09Source:SIAM,IMaCSanalysisCAGR30%MarutiSuzukiIndiaLtdHyundaiMotorIndiaLtdTataMotorsIndiaLtd22Indiaisincreasinglybecomingamanufacturinghubforpassengercars…(2/2)ExportsofcarsfromIndiahavegrownataCAGRof30percentinthelastsevenyearstoreach331,000unitsin2008-09.
Exportsofcarsin2008-09increased52percentover2007-08.
Thisisthehighest-ever,single-yearjumpincarexportnumbersinIndia.
HyundaiMotorsisthemarketleaderincarexportswitha76percentshare,upfromthepreviousyear's66percentshare;thecompanyusesIndiaasamanufacturingbaseforcompactcarsthatareexportedworldwide.
CarexportsaremadelargelytoSouthAmerica,Africa,Europe,LatinAmericaandtheMiddleEast.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY23Commercialvehiclessegmentpicksupafterslightdragin2008–09…(1/2)Breakupoftheindustrybysegment(2008–09)Source:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY146.
67190.
68260.
11318.
43351.
04467.
88486.
82384.
1205010015020025030035040045050055020022003200420052006200720082009DomesticCVindustryinIndia(thousandunits)45%39%9%7%LCVgoodscarriersM&HCVgoodscarriersM&HCVpassengervehiclesLCVpassengervehiclesSource:SIAM,IMaCSanalysis24Thedomesticcommercialvehiclesindustryclockedsalesofmorethan384,000vehiclesin2008-09.
Aseriesofrecentincentiveschemes,providedbythegovernment,havehadapositiveimpactonsales.
TheshareofLCVsisgraduallyincreasing,indicatingtheemergenceofthehub-and-spokemodeloftransportation.
In2008-09,theLCVgoodssegmentledgrowthwithashareof45percent.
Thegoodsindustryisdominatedbymulti-axlevehicles,whichaccountfornearly50percentofthemarket.
Commercialvehiclessegmentpicksupafterslightdragin2008–09…(2/2)AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY25CommercialvehiclessegmentisdominatedbyIndianplayers…(1/3)TataMotorsLtd.
:Thecompanyisthelargestcommercialvehiclemanufacturerinthecountry.
HavingestablishedastrongpositioninIndia,ithasbeenrapidlyexpandinggloballywithaseriesofrecentacquisitionssuchasDaewooCommercialVehicleCo.
Ltd.
(2004)andHispanoCarroceraS.
A.
,Spain,(2009)andjointventureswithThonburiAutomotiveAssemblyPlantCo.
,Thailand,(2006)apartfromseveralotherstrategicalliancesinthecommercialvehiclesspace.
Mahindra&MahindraLtd.
:Arelativelynewplayerinthesegment,thecompanyformedajointventurewithInternationalTrucksinNovember2005tomanufactureM&HCVtrucksinIndiaandhasdisplacedAshokLeylandLtd.
fromsecondpositionwithrespecttomarketshare.
AshokLeylandLtd.
:Thecompanyisthethird-largestplayerinthecommercialvehcilessegmentinIndia.
EicherMotorsLtd.
:AleadingplayerintheLCVtruckssegment,EicherenteredtheM&HCVtruckssegmentrecently;ithasalsoenteredintoajointventurewithVolvoforthemanufactureofcommercialvehicles.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY26CommercialvehiclessegmentisdominatedbyIndianplayers…(2/3)VolvoIndia:Thecompanyisoneoftheleadingplayersinluxurypassengerbusesandheavydutytippers.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY64%15%13%8%5%TatamotorsltdMahindraandmahindraltdAshokleylandltdOthersEichermotorsltdOthersMarketsharesofkeyplayersin2008–09Source:SIAM,IMaCSanalysisMahindra&MahindraLtdEicherMotorsLtdTataMotorsIndiaLtdAshokLeylandLtd27CommercialvehiclessegmentisdominatedbyIndianplayers…(3/3)TataMotorsisthemarketleaderinboththegoodsandpassengervehiclesegments.
TheLCVmarketisdominatedbyTataMotors,followedbyMahindra&Mahindra.
TheintroductionofTataAceinMay2005contributedtowardsthesignificantgrowthofthesub-1tonnesegment.
Withotherplayersenteringthissegment,itisexpectedtogrowrapidlyinthemediumterm.
Manyplayersareintheprocessofstrengtheningtheirholdinthemarketbyenteringintopartnershipsandjointventures.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY28ExportsofIndiancommercialvehicles…(1/2)Keyplayers'exportshare(2008–09)AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY11.
8712.
2617.
4329.
9440.
649.
775942.
67010203040506020022003200420052006200720082009(thousandunits)CVexportsfromIndiaSource:SIAM,IMaCSanalysis62%16%14%5%3%TatamotorsltdMahindraandmahindraltdAshokleylandltdOthersEichermotorsltdSource:SIAM,IMaCSanalysisMahindra&MahindraLtdEicherMotorsLtdTataMotorsIndiaLtdAshokLeylandLtdOthers29ExportsofIndiancommercialvehicles…(2/2)TataMotorsaccountsfor62percentofcommercialvehicleexports,andAshokLeylandandMahindra&Mahindramakeupforalargeportionofthebalance.
LCVgoodscarriersaccountedfor60percentofoverallexports.
ThemajorportionoftheexportsaretoSriLanka,theGulfcountriesandAfrica.
Althoughcommercialvehicleexportswitnessedlowersalesin2008-09,thefuturegrowthprospectsremainbrightowingtotheexpectedrecoveryofworldmarkets.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY30Growthinthree-wheelershasbeendrivenbytheneedforalow-cost,lastmiletransportationsystem…(1/2)Breakupofindustrybysegment(2009)AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY200.
28231.
53284.
08307.
86359.
92403.
91364.
735005010015020025030035040045020022003200420052006200720082009Source:SIAM,IMaCSanalysis(thousandunits)Domesticthree-wheelerindustry76.
7%23.
3%PassengercarriersGoodscarriersSource:SIAM,IMaCSanalysis31Growthinthree-wheelershasbeendrivenbytheneedforalow-cost,lastmiletransportationsystem…(2/2)Three-wheelersalesinIndiatouchedanewrecordof0.
4millionin2006–07.
Thelaunchoffour-wheel,sub-1-tonnevehicleshasresultedinasegmentalshiftfromthree-wheelers.
Theproportionofthree-wheelergoodscarriersinoverallsaleshasdoubled,indicatingtheincreasedneedforalow-cost,lastmiletransportationsystem.
Theless-than-3.
5tonnesegmentingoodsaccountedfor82percentofsalesandtheless-than-fourseatersegmentinpassengerversionsaccountedfor97percentofsales.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY32Thethree-wheelermarketisdominatedbyPiaggioandBajajAutoPiaggioVehicles:Themarketleaderinthethree-wheelersegment,itisintheprocessofmakingIndiaitsglobalmanufacturinghub.
BajajAutoLtd.
:Secondbymarketshareinthethree-wheelersegment,BajajAutointheprocessofrevampingitsproductportfolio.
Mahindra&Mahindra:Oneoftheleadingplayersinthesegmentwithagrowingmarketshare.
AtulAutoLtd.
:Thecompanyhasintroducednewproductsintherearenginesegment.
ItalsomanufacturesChakda'-athree-wheelerreengineeredfromatwo-wheeler-popularinthewesternpartsofthecountry.
ForceMotorsLtd.
:AjointventurebetweenBajajTempoandMANAGofGermany,Forceisaleadingplayerinthegoodscarriersegment.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY33Thethree-wheelermarketisdominatedbyPiaggioandBajajAutoMarketsharesofkeyplayersin2008–09Source:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY34Exportsofthree-wheelershavebeengrowingrapidly,withBajajAutoastheclearmarketleaderExportsofthree-wheelerstouchedanewhighof148,000unitsin2008–09,registeringarobustCAGRof38percentoverthelastsevenyears.
ThishasbeencontributedalmostentirelybyBajajAuto,whichaccountedforaround94percentofexportsin2008-09.
BajajAutoexportstoSriLanka,Egypt,NepalandBangladesh,amongothercountries.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY15.
4643.
3768.
1466.
876.
88143.
9141.
2414805010015020020022003200420052006200720082009(thousandunits)Three-wheelersexportsSource:SIAM,IMaCSanalysis35IndianfirmsareincreasinglypartneringwithforeignfirmsacrosssegmentsIndianOEMForeignpartnerTypeofpartnershipMarutiSuzukiSuzukiMotorCorporation-JapanEquitypartnerMahindraLoganRenaultJointventureTataMotorsFiatTieupformanufacturingandmarketinginIndiaKineticGroupSanyangIndustryCoLtd(SYM-Taiwan)TechnologyItaljet-ItalyTieupformanufacturinganddistributionHeroHonda-JapanTechnologyHeroCyclesUltraMotorCompany,UKTechnologyBajajAutoKawasakiHeavyIndustriesLtd.
,JapanEnginetechnologyTokyaR&DCo.
Ltd.
,JapanTechnologyKubotaCorp.
,JapanTechnologyAshokLeylandNissanLCVsHino-JapanEnginetechnologyIrizar-SpainBusbodytechnologyZF-GermanyGearboxtechnologyTataMotorsMarcoPolo-BrazilBus/coachtechnologyCummins-USAEnginetechnologyAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY36Indianautoindustryhasevolvedaroundthreemajorclusters…(1/5)Majorautomotiveclusters:Mumbai-Pune-Nashik-Aurangabad(west);Chennai-Bangalore-Hosur(south);andDelhi-Gurgaon-Faridabad(north).
Export-orientedcompanieshaveformedbaseinthewest/southregions,duetoproximitytoports.
Uttarakhandisfastemergingasanautohubwithleadingcompaniesdecidingtosetupunitsinthestatetomakeuseofthebenefitsofthestate'stax-holidayscheme.
TataMotors,alongwithBajajAutoandMahindra&Mahindra,aretogetherinvestingaboutUS$640millioninUttarakhand.
WiththeupcomingplantofTataNano,SanandinGujaratisalsolikelytodevelopasanothernodeinthewesterncluster.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY37Indianautoindustryhasevolvedaroundthreemajorclusters…(2/5)Majorcluster:North/CentralDelphiAutoJBMSonaKoyoAsahiIndiaDensoIndiaLumaxJohnsonMattheyHeroHondaHondaSIELHondaMotorcycle&ScooterIndiaMarutiSuzukiTataMotorsBajajAutoAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY38Indianautoindustryhasevolvedaroundthreemajorclusters…(3/5)Majorcluster:WestDaimlerGMSkodaBajajAutoBharatForgeDGPHinodayKirloskarBrothersTACOGroupSKFBearingsSupremeIndustriesBrightBrothersBoschChassisTataJohnsonNRBBearingsAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYMahindra&MahindraTataMotorsVolkswagen39Indianautoindustryhasevolvedaroundthreemajorclusters…(4/5)Majorcluster:SouthAshokLeylandFordTVSMotorsHyundaiToyotaKirloskarMotorBrakeIndiaFennerRaneGroupVisteonSundaramFastenersDelphiTVSIndiaNipponTIGroupLucas-TVSUCALAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYRoyalEnfieldVolvo40Indianautoindustryhasevolvedaroundthreemajorclusters…(5/5)Minorcluster:EastTataMotorsSimpson&CoInternationalAutoForgingsRamkrishnaForgingsJMTExideAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYHindustanMotors41IndianautopolicyisdesignedforsupportingthegrowthoftheindustryAutomaticapprovalforforeignequityinvestmentupto100percentNominimuminvestmentcriteriaInvestmentincentivesbylocalstategovernments:MoststatescustomiseincentivesforlargeinvestmentsGovernment'sintentionofharmonisingregulatorystandardswiththerestoftheworldWeightedtaxdeductionupto150percentforin-houseresearchandR&DactivitiesIndianAutoPolicy2002LOW-ENTRYBARRIERINVESTMENTINCENTIVESCONCERNFOREMISSIONSEMPHASISONR&DIn2002,theIndiangovernmentformulatedanautopolicyaimedatpromotinganintegrated,phasedandself-sustainedgrowthoftheindustry.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY42IndianautomotiveregulationsareintheprocessofbeingalignedwithEuropeanregulationsIndianautomotiveregulationsarecloselyalignedtoECEregulations.
ThediagramdepictsthelevelofalignmentofIndianregulationswithECEregulations.
Thekeyregulationsthatarelikelytoimpacttheautoindustryandcreatetheneedforworld-classproductsinthefuturearecrash-relatedregulationsandtheintroductionofBharatStageIVnorms.
numberofregulationsAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYIndianregulationsalignedwithECEregulations43Safetyandemission-relatedregulationsinIndia—achievementsandplans2000Entirecountry2001NCRandthreemajormetros2003NCRand10majorcities2005EntirecountryNCRand10majorcities2010EntirecountryNCRand10majorcitiesEmissionregulationsBrakesSteeringeffortGradeabilityInstallationofmirror,hornandlightingdevicesRearunder-runprotectivedevices(RUPD)/lateralprotectivedevices(LPD)SafetybeltElectro-magneticinterference(EMI)WipingsystemRearviewmirror,etc.
Antibrakeskid–2007Truckcaboccupantprotection–crashSuperstructureofbusAirbagsElectromagneticcompatibility(EMC)Frontunder-runprotectivedevices(FUPD)SafetyregulationsEURO-IVEURO-IIIEURO-IIEURO-IAchievementsuntildatePlanAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY44NationalAutomotiveTestingandR&DInfrastructureProject(NATRIP)—aninitiativetostrengthenR&Dinfrastructure—isapproachingcompletionNATRIP,aGovernmentofIndiainitiative,hasenvisagedaninvestmentofRs.
1,718crore(aboutUS$380million)insettingupthefollowingfacilities.
NATRIPisexpectedtostrengthentheautomotiveR&DinfrastructureinIndia.
RaeBareillycentreCompletehomologationservicestoagri-tractors,off-roadvehicles,gensetsasperIndianorglobalstandardsandadrivertrainingcentre.
Centerofexcellenceforaccidentdataanalysis.
Thecommissioningscheduleforphase-IisJuly2010andAugust2010forphase-II.
TheacquisitionoflandforsettingupthecentreisinprogressandisunderconsiderationoftheUttarPradeshgovernment.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY45NATRIP—northernandeasternregionInternationalCentreforAutomotiveTechnology(iCAT),ManesarCompletehomologationservicestoallvehiclecategoriesasperIndianorglobalstandards.
Centerofexcellenceforcomponentdevelopment,noisevibrationandharshness(NVH)testing.
ItisscheduledtobecommissionedinMarch2010.
Constructionofbuildingsforpowertrainlabandfatigueandcertificationlab;procurementofequipmentfortwomorelabs;andacquisitionofanadditional42acresoflandisinprogress.
SilcharcentreHillareadrivertrainingcentreandinspection&maintenancefacilities.
Centerofexcellencefordrivertraining.
Commissioningschedule:2010(onschedule);civilworksatonesitecompleted;tendersforequipmentontrack.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY46NATRIP–westernregionAhmednagar—Vehiclesresearch&developmentestablishment(VRDE)upgradationResearch,design,developmentandtestingofvehicles.
Centerofexcellenceforphotometry,electromagneticcompatibility(EMC),testtracks.
Commissioningschedule:Completed.
Indore–NationalAutomotiveTestTracks(NATRAX)CompletetestingfacilitiestoallvehiclecategoriesasperIndianorglobalstandards.
Centerofexcellenceforvehicledynamics,tyredevelopment.
Commissioningschedule:December2010.
Inprogress:4,000acresoflandalreadyacquired;constructionofpowertrainlab,testtracksandbuildinginadvancedstages;shiftingofutilitiesinprogress.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY47NATRIP–southernregionPune—ARAIupgradationCompletehomologationservicestoallvehiclecategoriesasperIndianorglobalstandards.
Centerofexcellenceforpowertraindevelopment,materials,fatigue.
Commissioningschedule:RescheduledtoMarch2010.
Inprocess:Landacquisitionnearingcompletion;civilpackagetenderinfinalstages;equipmenttenderfinalised.
ChennaicentreCompletehomologationservicestoallvehiclecategoriesasperIndianorglobalstandards.
Centerofexcellenceforinfotronics,EMC,passivesafety.
Commissioningschedule:RescheduledforDecember2009.
Inprogress:AwardofmostoftheworkcompletedbyApril2009.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY48ContentGrowthpotentialofIndianautomotiveindustryIndiaasamanufacturinghubProfileofIndianautomotiveindustryAUTOMOTIVEINDUSTRYSeptember200949GrowthdriversfortheIndianautomotiveindustryNewproductslaunchesIndianautomotiveindustryGovernmentpoliciesIncreasingconsumerdemandCostcompetitivenessOveralleconomicgrowthLowerdutiesandtaxesGrowthinincomelevelsEasierfinancingExportcompetitivenessReducedcosttoconsumerIndiaemergingasamanufacturinghubContemporaryproductsShorterlifecycleAutomotiveIndustrySeptember2009GROWTHPOTENTIALOFINDIANAUTOMOTIVEINDUSTRY50IndianAutomotiveMissionPlan(AMP)—vehiclessalesexpectedtogrowto32millionby2015–16ThesizeoftheIndianautomotiveindustryisexpectedtogrowat13percentperannumoverthenextdecadetoreacharoundUS$120billiontoUS$159billionby2016.
ThetotalinvestmentsrequiredtosupportthegrowthareestimatedataroundUS$35billiontoUS$40billion.
Thetwo-wheelersegmentisexpectedtoleadthegrowth,withanestimatedsalesof27.
8millionunitsby2016.
TotalexportsintheautomotivesectorwouldbearoundUS$30billiontoUS$35billion,ofwhichcomponentexportswouldaccountforUS$20billiontoUS$25billion,andvehicleexportsfortherest.
2.
6531.
960.
6427.
80.
87CarsCVsTwowheelersThreeWheelersTotalPotentialvehiclesalesinIndia(2015–16)AutomotiveIndustrySeptember2009GROWTHPOTENTIALOFINDIANAUTOMOTIVEINDUSTRY(millionunits)-wheelers-51ContentGrowthpotentialofIndianautomotiveindustryIndiaasamanufacturinghubProfileofIndianautomotiveindustryAUTOMOTIVEINDUSTRYSeptember200952GlobalpassengercarcompaniesaretakingadvantageofIndiaasamanufacturingbase…(1/2)NissanMotorCo.
hasidentifiedIndiaasoneofthefivelow-costcountriestomanufactureitsnewgenerationcompactcars,includingtheMicra.
Volkswagenhasinvestedina110,000-unitpassengercarassemblyplant,whichwasmadeoperationalinApril2009.
Volkswagen'sIndiaplansincludethemanufactureofsmallcarsbasedonthePolo'platform.
Toyotahasannouncedplansforasecondplanttobeginoperationsin2010,havinganinitialannualproductioncapacityofaround100,000vehicles,apartfromthetransmissionplantthatthecompanyhassetuptomeetregionaldemand.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB53GlobalpassengercarcompaniesaretakingadvantageofIndiaasamanufacturingbase…(2/2)HyundaiMotorshasshiftedtheentireproductionofAtosPrime,itscompactmodel,toitsChennaiplant.
IthasalsosetupaUS$40millioncomputer-aideddesigncentreinHyderabad.
Further,Indiaisthesolemanufacturingbaseforthenewly-launchedmodeli10.
ThecompanyalsoplanstoinvestafurtherUS$250millioninIndiaby2013,raisingitscumulativeinvestmentinthecountrytoaroundUS$1billion.
GeneralMotors'US$60milliontechnicalcentreinBangalorewillbeitspowerhousefordevelopingfuturetechnologiesandshapingnewcars.
Apartfromtheabove,itisalsointheprocessofsettingupanadditionalfacilityatTalegaon,nearPune.
FordMotorCo.
exports58percentofthetotalnumberofcarsproducedinitsIndiaplantatChennai.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB54IndianautoindustryiswitnessingmorejointventuresandacquisitionsthanbeforeMergers,acquisitionsandjointventureshavecontinuedtobethedrivingforceintheIndianautomobileindustryinsyncwiththedynamicsofanopenmarket.
LeadingautomobilecompanieshaveeithersetuptheirownmanufacturingbaseinIndiaorhavetiedupwithIndianautomotivefirmstorolloutnewproducts.
ThelistincludesInternational,MAN,Daimler,Toyota,Nissan,Renault,Fiat,Honda,KawasakiandCummins,amongothers.
DaimlerAGboughta26percentstakeinSutlejMotorsinthefirsthalfof2008.
Indiancompanieshavealsobeenbullishinacquiringforeignautomobilecompaniestoreinforcetheirpresenceintheglobalmarket.
Thelandmarkdealinthefirsthalfof2008wasTataMotors'acquisitionofJaguar-LandRoverfromFordforUS$2.
30billion.
Duringthisperiod,Mahindra&MahindraacquiredthreeItaliancompanies-GRGraficaRicerca,MetalcastelloandEnginesEngineering.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB55SeveralfactorsmakeIndiaafavouriteinvestmentdestinationProximitytomarketsProximitytootherAsianeconomiesProximitytotheemergingmarketssuchasAfricaShipmentstoEuropecheaperthanthosefromBrazilandThailandHighqualitystandards11IndiancomponentmanufacturershavewontheDemingawardforqualityMostleadingcomponentmanufacturersareQSandISOcertifiedCompetitivemanufacturingcostSkilledlabourcostsamongstthelowestinIndiaExportpotentialTotalvalueofexportsby2015expectedtoreachUS$8billiontoUS$10billionforvehiclesandUS$20billiontoUS$25billionforcomponentsAvailabilityofmanpower0.
4millionengineeringgraduateseveryyearSevenmillionenterworkforceeveryyearLargeandgrowingdomesticdemandDemandgrowthof14percentCAGRmakesIndiaoneofthefastestgrowingmarketsStableeconomicpoliciesContinuityineconomicreformsandpoliciesrelatedtoinvestmentsProvenproductdevelopmentalcapabilitiesMorethan125Fortune500(includinglargeautocompanies)haveR&DcentresinIndiaCompaniescanleverageIndia'sacknowledgedleadershipintheITindustryIndiaasanautomotivehubAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB56ManyglobalautocompanieshavemadeIndiaamanufacturingbaseasarobustsupplybaseexistsinIndiaMarutiSuzukiHeroHondaToyotaKirloskarSkodaIndiaSwarajMazdaTatraVectraVolvoFordIndiaForceMotorsGMDelphiDensoLearMeritorVisteonJohnsonMattheyTRWValeoRicoMindaTataMotorsMahindra&MahindraAshokLeylandHindustanMotorsTVSMotorsBajajAutoTier-1andtier-2suppliersIndianOEMsGlobalOEMs/JVsIndiansupplybaseEnginesStampingGearboxesEngineeringservicesPlasticsMouldsForgingCastingsLampsDiemakingAirbrakesGlobalexportsAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB57India—asourcinghubandamanufacturingbaseforOEMsManufacturerComponentsWorthCommentsHyundai,Ford,Skoda,Suzuki,MahindraSpecificmodelsofcarsN/AHavealreadypickedIndiaasamanufacturingbaseforparticularcarmodelToyota,GM,Fiat,Volkswagen,RenaultandDaimlerHubforautocomponentsN/AAreintheprocessofmakingIndiaamanufacturinghubforautocomponentsFiatGroupPurchasingAutopartsUS$1billionBy2010foritsEuropeanandotheroperations.
About70percentoftheoutsourcedpartswillbesolelyfortheFiatGroup'smultipleoperationsinIndiaHyundaiAutopartsforglobaloperationsLookingtosourceagreaterpercentageofcomponentsfromIndiansuppliersforitsglobaloperationsVolvoComponentsinthecommercialvehiclessegmentforproductsmanufacturedatitsBangalorefacilityN/ASourcingofautocomponentsthroughtherecently-inkedjointventurewithEicherMotors;tobemanufacturedfromthePithampurplantVolkswagenAGAutocomponents1billionThecompanyistargetingabout70percentlocalisationofitscarsproducedinIndiawithintwoyearsofstartingoperationsRenault-NissanHasfirmedupplanstosourcecomponentsandaggregates300millionoverthenexttwoyearsFirstphasetosourcelow-endtechforlow-endmodels,high-endinsecondphaseDaimlerChryslerAutocomponentsandITservicesUS$125millionGrowingat20percentCAGRAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB58CompetitivenessofIndianautomotiveindustryInordertoemergeasamanufacturinghub,Indiafacescompetitionfromotherlow-costcountriessuchas:-China-Thailand-BrazilIMaCShascomparedthecostcompetitivenessofmanufacturingsixautomotivecomponentgroups(engine,transmissionandsteering,suspensionandbraking,electricals,equipmentandothers)inIndiawithrespecttothesecountriesintermsoffactorssuchas:-Taxesandduties-Costofmanufacturing(forexample,powerandfuelcosts,labourcosts)-EconomiesofscaleCompetitivenessofmanufacturinginIndiaisimprovingwiththereductionoftaxlevels,taxreformsandwithimprovingbusinessinfrastructure.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB59TaxstructureinIndiavis-à-visothercountriesTheburdenofdirectandindirecttaxesishigherinIndiathaninothercountries.
IndiaBrazilChinaThailandExcise8-16%---VAT12.
5%17%17%7%Othertaxes15%*Corporatetax34%34%25%30%ExemptionsSpecificpackagesprovidedbystatesforlargeinvestmentsTaxincentivesforcompaniesinexportprocessingzonesPreferentialcorporatetaxpoliciesforforeigninvestmententerprisesTaxincentivesforinvestmentsoutsidecentralzoneImportduty13%16%8%FreeonrubberImportdutyonsteel5%12%^2%10%Source:GoI,ApectariffGovernmentofIndiaannouncedanacross-the-boardexcisedutyreductionof4percentacrossautomobilesonDecember7,2008Incaseofbuschassis,excisedutyisat8.
18percent.
*ReferstolocaltaxessuchasWithholdingTax(WHT)^Importdutyonheavyplateshasbeenreducedto2percent,butwithacapof20,000tonnesAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB60LabourandlabourproductivityinIndiavis-à-visothercountriesIndiacomparesfavourablywithotherlow-costcountriesinproductivity-adjustedlabourcost.
Indianlabourproductivityinthemanufacturingsectorisontheincreasewiththeapplicationofproductionmanagementtechniques;manycompanieshavedoubledtheirproductivityinthelastfiveyears.
GovernmentofIndiahasearmarkednearlyRs.
1,000croreforhumanresourceskilldevelopmentinitiativesacrossindustrysectors.
IndiaBrazilChinaThailandLabourcost(US$/hour)0.
754.
30.
750.
8Labourcost(US$/day)*633.
666.
4Productivityindex**1.
02.
01.
01.
2Productivityadjustedlabourcost(US$/day)616.
865.
33*Assumingeight-hourshiftperday**GrossvalueaddedperpersonemployedwhencomparedtoIndiaAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB61SwiftprogressonNationalSkillDevelopmentProgram(NSDP)Theaimofthemissionis―toprovidewithina5-8yeartimeframe,apoolofskilledworkforce,sufficienttomeetdomesticrequirements,withsurplusestocatertotheskilldeficitsinotherageingeconomies‖.
TheNationalSkillDevelopmentCorporation(NSDC)hasbeenestablishedwithacommitmentofRs.
1,000crorefromtheCentre.
AnotherRs.
15,000croreisenvisagedtobegeneratedfromstategovernments,publicsectorentities,theprivatesector,andbilateralandmultilateralsources.
Theautomobileandautocomponentssectorisoneofthetop-10,high-growthmanufacturingsectorsthatisinfocusforsector-specificskilldevelopment;thesectorenjoysextensiveparticipationfromtheindustry.
Themissionisexpectedtoenhanceskillavailabilityandproductivityacrosstheindustry.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB62PowercostsandinterestratesinIndiavis-à-visothercountriesPowercostsinIndiaarethehighestamongstcompetingcountries.
However,powercostaccountsforonlyaround3percentoftheoverallcoststructureandis,hence,notasignificantdisadvantage.
PowercostsinIndiavarybystateandareaslowasUS$0.
1instatessuchasMaharashtra.
WithprivatisationandcompetitionintheIndianpowersector,thecostofpowerisexpectedtoberationalisedfurther.
InterestratesinIndiaarehighascomparedtocompetingcountries,butareexpectedtosofteninthefuture.
Therecentdownturnacrosstheglobaleconomyhasforcedcentralbanksofmajorcountriestoslashlendingrates.
PowercostsCountryCostperkWh(US$)India0.
14Brazil0.
05China0.
03Thailand0.
11InterestratesCountryAnnuallendingIndia10-11%Brazil13-14%China5-6%Thailand7-8%AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB63ManufacturinginChinavis-à-visIndiaIndianmanufacturerssufferfromacostdisadvantagevis-à-visChinesemanufacturersmainlybecauseofhigherpowerandfuelcostsand,tosomeextent,duetothecascadingimpactoftaxes.
ChinaEnginepartsTransmissionandsteeringSuspensionandbrakingElectricalsEquipmentOthersCostofcomponentforanIndiancompany100%100%100%100%100%100%LessTaxesanddutiesHighernetstate-levelleviesand0.
55%0.
85%1.
58%1.
51%1.
72%0.
89%cascadingimpactoftaxesHigherimportduty0.
01%0.
01%0.
03%0.
07%0.
08%0.
03%Highercorporatetaxes0.
27%0.
27%0.
27%0.
27%0.
27%0.
27%IndustrycostsHighercostofpowerandfuel3.
43%3.
16%4.
01%3.
02%2.
13%2.
68%Highercostoffunds0.
62%0.
30%0.
18%0.
00%0.
44%0.
13%Higherrateofinsurance0.
10%0.
08%0.
10%0.
08%0.
11%0.
08%OthersOthers3.
63%2.
98%3.
08%3.
11%3.
50%2.
72%TotalcostdisadvantageforIndia8.
61%7.
65%9.
25%8.
06%8.
25%6.
80%AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB64ManufacturinginThailandvis-à-visIndiaIndianmanufacturerssufferfromacostdisadvantagevis-à-visThaimanufacturersmainlybecauseofhigherleveloftaxesandtheircascadingimpact.
ThailandEnginepartsTransmissionandsteeringSuspensionandbrakingElectricalsEquipmentOthersCostofcomponentforanIndiancompany100%100%100%100%100%100%LessTaxesanddutiesHighernetstate-levelleviesand3.
92%5.
26%5.
98%5.
48%5.
69%5.
42%cascadingimpactoftaxesHigherimportduty0.
51%0.
29%0.
38%0.
88%0.
91%0.
79%Highercorporatetaxes0.
12%0.
12%0.
12%0.
12%0.
12%0.
12%IndustrycostsHighercostofpowerandfuel0.
93%0.
86%1.
09%0.
82%0.
58%0.
73%1.
72%1.
10%1.
19%1.
22%1.
59%0.
85%Highercostoffunds0.
50%0.
24%0.
14%0.
00%0.
35%0.
10%Higherrateofinsurance0.
10%0.
08%0.
10%0.
08%0.
11%0.
08%Others2.
15%1.
51%1.
60%1.
63%2.
02%1.
25%TotalcostdisadvantageforIndia9.
95%9.
46%10.
60%10.
23%11.
37%9.
34%AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB65ManufacturinginBrazilvis-à-visIndiaIndiaiscompetitivelypositionedvis-à-visBrazilacrosscomponentsmainlyduetothehighercostoflabourinBrazil.
BrazilEnginepartsTransmissionandsteeringSuspensionandbrakingElectricalsEquipmentOthersCostofcomponentforanIndiancompany100%100%100%100%100%100%LessTaxesanddutiesHighernetstate-levelleviesand-4.
28%-5.
81%-3.
94%-3.
26%-3.
22%-5.
21%cascadingimpactoftaxesHigherimportduty-0.
34%-0.
23%-0.
19%-0.
31%-0.
27%-0.
39%Highercorporatetaxes000000IndustrycostsHighercostofpowerandfuel2.
79%2.
58%3.
28%2.
47%1.
74%2.
19%HighLabourcost-23.
16%-14.
85%-16.
07%-16.
45%-21.
47%-11.
51%Highercostoffunds-0.
27%-0.
13%-0.
08%0.
00%-0.
19%-0.
06%Higherrateofinsurance-0.
06%-0.
05%-0.
06%-0.
04%-0.
06%-0.
05%Others5.
55%4.
90%5.
00%5.
02%5.
42%4.
64%TotalcostdisadvantageforIndia-19.
77%-13.
59%-12.
06%--12.
57%-17.
78%-10.
39%AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB66Conclusions…(1/2)IndiahasacostadvantagewhencomparedtoBrazil.
India,however,suffersfromacostdisadvantagevis-à-visChinaandThailand,primarilyduetohighleveloftaxesandtheircascadingimpact.
India,inthenearfuture,isexpectedtogoaheadwiththeabolitionofinter-statecentralsalestax(CST),whichwillreducethecascadingimpactoftaxestosomeextent.
Implementationofgoodsandservicestax(GST),alongthelinesofvalue-addedtax(VAT),andabolitionofallothertaxesisinprogressandistargetedforApril2010.
Itwillreducethetaxationloadingontheautomotivesectorconsiderably.
ThisstepisexpectedtostrengthenIndia'spositionasaleadingautomobilemanufacturinghubinthefuture.
VariousstepsbeingtakenbytheIndiangovernmenttoimproveinfrastructureinordertoreducethedisadvantagethatIndiasuffersbecauseofpoorinfrastructurethatcausesprojectdelays,delaysindeliveriesandsoon.
Thiswouldincreasethedemandforroadtransportationinthecountry.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB67Conclusions…(2/2)Apartfromroadinfrastructure,R&DinfrastructureundertheUS$380millionCentralgovernmentproject,NATRIP,whichisexpectedtobecompletedbytheendofyear2010,isexpectedtoprovideIndiaadistinctadvantageoverotherlow-costcountriesintheautomotiveindustry.
WiththewidespreadimplementationoftheNSDPandtheeffectingoftheASEANfreetradeagreement,skilldevelopmentandproductivityenhancementwilladdtotheindustry'scompetitivenessintheglobalmarket.
Further,withtherisingmanpowercostsinChina,thecompetitivenessdifferentialbetweenIndiaandChinaisfastreducing,strengtheningIndia'spotentialforbecomingthemanufacturinghubfortheglobalautomotiveindustry.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB68DISCLAIMERIndiaBrandEquityFoundation(―IBEF‖)engagedICRAManagementConsultingServicesLimited(IMaCS)topreparethispresentationandthesamehasbeenpreparedbyIMaCSinconsultationwithIBEF.
Allrightsreserved.
AllcopyrightinthispresentationandrelatedworksissolelyandexclusivelyownedbyIBEF.
Thesamemaynotbereproduced,whollyorinpartinanymaterialform(includingphotocopyingorstoringitinanymediumbyelectronicmeansandwhetherornottransientlyorincidentallytosomeotheruseofthispresentation),modifiedorinanymannercommunicatedtoanythirdpartyexceptwiththewrittenapprovalofIBEF.
Thispresentationisforinformationpurposesonly.
WhileduecarehasbeentakenduringthecompilationofthispresentationtoensurethattheinformationisaccuratetothebestofIMaCS'sandIBEF'sknowledgeandbelief,thecontentisnottobeconstruedinanymannerwhatsoeverasasubstituteforprofessionaladvice.
IMaCSandIBEFneitherrecommendnorendorseanyspecificproductsorservicesthatmayhavebeenmentionedinthispresentationandnordotheyassumeanyliabilityorresponsibilityfortheoutcomeofdecisionstakenasaresultofanyrelianceplacedonthispresentation.
NeitherIMaCSnorIBEFshallbeliableforanydirectorindirectdamagesthatmayariseduetoanyactoromissiononthepartoftheuserduetoanyrelianceplacedorguidancetakenfromanyportionofthispresentation.
‖AUTOMOTIVEINDUSTRYSeptember2009
,setupmanufacturingbasesinIndiaHighlevelsofcompetenceindesignandprocesses,highproductivityandlowcostaretheforteofIndianauto-makers.
*ASEANmembercountriesincludeMalaysia,thePhilippines,Singapore,Thailand,BruneiDarussalam,Vietnam,LaoPDR,Myanmar,IndonesiaandCambodiaAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY4Indianautomobileindustrystandsat11millionvehiclesatpresentThelargesttwo-wheelermanufacturerintheworld.
Thelargestthree-wheelermarketintheworld.
Thesecondlargesttwo-wheelermarketintheworld.
Thefourth-largestcommercialvehiclemarketintheworld.
TheIndianautoindustryhasthepotentialtoemergeasoneofthelargestintheworld.
Presently,Indiais:*CompoundAnnualGrowthRate(CAGR)SegmentShareintotal5-yearCAGR*Two-wheelers75.
4%8.
8%Passengervehicles16.
4%16.
7%Three-wheelers4.
5%10.
4%Commercialvehicles3.
7%12.
6%Source:SocietyofIndianAutomobileManufacturers(SIAM)/IMACSAnalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY7.
248.
479.
7411.
0910.
8511.
180369122003-042004-052005-062006-072007-082008-09CAGR9.
08%Automotiveproduction(millionunits)Shareofautomotivesegments(2008-09)5AlllargeglobalplayersarepresentinIndiaGMToyotaFordHyundaiMarutiSuzukiHondaSkodaVolvoMercedesBenzBMWVolkswagenSuzukiMotorcycleTataMotorsMahindra&MahindraBajajAutoTVSMotorsHeroHondaForceMotorsAshokLeylandEicherSwarajMazdaDelphiVisteonBoschDensoValeoThyssenKruppBharatForgeSundramFastenersRaneGroupShriramPistonsRICOAutoSonoKoyoSteeringExideGlobalOEMsGlobalsuppliersIndianOEMsIndiansuppliersAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY6TheOEMaswellasthecomponentindustryishighlycompetitiveTheIndianautoindustryishighlycompetitivewithanumberofglobalandIndianauto-companiespresent.
ThesupplierindustryisequallycompetitivewithamixofglobalandIndianplayers.
Two-thirdsofautocomponentproductionisconsumeddirectlybyOEMs.
ThemajoradvantageoftheIndianautomotiveindustryisaneducatedandskilled,English-speakingworkforce.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY7MostautomotiveplayersarepresentinmorethanonesegmentManufacturerSegmentsAshokLeylandLCVs,M&HCVs,busesAsianMotorWorksM&HCVsAtulAutoThree-wheelersBajajAutoTwo-andthree-wheelersBMWIndiaCarsandMUVs,high-endbikesDaimlerChryslerIndiaCars,commercialvehiclesEicherMotorsLCVs,M&HCVs,buses,bikesElectrothermIndiaElectrictwo-wheelersFiatIndiaCarsForceMotorsThree-wheelers,MUVsandLCVsFordIndiaCarsandMUVsGeneralMotorsIndiaCarsandMUVsHeroHondaMotorsTwo-wheelersHindustanMotorsCars,MUVsandLCVsHondaTwo-wheelers,carsandMUVSHyundaiMotorsCarsandMUVsManufacturerSegmentsMahindra&MahindraThree-wheelers,two-wheelers,cars,MUVs,LCVsMajesticAutoThree-wheelersMarutiSuzukiCars,MUVs,MPVsPiaggioThree-wheelers,LCVsRevaElectricCarCo.
ElectriccarsScootersIndiaThree-wheelersVolkswagen,SkodaCarsSuzukiMotorcyclesTwo-wheelersSwarajMazdaLtd.
LCVs,M&HCVSs,busesTataMotorsCars,MUVs,LCVs,M&HCVs,busesTatraVectraMotorsM&HCVsToyotaKirloskarCars,MUVsTVSMotorCo.
Two-wheelersVolvoIndiaM&HCVs,busesYamahaMotorIndiaTwo-wheelersMUVs:Multi-utilityvehicles;MPVs:Multi-purposevehicles;LCVs:Lightcommercialvehicles;M&HCVs:MediumandheavycommercialvehiclesAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY8Two-wheelersegmentisdominatedbymotorcycles4.
24.
815.
366.
217.
057.
867.
257.
430246820022003200420052006200720082009(millionunits)Domestictwo-wheelerindustry81%14%5%Breakupoftheindustrybysegment(2009)MotorcyclesScootersMopedsSource:SIAM,IMaCSanalysisScooter/scooterette:Wheelsizelessthanorequalto12inchesMotorcycle:Wheelsizemorethan12inchesMopeds:Enginecapacitylessthan75ccwithfixedtransmission,wheelsizemorethan12inchesElectrictwo-wheelers:ElectricallydrivenAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY9Two-wheelersegmentisdominatedbymotorcyclesThedomestictwo-wheelerindustryhasgrownsteadilyataCAGRof8.
5percentfrom4.
2millionin2001to7.
43millionin2009.
Themotorcyclesegmentcontinuestodominatethemarket.
Entry-levelbikes(enginepowerbelow125ccandpriceintherangeofUS$850–1,000)accountforaround80percentofsales.
Thecostofownershipandeconomicsofoperationsarekeypurchasecriteria.
Thepremium-bikesegment(enginepowerabove150ccandpriceintherangeofUS$1,200–2,000)isgrowingatafasterpacethanentry-levelvehicles;thisisanindicationoftheincreasingaffluenceofcustomers.
Recenttrendsindicatethat100ccbikesarebeingpreferredover125ccbikesbythemarket.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY10Whilethemotorcyclesegmentisgrowing,thescootersegmentisshrinkingThescootersegment,excepttheA2segment,isshrinking.
Bikesinthe75ccto125ccrangecornerthemajorshareofthetwo-wheelersegment.
TheB3segmentisthefastest-growingsegmentintheIndiantwo-wheelermarket.
TheC1segmentcontinuestofallowingtolowerdemandformopeds.
SegmentDescriptionSharein2001–02Sharein2007–08Sharein2008–09A1Scooterwithenginecapacitylessthan75cc5%0.
5%0.
2%A2Scooterwithenginecapacitybetween75ccand125cc5%13%13%A3Scooterwithenginecapacitybetween125ccand250cc12%1%0.
5%B2Motorcyclewithenginecapacitybetween75ccand125cc62%58%56%B3Motorcyclewithenginecapacitybetween125ccand250cc5%21%25%B4Motorcyclewithenginecapacityabove250cc1%0.
5%0.
5%C1Mopeds10%6%5%Segment-wiseanalysisoftwo-wheelermarketSource:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY11Thedomestictwo-wheelermarketisdominatedbyIndianplayers…(1/3)HeroHonda:Largesttwo-wheelermanufacturerintheworldBajajAuto:Second-largesttwo-wheelermanufacturerandlargestthree-wheelermanufacturerinIndiaTVSMotorCo.
:Third-largesttwo-wheelermanufacturerinIndia;hasestablishedamanufacturingfacilityinIndonesiaHondaMotorcycle&ScooterIndia(Pvt)Ltd.
(HMSIL):HasrecentlyenteredtheIndianmarketthroughitsownsubsidiary(inadditiontoitsjointventureHeroHonda)SuzukiMotorcycleIndiaPvt.
Ltd.
:ThecompanystarteditsIndiaoperationsinFebruary2006throughthisfully-ownedsubsidiaryAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY12Thedomestictwo-wheelermarketisdominatedbyIndianplayers…(2/3)Inthetwo-wheelermarketinIndia,competitionisintensewitharound10playerscompetingforashareoftheindustry.
TheplayersincludeglobalgiantssuchasHonda,SuzukiandYamaha,aswellasIndianplayerssuchasBajajandTVS.
ThemarketleaderisHeroHondaMotors,closelyfollowedbyBajajAuto.
Thesegmentischaracterisedbyfrequentnewproductlaunches,withover22modelslaunchedin2007–08,andcloseto16modelsandvariantslaunchedin2008–09.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY49%17%15%14%5%HerohondamotorsltdBajajautoltdTVSmotorcompanyltdHMSILOthersMarketshareofkeyplayersin2008–09Source:SIAM,IMaCSanalysisHeroHondaMotorsLtdBajajAutoLtdTVSMotorCompanyLtdHMSILOthers13Thedomestictwo-wheelermarketisdominatedbyIndianplayers…(3/3)Mahindra&Mahindrahasrecentlymadeanentryintothetwo-wheelermarketwiththeacquisitionofKineticMotors.
Bikesfuelledbycompressednaturalgas(CNG)isarecentpromisingtechnologicaldevelopmentinthetwo-wheelermarket.
Severalforeignplayers,suchasBMWandHarleyDavidson,areenteringtheIndianmarketwitharangeofluxurybikes.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY14Two-wheelerexportshavegrownatanimpressiveCAGRofover38percent…(1/2)104.
2179.
7265.
1366.
4513.
2619.
2819.
81004.
20200400600800100020022003200420052006200720082009(thousandunits)Two-wheelerexportsfromIndiaCAGR38.
2%63%19%8%5%4%Marketshareofkeyplayersinexportsin2008-09BajajAutoLtdTVSMotorCompanyLtdHeroHondaMotorsLtdHondaMotorcycle&ScooterIndia(Pvt)LtdOthersSource:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYSource:SIAM,IMaCSanalysis15Two-wheelerexportshavegrownatanimpressiveCAGRofover38percent…(2/2)Two-wheelersexportshavegrownataCAGRofover38percentinthelastsevenyears.
ThemajorityoftheexportsweretoBangladesh,SriLanka,BhutanandNepal.
60percentofthebikesexportedwerethosewithanenginecapacitybelow125cc.
BajajAutoisthemarketleaderinexportswithashareof63percent.
BajajAutoisfurtherlookingtoexplorebikemarketsinAfricaandEurope.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY16PassengervehiclessegmentinIndiaisdominatedbycars…(1/2)DomesticpassengervehiclesindustryAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY675.
1707.
2902.
11061.
61143.
11379.
7154815520200400600800100012001400160020022003200420052006200720082009Source:SIAM,IMaCSanalysis(thousandunits)CAGR12.
6%78.
6%21.
4%PassengerscarsSUVs/MPVsDomesticpassengervehiclesindustry(2009)Source:SIAM,IMaCSanalysis17PassengervehiclessegmentinIndiaisdominatedbycars…(2/2)ThedomesticIndianpassengervehiclesmarkethasgrownataCAGRof12.
6percentoverthelastsevenyearstoreach1.
55millionunitsin2008-09.
Passengercars,whichaccountedfor78.
6percentofvolumes,grewataCAGRof15percent.
Theremainingsharewasaccountedforbymulti-utilityvehiclesandsports-utilityvehicles.
Domesticsalesin2008-09didnotincreasesignificantlyoversalesin2007–08;however,salesdidnotdropeither.
TheorganisedusedcarindustryisgainingsteadygroundintheIndianmarketwithsalesfastreachingthelevelsofnewcarsales.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY18AllmajorglobalplayersinpassengervehiclessegmenthaveapresenceinIndia…(1/3)Ford,GM,Toyota,MercedesandHyundaihavebeenpresentintheIndianmarketformorethanadecadeeachandhavesuccessfullyestablishedastrongfootholdinIndia.
AmongthenewerglobalplayersestablishingbasesinIndiaareVolkswagen,NissanandBMW.
MarutiSuzukiIndiaLtd.
isthelargestpassengercarmanufacturerinthecountry;Indiaisconsideredastrategicmarketbythecompany.
TataMotors,thelargestautomotiveplayerintheIndianindustry,launchedtheRs.
1lakh(US$2,500)carNano'inJune2009.
HyundaiMotorsisthethird-largestpassengercarmanufacturerinIndia;ithasoneofitsglobalmanufacturingbasesinIndia,nearChennai.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY19AllmajorglobalplayersinpassengervehiclessegmenthaveapresenceinIndia…(2/3)Source:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYMarketsharesofkeyplayersin2008–0947%16%15%7%4%12%MarutiSuzukiIndiaLtdHyundaiMotorIndiaLtdTataMotorsLtdMahindra&MahindraLtdGeneralMotorsIndiaLtdOthers20AllmajorglobalplayersinpassengervehiclessegmenthaveapresenceinIndia…(3/3)Mahindra&Mahindra:Amongstthelargestplayersinthemulti-utilityvehiclessegment,M&MhasatieupwithRenaultforthemanufacturingandmarketingoftheLoganbrandofcarsinIndia.
Toyota:Thecompanyenvisionscapturing10percentshareoftheIndianpassengercarmarketby2010.
HondaMotors:ItisoneoftheleadingplayersintheIndianpremiumcarsegment.
Ford:Thecompanyisaleadingplayerinthepremiumcarsegment.
GeneralMotors:Aleadingplayerinthepremiumcarsegment,GeneralMotorshasrecentlyenteredthecompactcarsegmentinIndia.
MostoftheleadingglobalplayershaveapresenceinIndiaintheformofjointventuresorsubsidiaries.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY21Indiaisincreasinglybecomingamanufacturinghubforpassengercars…(1/2)Thesubstantialgrowthincarexportsin2008-09isastrongindicatorofIndiamovingclosertobecomingamanufacturinghubforglobalplayers.
Source:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY53.
1772.
01129.
29166.
4175.
57198.
48217.
05331.
505010015020025030035020022003200420052006200720082009CarexportsfromIndia(thousandunits)21%76%2%MarutisuzukiindialtdHyundaimotorindialtdTatamotorsltdMarketsharesofkeyplayersin2008–09Source:SIAM,IMaCSanalysisCAGR30%MarutiSuzukiIndiaLtdHyundaiMotorIndiaLtdTataMotorsIndiaLtd22Indiaisincreasinglybecomingamanufacturinghubforpassengercars…(2/2)ExportsofcarsfromIndiahavegrownataCAGRof30percentinthelastsevenyearstoreach331,000unitsin2008-09.
Exportsofcarsin2008-09increased52percentover2007-08.
Thisisthehighest-ever,single-yearjumpincarexportnumbersinIndia.
HyundaiMotorsisthemarketleaderincarexportswitha76percentshare,upfromthepreviousyear's66percentshare;thecompanyusesIndiaasamanufacturingbaseforcompactcarsthatareexportedworldwide.
CarexportsaremadelargelytoSouthAmerica,Africa,Europe,LatinAmericaandtheMiddleEast.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY23Commercialvehiclessegmentpicksupafterslightdragin2008–09…(1/2)Breakupoftheindustrybysegment(2008–09)Source:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY146.
67190.
68260.
11318.
43351.
04467.
88486.
82384.
1205010015020025030035040045050055020022003200420052006200720082009DomesticCVindustryinIndia(thousandunits)45%39%9%7%LCVgoodscarriersM&HCVgoodscarriersM&HCVpassengervehiclesLCVpassengervehiclesSource:SIAM,IMaCSanalysis24Thedomesticcommercialvehiclesindustryclockedsalesofmorethan384,000vehiclesin2008-09.
Aseriesofrecentincentiveschemes,providedbythegovernment,havehadapositiveimpactonsales.
TheshareofLCVsisgraduallyincreasing,indicatingtheemergenceofthehub-and-spokemodeloftransportation.
In2008-09,theLCVgoodssegmentledgrowthwithashareof45percent.
Thegoodsindustryisdominatedbymulti-axlevehicles,whichaccountfornearly50percentofthemarket.
Commercialvehiclessegmentpicksupafterslightdragin2008–09…(2/2)AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY25CommercialvehiclessegmentisdominatedbyIndianplayers…(1/3)TataMotorsLtd.
:Thecompanyisthelargestcommercialvehiclemanufacturerinthecountry.
HavingestablishedastrongpositioninIndia,ithasbeenrapidlyexpandinggloballywithaseriesofrecentacquisitionssuchasDaewooCommercialVehicleCo.
Ltd.
(2004)andHispanoCarroceraS.
A.
,Spain,(2009)andjointventureswithThonburiAutomotiveAssemblyPlantCo.
,Thailand,(2006)apartfromseveralotherstrategicalliancesinthecommercialvehiclesspace.
Mahindra&MahindraLtd.
:Arelativelynewplayerinthesegment,thecompanyformedajointventurewithInternationalTrucksinNovember2005tomanufactureM&HCVtrucksinIndiaandhasdisplacedAshokLeylandLtd.
fromsecondpositionwithrespecttomarketshare.
AshokLeylandLtd.
:Thecompanyisthethird-largestplayerinthecommercialvehcilessegmentinIndia.
EicherMotorsLtd.
:AleadingplayerintheLCVtruckssegment,EicherenteredtheM&HCVtruckssegmentrecently;ithasalsoenteredintoajointventurewithVolvoforthemanufactureofcommercialvehicles.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY26CommercialvehiclessegmentisdominatedbyIndianplayers…(2/3)VolvoIndia:Thecompanyisoneoftheleadingplayersinluxurypassengerbusesandheavydutytippers.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY64%15%13%8%5%TatamotorsltdMahindraandmahindraltdAshokleylandltdOthersEichermotorsltdOthersMarketsharesofkeyplayersin2008–09Source:SIAM,IMaCSanalysisMahindra&MahindraLtdEicherMotorsLtdTataMotorsIndiaLtdAshokLeylandLtd27CommercialvehiclessegmentisdominatedbyIndianplayers…(3/3)TataMotorsisthemarketleaderinboththegoodsandpassengervehiclesegments.
TheLCVmarketisdominatedbyTataMotors,followedbyMahindra&Mahindra.
TheintroductionofTataAceinMay2005contributedtowardsthesignificantgrowthofthesub-1tonnesegment.
Withotherplayersenteringthissegment,itisexpectedtogrowrapidlyinthemediumterm.
Manyplayersareintheprocessofstrengtheningtheirholdinthemarketbyenteringintopartnershipsandjointventures.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY28ExportsofIndiancommercialvehicles…(1/2)Keyplayers'exportshare(2008–09)AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY11.
8712.
2617.
4329.
9440.
649.
775942.
67010203040506020022003200420052006200720082009(thousandunits)CVexportsfromIndiaSource:SIAM,IMaCSanalysis62%16%14%5%3%TatamotorsltdMahindraandmahindraltdAshokleylandltdOthersEichermotorsltdSource:SIAM,IMaCSanalysisMahindra&MahindraLtdEicherMotorsLtdTataMotorsIndiaLtdAshokLeylandLtdOthers29ExportsofIndiancommercialvehicles…(2/2)TataMotorsaccountsfor62percentofcommercialvehicleexports,andAshokLeylandandMahindra&Mahindramakeupforalargeportionofthebalance.
LCVgoodscarriersaccountedfor60percentofoverallexports.
ThemajorportionoftheexportsaretoSriLanka,theGulfcountriesandAfrica.
Althoughcommercialvehicleexportswitnessedlowersalesin2008-09,thefuturegrowthprospectsremainbrightowingtotheexpectedrecoveryofworldmarkets.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY30Growthinthree-wheelershasbeendrivenbytheneedforalow-cost,lastmiletransportationsystem…(1/2)Breakupofindustrybysegment(2009)AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY200.
28231.
53284.
08307.
86359.
92403.
91364.
735005010015020025030035040045020022003200420052006200720082009Source:SIAM,IMaCSanalysis(thousandunits)Domesticthree-wheelerindustry76.
7%23.
3%PassengercarriersGoodscarriersSource:SIAM,IMaCSanalysis31Growthinthree-wheelershasbeendrivenbytheneedforalow-cost,lastmiletransportationsystem…(2/2)Three-wheelersalesinIndiatouchedanewrecordof0.
4millionin2006–07.
Thelaunchoffour-wheel,sub-1-tonnevehicleshasresultedinasegmentalshiftfromthree-wheelers.
Theproportionofthree-wheelergoodscarriersinoverallsaleshasdoubled,indicatingtheincreasedneedforalow-cost,lastmiletransportationsystem.
Theless-than-3.
5tonnesegmentingoodsaccountedfor82percentofsalesandtheless-than-fourseatersegmentinpassengerversionsaccountedfor97percentofsales.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY32Thethree-wheelermarketisdominatedbyPiaggioandBajajAutoPiaggioVehicles:Themarketleaderinthethree-wheelersegment,itisintheprocessofmakingIndiaitsglobalmanufacturinghub.
BajajAutoLtd.
:Secondbymarketshareinthethree-wheelersegment,BajajAutointheprocessofrevampingitsproductportfolio.
Mahindra&Mahindra:Oneoftheleadingplayersinthesegmentwithagrowingmarketshare.
AtulAutoLtd.
:Thecompanyhasintroducednewproductsintherearenginesegment.
ItalsomanufacturesChakda'-athree-wheelerreengineeredfromatwo-wheeler-popularinthewesternpartsofthecountry.
ForceMotorsLtd.
:AjointventurebetweenBajajTempoandMANAGofGermany,Forceisaleadingplayerinthegoodscarriersegment.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY33Thethree-wheelermarketisdominatedbyPiaggioandBajajAutoMarketsharesofkeyplayersin2008–09Source:SIAM,IMaCSanalysisAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY34Exportsofthree-wheelershavebeengrowingrapidly,withBajajAutoastheclearmarketleaderExportsofthree-wheelerstouchedanewhighof148,000unitsin2008–09,registeringarobustCAGRof38percentoverthelastsevenyears.
ThishasbeencontributedalmostentirelybyBajajAuto,whichaccountedforaround94percentofexportsin2008-09.
BajajAutoexportstoSriLanka,Egypt,NepalandBangladesh,amongothercountries.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY15.
4643.
3768.
1466.
876.
88143.
9141.
2414805010015020020022003200420052006200720082009(thousandunits)Three-wheelersexportsSource:SIAM,IMaCSanalysis35IndianfirmsareincreasinglypartneringwithforeignfirmsacrosssegmentsIndianOEMForeignpartnerTypeofpartnershipMarutiSuzukiSuzukiMotorCorporation-JapanEquitypartnerMahindraLoganRenaultJointventureTataMotorsFiatTieupformanufacturingandmarketinginIndiaKineticGroupSanyangIndustryCoLtd(SYM-Taiwan)TechnologyItaljet-ItalyTieupformanufacturinganddistributionHeroHonda-JapanTechnologyHeroCyclesUltraMotorCompany,UKTechnologyBajajAutoKawasakiHeavyIndustriesLtd.
,JapanEnginetechnologyTokyaR&DCo.
Ltd.
,JapanTechnologyKubotaCorp.
,JapanTechnologyAshokLeylandNissanLCVsHino-JapanEnginetechnologyIrizar-SpainBusbodytechnologyZF-GermanyGearboxtechnologyTataMotorsMarcoPolo-BrazilBus/coachtechnologyCummins-USAEnginetechnologyAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY36Indianautoindustryhasevolvedaroundthreemajorclusters…(1/5)Majorautomotiveclusters:Mumbai-Pune-Nashik-Aurangabad(west);Chennai-Bangalore-Hosur(south);andDelhi-Gurgaon-Faridabad(north).
Export-orientedcompanieshaveformedbaseinthewest/southregions,duetoproximitytoports.
Uttarakhandisfastemergingasanautohubwithleadingcompaniesdecidingtosetupunitsinthestatetomakeuseofthebenefitsofthestate'stax-holidayscheme.
TataMotors,alongwithBajajAutoandMahindra&Mahindra,aretogetherinvestingaboutUS$640millioninUttarakhand.
WiththeupcomingplantofTataNano,SanandinGujaratisalsolikelytodevelopasanothernodeinthewesterncluster.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY37Indianautoindustryhasevolvedaroundthreemajorclusters…(2/5)Majorcluster:North/CentralDelphiAutoJBMSonaKoyoAsahiIndiaDensoIndiaLumaxJohnsonMattheyHeroHondaHondaSIELHondaMotorcycle&ScooterIndiaMarutiSuzukiTataMotorsBajajAutoAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY38Indianautoindustryhasevolvedaroundthreemajorclusters…(3/5)Majorcluster:WestDaimlerGMSkodaBajajAutoBharatForgeDGPHinodayKirloskarBrothersTACOGroupSKFBearingsSupremeIndustriesBrightBrothersBoschChassisTataJohnsonNRBBearingsAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYMahindra&MahindraTataMotorsVolkswagen39Indianautoindustryhasevolvedaroundthreemajorclusters…(4/5)Majorcluster:SouthAshokLeylandFordTVSMotorsHyundaiToyotaKirloskarMotorBrakeIndiaFennerRaneGroupVisteonSundaramFastenersDelphiTVSIndiaNipponTIGroupLucas-TVSUCALAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYRoyalEnfieldVolvo40Indianautoindustryhasevolvedaroundthreemajorclusters…(5/5)Minorcluster:EastTataMotorsSimpson&CoInternationalAutoForgingsRamkrishnaForgingsJMTExideAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYHindustanMotors41IndianautopolicyisdesignedforsupportingthegrowthoftheindustryAutomaticapprovalforforeignequityinvestmentupto100percentNominimuminvestmentcriteriaInvestmentincentivesbylocalstategovernments:MoststatescustomiseincentivesforlargeinvestmentsGovernment'sintentionofharmonisingregulatorystandardswiththerestoftheworldWeightedtaxdeductionupto150percentforin-houseresearchandR&DactivitiesIndianAutoPolicy2002LOW-ENTRYBARRIERINVESTMENTINCENTIVESCONCERNFOREMISSIONSEMPHASISONR&DIn2002,theIndiangovernmentformulatedanautopolicyaimedatpromotinganintegrated,phasedandself-sustainedgrowthoftheindustry.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY42IndianautomotiveregulationsareintheprocessofbeingalignedwithEuropeanregulationsIndianautomotiveregulationsarecloselyalignedtoECEregulations.
ThediagramdepictsthelevelofalignmentofIndianregulationswithECEregulations.
Thekeyregulationsthatarelikelytoimpacttheautoindustryandcreatetheneedforworld-classproductsinthefuturearecrash-relatedregulationsandtheintroductionofBharatStageIVnorms.
numberofregulationsAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRYIndianregulationsalignedwithECEregulations43Safetyandemission-relatedregulationsinIndia—achievementsandplans2000Entirecountry2001NCRandthreemajormetros2003NCRand10majorcities2005EntirecountryNCRand10majorcities2010EntirecountryNCRand10majorcitiesEmissionregulationsBrakesSteeringeffortGradeabilityInstallationofmirror,hornandlightingdevicesRearunder-runprotectivedevices(RUPD)/lateralprotectivedevices(LPD)SafetybeltElectro-magneticinterference(EMI)WipingsystemRearviewmirror,etc.
Antibrakeskid–2007Truckcaboccupantprotection–crashSuperstructureofbusAirbagsElectromagneticcompatibility(EMC)Frontunder-runprotectivedevices(FUPD)SafetyregulationsEURO-IVEURO-IIIEURO-IIEURO-IAchievementsuntildatePlanAutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY44NationalAutomotiveTestingandR&DInfrastructureProject(NATRIP)—aninitiativetostrengthenR&Dinfrastructure—isapproachingcompletionNATRIP,aGovernmentofIndiainitiative,hasenvisagedaninvestmentofRs.
1,718crore(aboutUS$380million)insettingupthefollowingfacilities.
NATRIPisexpectedtostrengthentheautomotiveR&DinfrastructureinIndia.
RaeBareillycentreCompletehomologationservicestoagri-tractors,off-roadvehicles,gensetsasperIndianorglobalstandardsandadrivertrainingcentre.
Centerofexcellenceforaccidentdataanalysis.
Thecommissioningscheduleforphase-IisJuly2010andAugust2010forphase-II.
TheacquisitionoflandforsettingupthecentreisinprogressandisunderconsiderationoftheUttarPradeshgovernment.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY45NATRIP—northernandeasternregionInternationalCentreforAutomotiveTechnology(iCAT),ManesarCompletehomologationservicestoallvehiclecategoriesasperIndianorglobalstandards.
Centerofexcellenceforcomponentdevelopment,noisevibrationandharshness(NVH)testing.
ItisscheduledtobecommissionedinMarch2010.
Constructionofbuildingsforpowertrainlabandfatigueandcertificationlab;procurementofequipmentfortwomorelabs;andacquisitionofanadditional42acresoflandisinprogress.
SilcharcentreHillareadrivertrainingcentreandinspection&maintenancefacilities.
Centerofexcellencefordrivertraining.
Commissioningschedule:2010(onschedule);civilworksatonesitecompleted;tendersforequipmentontrack.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY46NATRIP–westernregionAhmednagar—Vehiclesresearch&developmentestablishment(VRDE)upgradationResearch,design,developmentandtestingofvehicles.
Centerofexcellenceforphotometry,electromagneticcompatibility(EMC),testtracks.
Commissioningschedule:Completed.
Indore–NationalAutomotiveTestTracks(NATRAX)CompletetestingfacilitiestoallvehiclecategoriesasperIndianorglobalstandards.
Centerofexcellenceforvehicledynamics,tyredevelopment.
Commissioningschedule:December2010.
Inprogress:4,000acresoflandalreadyacquired;constructionofpowertrainlab,testtracksandbuildinginadvancedstages;shiftingofutilitiesinprogress.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY47NATRIP–southernregionPune—ARAIupgradationCompletehomologationservicestoallvehiclecategoriesasperIndianorglobalstandards.
Centerofexcellenceforpowertraindevelopment,materials,fatigue.
Commissioningschedule:RescheduledtoMarch2010.
Inprocess:Landacquisitionnearingcompletion;civilpackagetenderinfinalstages;equipmenttenderfinalised.
ChennaicentreCompletehomologationservicestoallvehiclecategoriesasperIndianorglobalstandards.
Centerofexcellenceforinfotronics,EMC,passivesafety.
Commissioningschedule:RescheduledforDecember2009.
Inprogress:AwardofmostoftheworkcompletedbyApril2009.
AutomotiveIndustrySeptember2009PROFILEOFINDIANAUTOMOTIVEINDUSTRY48ContentGrowthpotentialofIndianautomotiveindustryIndiaasamanufacturinghubProfileofIndianautomotiveindustryAUTOMOTIVEINDUSTRYSeptember200949GrowthdriversfortheIndianautomotiveindustryNewproductslaunchesIndianautomotiveindustryGovernmentpoliciesIncreasingconsumerdemandCostcompetitivenessOveralleconomicgrowthLowerdutiesandtaxesGrowthinincomelevelsEasierfinancingExportcompetitivenessReducedcosttoconsumerIndiaemergingasamanufacturinghubContemporaryproductsShorterlifecycleAutomotiveIndustrySeptember2009GROWTHPOTENTIALOFINDIANAUTOMOTIVEINDUSTRY50IndianAutomotiveMissionPlan(AMP)—vehiclessalesexpectedtogrowto32millionby2015–16ThesizeoftheIndianautomotiveindustryisexpectedtogrowat13percentperannumoverthenextdecadetoreacharoundUS$120billiontoUS$159billionby2016.
ThetotalinvestmentsrequiredtosupportthegrowthareestimatedataroundUS$35billiontoUS$40billion.
Thetwo-wheelersegmentisexpectedtoleadthegrowth,withanestimatedsalesof27.
8millionunitsby2016.
TotalexportsintheautomotivesectorwouldbearoundUS$30billiontoUS$35billion,ofwhichcomponentexportswouldaccountforUS$20billiontoUS$25billion,andvehicleexportsfortherest.
2.
6531.
960.
6427.
80.
87CarsCVsTwowheelersThreeWheelersTotalPotentialvehiclesalesinIndia(2015–16)AutomotiveIndustrySeptember2009GROWTHPOTENTIALOFINDIANAUTOMOTIVEINDUSTRY(millionunits)-wheelers-51ContentGrowthpotentialofIndianautomotiveindustryIndiaasamanufacturinghubProfileofIndianautomotiveindustryAUTOMOTIVEINDUSTRYSeptember200952GlobalpassengercarcompaniesaretakingadvantageofIndiaasamanufacturingbase…(1/2)NissanMotorCo.
hasidentifiedIndiaasoneofthefivelow-costcountriestomanufactureitsnewgenerationcompactcars,includingtheMicra.
Volkswagenhasinvestedina110,000-unitpassengercarassemblyplant,whichwasmadeoperationalinApril2009.
Volkswagen'sIndiaplansincludethemanufactureofsmallcarsbasedonthePolo'platform.
Toyotahasannouncedplansforasecondplanttobeginoperationsin2010,havinganinitialannualproductioncapacityofaround100,000vehicles,apartfromthetransmissionplantthatthecompanyhassetuptomeetregionaldemand.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB53GlobalpassengercarcompaniesaretakingadvantageofIndiaasamanufacturingbase…(2/2)HyundaiMotorshasshiftedtheentireproductionofAtosPrime,itscompactmodel,toitsChennaiplant.
IthasalsosetupaUS$40millioncomputer-aideddesigncentreinHyderabad.
Further,Indiaisthesolemanufacturingbaseforthenewly-launchedmodeli10.
ThecompanyalsoplanstoinvestafurtherUS$250millioninIndiaby2013,raisingitscumulativeinvestmentinthecountrytoaroundUS$1billion.
GeneralMotors'US$60milliontechnicalcentreinBangalorewillbeitspowerhousefordevelopingfuturetechnologiesandshapingnewcars.
Apartfromtheabove,itisalsointheprocessofsettingupanadditionalfacilityatTalegaon,nearPune.
FordMotorCo.
exports58percentofthetotalnumberofcarsproducedinitsIndiaplantatChennai.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB54IndianautoindustryiswitnessingmorejointventuresandacquisitionsthanbeforeMergers,acquisitionsandjointventureshavecontinuedtobethedrivingforceintheIndianautomobileindustryinsyncwiththedynamicsofanopenmarket.
LeadingautomobilecompanieshaveeithersetuptheirownmanufacturingbaseinIndiaorhavetiedupwithIndianautomotivefirmstorolloutnewproducts.
ThelistincludesInternational,MAN,Daimler,Toyota,Nissan,Renault,Fiat,Honda,KawasakiandCummins,amongothers.
DaimlerAGboughta26percentstakeinSutlejMotorsinthefirsthalfof2008.
Indiancompanieshavealsobeenbullishinacquiringforeignautomobilecompaniestoreinforcetheirpresenceintheglobalmarket.
Thelandmarkdealinthefirsthalfof2008wasTataMotors'acquisitionofJaguar-LandRoverfromFordforUS$2.
30billion.
Duringthisperiod,Mahindra&MahindraacquiredthreeItaliancompanies-GRGraficaRicerca,MetalcastelloandEnginesEngineering.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB55SeveralfactorsmakeIndiaafavouriteinvestmentdestinationProximitytomarketsProximitytootherAsianeconomiesProximitytotheemergingmarketssuchasAfricaShipmentstoEuropecheaperthanthosefromBrazilandThailandHighqualitystandards11IndiancomponentmanufacturershavewontheDemingawardforqualityMostleadingcomponentmanufacturersareQSandISOcertifiedCompetitivemanufacturingcostSkilledlabourcostsamongstthelowestinIndiaExportpotentialTotalvalueofexportsby2015expectedtoreachUS$8billiontoUS$10billionforvehiclesandUS$20billiontoUS$25billionforcomponentsAvailabilityofmanpower0.
4millionengineeringgraduateseveryyearSevenmillionenterworkforceeveryyearLargeandgrowingdomesticdemandDemandgrowthof14percentCAGRmakesIndiaoneofthefastestgrowingmarketsStableeconomicpoliciesContinuityineconomicreformsandpoliciesrelatedtoinvestmentsProvenproductdevelopmentalcapabilitiesMorethan125Fortune500(includinglargeautocompanies)haveR&DcentresinIndiaCompaniescanleverageIndia'sacknowledgedleadershipintheITindustryIndiaasanautomotivehubAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB56ManyglobalautocompanieshavemadeIndiaamanufacturingbaseasarobustsupplybaseexistsinIndiaMarutiSuzukiHeroHondaToyotaKirloskarSkodaIndiaSwarajMazdaTatraVectraVolvoFordIndiaForceMotorsGMDelphiDensoLearMeritorVisteonJohnsonMattheyTRWValeoRicoMindaTataMotorsMahindra&MahindraAshokLeylandHindustanMotorsTVSMotorsBajajAutoTier-1andtier-2suppliersIndianOEMsGlobalOEMs/JVsIndiansupplybaseEnginesStampingGearboxesEngineeringservicesPlasticsMouldsForgingCastingsLampsDiemakingAirbrakesGlobalexportsAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB57India—asourcinghubandamanufacturingbaseforOEMsManufacturerComponentsWorthCommentsHyundai,Ford,Skoda,Suzuki,MahindraSpecificmodelsofcarsN/AHavealreadypickedIndiaasamanufacturingbaseforparticularcarmodelToyota,GM,Fiat,Volkswagen,RenaultandDaimlerHubforautocomponentsN/AAreintheprocessofmakingIndiaamanufacturinghubforautocomponentsFiatGroupPurchasingAutopartsUS$1billionBy2010foritsEuropeanandotheroperations.
About70percentoftheoutsourcedpartswillbesolelyfortheFiatGroup'smultipleoperationsinIndiaHyundaiAutopartsforglobaloperationsLookingtosourceagreaterpercentageofcomponentsfromIndiansuppliersforitsglobaloperationsVolvoComponentsinthecommercialvehiclessegmentforproductsmanufacturedatitsBangalorefacilityN/ASourcingofautocomponentsthroughtherecently-inkedjointventurewithEicherMotors;tobemanufacturedfromthePithampurplantVolkswagenAGAutocomponents1billionThecompanyistargetingabout70percentlocalisationofitscarsproducedinIndiawithintwoyearsofstartingoperationsRenault-NissanHasfirmedupplanstosourcecomponentsandaggregates300millionoverthenexttwoyearsFirstphasetosourcelow-endtechforlow-endmodels,high-endinsecondphaseDaimlerChryslerAutocomponentsandITservicesUS$125millionGrowingat20percentCAGRAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB58CompetitivenessofIndianautomotiveindustryInordertoemergeasamanufacturinghub,Indiafacescompetitionfromotherlow-costcountriessuchas:-China-Thailand-BrazilIMaCShascomparedthecostcompetitivenessofmanufacturingsixautomotivecomponentgroups(engine,transmissionandsteering,suspensionandbraking,electricals,equipmentandothers)inIndiawithrespecttothesecountriesintermsoffactorssuchas:-Taxesandduties-Costofmanufacturing(forexample,powerandfuelcosts,labourcosts)-EconomiesofscaleCompetitivenessofmanufacturinginIndiaisimprovingwiththereductionoftaxlevels,taxreformsandwithimprovingbusinessinfrastructure.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB59TaxstructureinIndiavis-à-visothercountriesTheburdenofdirectandindirecttaxesishigherinIndiathaninothercountries.
IndiaBrazilChinaThailandExcise8-16%---VAT12.
5%17%17%7%Othertaxes15%*Corporatetax34%34%25%30%ExemptionsSpecificpackagesprovidedbystatesforlargeinvestmentsTaxincentivesforcompaniesinexportprocessingzonesPreferentialcorporatetaxpoliciesforforeigninvestmententerprisesTaxincentivesforinvestmentsoutsidecentralzoneImportduty13%16%8%FreeonrubberImportdutyonsteel5%12%^2%10%Source:GoI,ApectariffGovernmentofIndiaannouncedanacross-the-boardexcisedutyreductionof4percentacrossautomobilesonDecember7,2008Incaseofbuschassis,excisedutyisat8.
18percent.
*ReferstolocaltaxessuchasWithholdingTax(WHT)^Importdutyonheavyplateshasbeenreducedto2percent,butwithacapof20,000tonnesAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB60LabourandlabourproductivityinIndiavis-à-visothercountriesIndiacomparesfavourablywithotherlow-costcountriesinproductivity-adjustedlabourcost.
Indianlabourproductivityinthemanufacturingsectorisontheincreasewiththeapplicationofproductionmanagementtechniques;manycompanieshavedoubledtheirproductivityinthelastfiveyears.
GovernmentofIndiahasearmarkednearlyRs.
1,000croreforhumanresourceskilldevelopmentinitiativesacrossindustrysectors.
IndiaBrazilChinaThailandLabourcost(US$/hour)0.
754.
30.
750.
8Labourcost(US$/day)*633.
666.
4Productivityindex**1.
02.
01.
01.
2Productivityadjustedlabourcost(US$/day)616.
865.
33*Assumingeight-hourshiftperday**GrossvalueaddedperpersonemployedwhencomparedtoIndiaAutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB61SwiftprogressonNationalSkillDevelopmentProgram(NSDP)Theaimofthemissionis―toprovidewithina5-8yeartimeframe,apoolofskilledworkforce,sufficienttomeetdomesticrequirements,withsurplusestocatertotheskilldeficitsinotherageingeconomies‖.
TheNationalSkillDevelopmentCorporation(NSDC)hasbeenestablishedwithacommitmentofRs.
1,000crorefromtheCentre.
AnotherRs.
15,000croreisenvisagedtobegeneratedfromstategovernments,publicsectorentities,theprivatesector,andbilateralandmultilateralsources.
Theautomobileandautocomponentssectorisoneofthetop-10,high-growthmanufacturingsectorsthatisinfocusforsector-specificskilldevelopment;thesectorenjoysextensiveparticipationfromtheindustry.
Themissionisexpectedtoenhanceskillavailabilityandproductivityacrosstheindustry.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB62PowercostsandinterestratesinIndiavis-à-visothercountriesPowercostsinIndiaarethehighestamongstcompetingcountries.
However,powercostaccountsforonlyaround3percentoftheoverallcoststructureandis,hence,notasignificantdisadvantage.
PowercostsinIndiavarybystateandareaslowasUS$0.
1instatessuchasMaharashtra.
WithprivatisationandcompetitionintheIndianpowersector,thecostofpowerisexpectedtoberationalisedfurther.
InterestratesinIndiaarehighascomparedtocompetingcountries,butareexpectedtosofteninthefuture.
Therecentdownturnacrosstheglobaleconomyhasforcedcentralbanksofmajorcountriestoslashlendingrates.
PowercostsCountryCostperkWh(US$)India0.
14Brazil0.
05China0.
03Thailand0.
11InterestratesCountryAnnuallendingIndia10-11%Brazil13-14%China5-6%Thailand7-8%AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB63ManufacturinginChinavis-à-visIndiaIndianmanufacturerssufferfromacostdisadvantagevis-à-visChinesemanufacturersmainlybecauseofhigherpowerandfuelcostsand,tosomeextent,duetothecascadingimpactoftaxes.
ChinaEnginepartsTransmissionandsteeringSuspensionandbrakingElectricalsEquipmentOthersCostofcomponentforanIndiancompany100%100%100%100%100%100%LessTaxesanddutiesHighernetstate-levelleviesand0.
55%0.
85%1.
58%1.
51%1.
72%0.
89%cascadingimpactoftaxesHigherimportduty0.
01%0.
01%0.
03%0.
07%0.
08%0.
03%Highercorporatetaxes0.
27%0.
27%0.
27%0.
27%0.
27%0.
27%IndustrycostsHighercostofpowerandfuel3.
43%3.
16%4.
01%3.
02%2.
13%2.
68%Highercostoffunds0.
62%0.
30%0.
18%0.
00%0.
44%0.
13%Higherrateofinsurance0.
10%0.
08%0.
10%0.
08%0.
11%0.
08%OthersOthers3.
63%2.
98%3.
08%3.
11%3.
50%2.
72%TotalcostdisadvantageforIndia8.
61%7.
65%9.
25%8.
06%8.
25%6.
80%AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB64ManufacturinginThailandvis-à-visIndiaIndianmanufacturerssufferfromacostdisadvantagevis-à-visThaimanufacturersmainlybecauseofhigherleveloftaxesandtheircascadingimpact.
ThailandEnginepartsTransmissionandsteeringSuspensionandbrakingElectricalsEquipmentOthersCostofcomponentforanIndiancompany100%100%100%100%100%100%LessTaxesanddutiesHighernetstate-levelleviesand3.
92%5.
26%5.
98%5.
48%5.
69%5.
42%cascadingimpactoftaxesHigherimportduty0.
51%0.
29%0.
38%0.
88%0.
91%0.
79%Highercorporatetaxes0.
12%0.
12%0.
12%0.
12%0.
12%0.
12%IndustrycostsHighercostofpowerandfuel0.
93%0.
86%1.
09%0.
82%0.
58%0.
73%1.
72%1.
10%1.
19%1.
22%1.
59%0.
85%Highercostoffunds0.
50%0.
24%0.
14%0.
00%0.
35%0.
10%Higherrateofinsurance0.
10%0.
08%0.
10%0.
08%0.
11%0.
08%Others2.
15%1.
51%1.
60%1.
63%2.
02%1.
25%TotalcostdisadvantageforIndia9.
95%9.
46%10.
60%10.
23%11.
37%9.
34%AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB65ManufacturinginBrazilvis-à-visIndiaIndiaiscompetitivelypositionedvis-à-visBrazilacrosscomponentsmainlyduetothehighercostoflabourinBrazil.
BrazilEnginepartsTransmissionandsteeringSuspensionandbrakingElectricalsEquipmentOthersCostofcomponentforanIndiancompany100%100%100%100%100%100%LessTaxesanddutiesHighernetstate-levelleviesand-4.
28%-5.
81%-3.
94%-3.
26%-3.
22%-5.
21%cascadingimpactoftaxesHigherimportduty-0.
34%-0.
23%-0.
19%-0.
31%-0.
27%-0.
39%Highercorporatetaxes000000IndustrycostsHighercostofpowerandfuel2.
79%2.
58%3.
28%2.
47%1.
74%2.
19%HighLabourcost-23.
16%-14.
85%-16.
07%-16.
45%-21.
47%-11.
51%Highercostoffunds-0.
27%-0.
13%-0.
08%0.
00%-0.
19%-0.
06%Higherrateofinsurance-0.
06%-0.
05%-0.
06%-0.
04%-0.
06%-0.
05%Others5.
55%4.
90%5.
00%5.
02%5.
42%4.
64%TotalcostdisadvantageforIndia-19.
77%-13.
59%-12.
06%--12.
57%-17.
78%-10.
39%AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB66Conclusions…(1/2)IndiahasacostadvantagewhencomparedtoBrazil.
India,however,suffersfromacostdisadvantagevis-à-visChinaandThailand,primarilyduetohighleveloftaxesandtheircascadingimpact.
India,inthenearfuture,isexpectedtogoaheadwiththeabolitionofinter-statecentralsalestax(CST),whichwillreducethecascadingimpactoftaxestosomeextent.
Implementationofgoodsandservicestax(GST),alongthelinesofvalue-addedtax(VAT),andabolitionofallothertaxesisinprogressandistargetedforApril2010.
Itwillreducethetaxationloadingontheautomotivesectorconsiderably.
ThisstepisexpectedtostrengthenIndia'spositionasaleadingautomobilemanufacturinghubinthefuture.
VariousstepsbeingtakenbytheIndiangovernmenttoimproveinfrastructureinordertoreducethedisadvantagethatIndiasuffersbecauseofpoorinfrastructurethatcausesprojectdelays,delaysindeliveriesandsoon.
Thiswouldincreasethedemandforroadtransportationinthecountry.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB67Conclusions…(2/2)Apartfromroadinfrastructure,R&DinfrastructureundertheUS$380millionCentralgovernmentproject,NATRIP,whichisexpectedtobecompletedbytheendofyear2010,isexpectedtoprovideIndiaadistinctadvantageoverotherlow-costcountriesintheautomotiveindustry.
WiththewidespreadimplementationoftheNSDPandtheeffectingoftheASEANfreetradeagreement,skilldevelopmentandproductivityenhancementwilladdtotheindustry'scompetitivenessintheglobalmarket.
Further,withtherisingmanpowercostsinChina,thecompetitivenessdifferentialbetweenIndiaandChinaisfastreducing,strengtheningIndia'spotentialforbecomingthemanufacturinghubfortheglobalautomotiveindustry.
AutomotiveIndustrySeptember2009INDIAASAMANUFACTURINGHUB68DISCLAIMERIndiaBrandEquityFoundation(―IBEF‖)engagedICRAManagementConsultingServicesLimited(IMaCS)topreparethispresentationandthesamehasbeenpreparedbyIMaCSinconsultationwithIBEF.
Allrightsreserved.
AllcopyrightinthispresentationandrelatedworksissolelyandexclusivelyownedbyIBEF.
Thesamemaynotbereproduced,whollyorinpartinanymaterialform(includingphotocopyingorstoringitinanymediumbyelectronicmeansandwhetherornottransientlyorincidentallytosomeotheruseofthispresentation),modifiedorinanymannercommunicatedtoanythirdpartyexceptwiththewrittenapprovalofIBEF.
Thispresentationisforinformationpurposesonly.
WhileduecarehasbeentakenduringthecompilationofthispresentationtoensurethattheinformationisaccuratetothebestofIMaCS'sandIBEF'sknowledgeandbelief,thecontentisnottobeconstruedinanymannerwhatsoeverasasubstituteforprofessionaladvice.
IMaCSandIBEFneitherrecommendnorendorseanyspecificproductsorservicesthatmayhavebeenmentionedinthispresentationandnordotheyassumeanyliabilityorresponsibilityfortheoutcomeofdecisionstakenasaresultofanyrelianceplacedonthispresentation.
NeitherIMaCSnorIBEFshallbeliableforanydirectorindirectdamagesthatmayariseduetoanyactoromissiononthepartoftheuserduetoanyrelianceplacedorguidancetakenfromanyportionofthispresentation.
‖AUTOMOTIVEINDUSTRYSeptember2009
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