Dilip Chenoy Director General Society of Indian Automobile Manufacturers

Dilip ChenoyDirector General

Society of Indian Automobile Manufacturers

Plans for Expansion & Investment(Auto & Component Manufacturers)

Market Update Breakfast - IndiaSeptember 12, 2006

The Indian Automotive Sector: The Growth Story and Opportunities

Dilip Chenoy, Director General , Society of Indian Automobile Manufacturers

atINDIA BREAKFAST

in CHICAGO, ILLINOIS

SIAM12th September 2006

Presentation Outline

• SIAM

• Indian Automotive Industry-Current Scenario

• Growth prospects

• Forecasts and Expansion Plans

SIAM

Society of Indian Automobile Manufacturers

• Apex National Body representing 38 Vehicle Manufacturers in India

• Non-profit organisation

• Industrial & Economic Policy, Technical roadmaps and Public Policy

• Statistical services – production, sales and exports

• Auto Expo

Promotes sustainable development of Indian automobile industry

SIAM

Presentation Outline

• SIAM

• Indian Automotive Industry-Current Scenario

• Growth prospects

• Forecasts and Expansion Plans

SIAM

Evolution of Automobile Industry

1970 - 1984 1985 - 1995 1995-2000

Cars were luxury

Manufacturing licensed; expansion restricted

QR on importHigh

customs duty, excise duty & sales tax

Market dominated by Tata, HM, Bajaj, PAL

Entry of Maruti

Entry of Japanese 2 Wheeler and LCV mfrs

Delicensing in 1993

QR on importDecreasing

customs & excise duties

Seller’s mktEmergence of

Hero HondaMaruti

became mkt leader

Entry of international players in cars

Increased competition

Auto financeBuyers

marketMarket boomEnvironment

al concernsSuperior

technologyFocus on

pollution control

Segmentation

Service networks

Post 2000

QRs removedIncreasing

choice to customers

Easy auto finance

Diversification - financing, insurance, etc

Focus on safety Improving

capacity utilisation

Indigenously designed and developed

Increased exports

SIAM

Auto Policy Today . . .

No

• Restriction on FDI• Requirement of local content• Export obligation• Foreign Exchange neutralization• Minimum R&D spend

SIAM

Government intention to make India an automotive manufacturing hub

Size of the Indian Automobile Industry

Size ~ 9.7 mn vehicles

Production Volume Contribution

All figures for Apr 2005- Mar 06

• India second largest producer of motorcycles (7.6 mn) in the world

Passenger Vehicles

13%

Three Wheelers4%

Two Wheelers79%

Commercial Vehicles

4%

SIAM

Value of the Indian Automobile Industry

Estimated Sales Value Contribution

Size ~ USD 25.5 billion

All figures for Apr 2005- Mar 06

Market for passenger cars greater than that for 2 wheelers.

Commercial vehicles contribute to significant value.

Commercial Vehicles

26%

Passenger Vehicles

43%

Three Wheelers2%

Two Wheelers29%

India exports another USD 2.5 billion value of vehicles

SIAM

Total Registered Vehicles ~ 87 Mn

Commercial Vehicles

14%

Passenger Vehicles

13%

Two Wheelers

73%

Indian Vehicle Parc

Source: Govt. of India Statistics of Registered Vehicles & SIAM estimates

2005

SIAM

Global vehicle sales grew more than 1m units a year

80% of growth (1993-2003) was in Top 10 mktsNearly 50% in China and the U.S.

393

434

434

655

666

715

803

970

2769

3268

0 1000 2000 3000 4000

MEXICO

CANADA

FRANCE

RUSSIA

ITALY

INDIA

SPAIN

U.K.

USA

CHINA

CAGR

13.8%1.8%

4.1%

6.5%

11.7%

3.2%

7.1%

2.0%

3.2%5.1%

(thousands of units)

SIAM

Total Vehicle Sales: 1970 - 2004

0

1

2

3

4

5

6

7

8

9

10

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Millions

Germany

Japan

China

India

SIAMSource: General Motors

Indian Automobile Industry –Growth

0

2,000

4,000

6,000

8,000

10,000

12,000

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

Year

To

tal

Sale

s (

In

cl.

Exp

ort

s)

In

'000s

Sales

1073 23

07

1875

3879

8248

5175

4123

SIAM8

9717

Vehicles Manufacturers in India

SIAM

Indian Auto-components Industry

SIAM

• US$ 10 billion revenue growing at about 18 - 20% per annum

• About 500 organised sector players and 5000 unorganised sector players

• Investment of US $ 3.8 billion

• Exports account for about 18% at about US$ 1.8 billion

• OEM demand about 54% ; 28% is replacement market

• The Indian component industry is characterised by: ۰Strong backward and forward linkages ۰Many technically capable companies ۰Increasing success in tapping export markets

Electrical Parts9%

Equipments10%

Suspension & Braking Parts

12%

Engine Parts31%

Drive Transmission

& Steering Parts19%

Body & Chassis

12%

Others7%

And Covers A Comprehensive Production Range

Break-up of Turnover

SIAM

Source: ACMA

Size of the Auto Component Industry

Year Size ( USD millions) Exports ( USD millions)

’99 – 00 3,849 456

’00 – 01 3,965 625

’01 – 02 4,470 578

’02 - 03 5,430 760

’03 – 04 6,730 1,020

’04 - 05 8,700 1,400

’05-06 10,000 1,800

SIAM

Presentation Outline

• SIAM

• Indian Automotive Industry-Current Scenario

• Growth prospects

• Forecasts and Expansion Plans

SIAM

Indian Market is interesting . . .

• Growth of Economy – GDP

• Development of Infrastructure

• Easy availability of low cost finance

• Changing demographic characteristics

• Increased need for mobility

SIAM

Growth of economy - GDP

SIAM

Growth of per capita GDP (1993-2003)

3.2%

3.4%

3.5%

3.6%

3.8%

4.0%

4.3%

4.5%

4.7%

6.6%

7.9%

0% 2% 4% 6% 8% 10%

Chile

Finland

Tunisia

Taiw an

Hungary

Slovenia

Poland

South Korea

India

Ireland

China

Top Ten Growing Economies

Source: World Bank, SIAM

Per Capita Income in BRIC will Grow Significantly

Projected US$ GDP Per Capita

2003 US$ Brazil China India Russia Germany

2000 4338 854 468 2875 22814

2005 2512 1324 559 3718 24402

2010 3417 2233 804 5948 26577

2015 6664 3428 1149 8796 29111

2020 6302 4965 1622 12527 31000

2025 7781 7051 2331 18862 32299

2030 9823 9809 3473 22427 33898

2035 12682 13434 5327 28749 37087

2040 16370 18209 8124 36314 40988

2045 20926 24192 12048 42081 44949

2050 26592 31367 17966 49848 48952Source : Dreaming With BRICs: The Path to 2050 by Goldman Sachs

Auto Industry takes off at USD 1000 per capita SIAM

Projected Growth Rates of GDP

% Brazil Russia India China

2000-2005 2.7 5.9 5.3 8.0

2005-2010 4.2 4.8 6.1 7.2

2010-2015 4.1 3.8 5.9 5.9

2015-2020 3.8 3.4 5.7 5.0

2020-2025 3.7 3.4 5.7 4.6

2025-2030 3.8 3.5 5.9 4.1

2030-2035 3.9 3.1 6.1 3.9

2035-2040 3.8 2.6 6.0 3.9

2040-2045 3.6 2.2 5.6 3.5

2045-2050 3.4 1.9 5.2 2.9

BRIC’s Real GDP Growth: 5-Year Period Averages

Source : Dreaming With BRICs: The Path to 2050 by Goldman Sachs

SIAM

Infrastructure

SIAM

Three main areas in roads:

• Golden Quadrilateral Project & North-South/ East-West Corridors

• National Connectivity Project

• Ports

• Key cities

• Grameen Sarak Yojana for development of rural roads

SIAM

Golden Quadrilateral & North-South/ East-West Corridors

13,146 km to be 4/6 laned

Estimated cost USD 12 Billion

SIAM

Easy Availability of low cost finance

SIAM

Easy finance

• Almost 95% of vehicles are financed• Lower financing rates• Large variety of financing options are available• Longer financing terms• Lower up front payment

Markets are still under-penetrated

Consumer loans / GDP (%)

18

33

52

5

55

0

10

20

30

40

50

60

Korea Taiwan Malaysia Thailand India

. . penetration currently low, with growth driven by strong fundamentals…

SIAM

Changing demographic characteristics

SIAM

India: Urban Population as % of Total Population

20.00

23.00

26.00

29.00

32.00

35.00

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Euro Monitor SIAM

Demographic Profile

Per cent of population, 2003

7

23

35

35

>60

35-59

15-34

0-14

10

30

35

25

23

36

26

16

8

26

37

29

A “Young” population . . .

Highest proportion of population below 35 years (70%) in India……

Age in years

India China Germany Brazil

SIAM

. . .which means a bigger opportunity

365

240

73

3650-14

15-35

35-59

>60

2003

391

295

87

449

2009 E

Total Population in million1,04

41,22

1

130 mn plus people get added to working population in 6 yrs

Age in years

SIAM

Annual Income (at 1998-99 prices)

1992-93 1995-96 1998-99 2001-02 2006-07 (expected)

High income >$2,300

6.0 8.5 11.9 15 22

Middle income >$1,500-2,300

10.4 11.9 13.9 16 20

Low income $1,500

83.6 79.6 74.2 69 58

. . rapid changes in income segments taking place

Significant growth in high income and middle income segments will result in

higher market potential for most products SIAM

Increased need for mobility

SIAM

Large growth Potential given low penetration levels - 2004 ….

Countries Cars per thousand people

Commercial Vehicles per

thousand people

Germany 550 43

France 495 102

Malaysia 253 51

South Korea 219 89Mexico 135 69Brazil 96 24Thailand 51 75Indonesia 16 12Philippines 9 21India 7 4China 6 15

SIAM

Source: WARD’s

Buses per 1000 persons - 2003

VDA International statistics 2004SIAM

South Korea 26.0

China 6.7

Indonesia 3.5

Japan 1.8

Taiwan 1.1

Germany 1.0

India 0.7

UK 0.2

SIAM

…Low Traffic Density - 2004Countries Vehicles (Four Wheelers)

per mile

Germany 212

Korea 171.7

Thailand 140.2

Malaysia 108.8

Mexico 65.1

France 36.2

Indonesia 19.1

China 16.3

Brazil 12.8

Philippines 12.8

India 3.5

Source: WARD’s

Passenger Vehicles Growth Drivers

• Increasing affordability– Higher growth in personal disposable incomes

relative to car prices– Cheaper and easier financing options

• Growing aspirations– Faster replacement and upgrades– Income and demographic distribution

• Increased demand for mobility

SIAM

Commercial Vehicles Growth Drivers

• Growth in GDP and Manufacturing output

• Changing demand patterns

• Improved Infrastructure

• Change in transportation pattern

SIAM

Two Wheelers Growth Drivers

• Increased disposable income – more families graduating to the threshold level required for potential two wheeler customers

• Rapid urbanization with cities becoming larger-Increasing need fro mobility

• Increased demand from Semi-Urban & Rural Areas.• Wider product range/ choice available to customer • Real Price of products going down• Greater Finance Opportunities

SIAM

Presentation Outline

• SIAM

• Indian Automotive Industry-Current Scenario

• Growth prospects

• Forecasts and Expansion Plans

SIAM

India Long-Term Sales Forecast

0

500

1,000

1,500

2,000

2,500

3,000

3,500

X1,0

00

Annual Average Growth

80s 12.2

90s 8.8

00s 10.1

Source: General Motors SIAM

Future Potential Market Size of VehiclesAll figures for 2009-10

Category Growth pa

Number

Passenger Cars 18% 2,040,245

Multi Utility Vehicles 18% 331,680

Commercial Vehicles 20% 777,385

Two Wheelers 12% 10,589,585

Three Wheelers 12% 530,370

All Vehicles 14,269,265

However, potential is more if exports market is taken into consideration

The vehicle industry turnover in 2004-05 is estimated to be USD 25 billion. Even if the market grows at 8% pa, the turnover would be more than USD 65 billion in 10 years SIAM

Forecasted Two wheeler production

Source: ADB

SIAM

Forecasted Two Wheeler Production

0

50

100

150

200

250

2008 2015 2025

Year

fig

ure

s in

mill

ion

India

China

Forecasted Three wheeler production

Forecasted Three wheeler Production

0

2

4

6

8

10

2008 2015 2025

Year

fig

ure

s in

mil

lio

n

India

China

Source: ADB

SIAM

Forecasted Commercial Vehicles production

Source: ADB

SIAM

Forecasted Commercial Vehicles Production

0

10

20

30

40

50

60

70

80

2008 2015 2025

Year

fig

ure

s in

mil

lio

n

India

China

Forecasted Cars, MUVs Production

Source: ADB

SIAM

Forecasted CAr, MUVs Production

0

20

40

60

80

100

120

140

2008 2015 2025

Year

fig

ure

s in

mil

lio

n

India

China

Auto Component Industry – Managing High Growth

10+8.7

6.735.43

4.473.973.93.253.10

0.00

5.00

10.00

15.00

20.00

25.00

1997 1998 1999 2000 2001 2002 2003 2004 2005

Source : ACMA McKinsey Report

PROJECTED CAGR 2005-201415%

CAGR1997-200416.5%

(in US $ bn)

2009

18.65

40.0

20142009

18.65

40.0

2014

18.65

SIAM

Companies in India are …

Setting up Greenfield manufacturing facilities

Establishing new Joint Ventures in India

Substantially increasing their production capacities

Investing in or acquiring companies Overseas

Establishing manufacturing footprints overseas.

SIAM

Design & Research Centers in India

Cummins

SIAM

India: Entry Plans

• BMW

• Citroen

• ITL

• Man

• Nissan

• Renault

SIAM

• Volksawgen AG

• Alfa Romeo

• Maserati

• Land Rover

• Aston Martin

• Scania

India: Expansion Plans

SIAM

• Ashok Leyland• Bajaj Auto• Eicher• Force Motors• General Motors• Hero Honda• Honda

• Hyundai Motors• Mahindra & Mahindra• Maruti Udyog• SkodaAuto• Tata Motors• Toyota• TVS Motors

. . . . And more

Thank You!

Society of Indian Automobile Manufacturers

Core 4B, 5th Floor

India Habitat Centre

Lodi Road

New Delhi

Phone: 011 2464 7810 - 12

Fax: 011 2464 8222

E-mail: dchenoy@siam.in

Website: www.siamindia.com

SIAM