Presentation by – Amit Singh Bhadauriya , Roll Number -14BM60041

Automobile Industry in India

Contents :

• Introduction of Automobile Industry in India

• Advantage India

• Market Overview and Trends

• Growth Drivers

• Effect of Macroeconomic Policies

• Success Stories

• Opportunities

• Useful Information

• Current and future outlook of auto industry

Automobile Industry in India

INTRODUCTION

Indian Automotive Industry growth decades started in the 1970s. Between 1970 and 1984 cars were considered a luxury product; manufacturing was licensed, expansion was restricted; there were Quantitative Restriction (QR) on imports and tariff structure designed to restrict the market but starting in 2000, several landmark policy changes like QR and 100% FDI through automotive route were introduced. In 2003, Core group on Automotive R&D (C.A.R) was set up to identify priority areas for automotive R&D in India . Indian Auto Industry is 2nd in Two Wheelers, 3rd in Small Cars and 5th in Commercial Vehicles among the top 10 in World .

India is a global hub of automobile industry having:

• 15 Manufacturers of passenger cars and multi-utility vehicles• 9 Manufacturers of commercial vehicles• 16 Manufacturers of 2/3 wheelers• 14 Manufacturers tractors• 5 Manufacturers of engines

Sources : Automotive Mission Plan, 2006-2016, A Mission for Development of Indian Automotive Industry, [Online] Available: http://www.siamindia.com/upload/AMP.pdf

Sunil Kakkar,“Indian Auto Industry, the way forward”, Maruti Suzuki India Ltd.

Automobile Industry in India

ADVANTAGE INDIA

Automobile Industry in India

Growing demand

• Strong growth in demand due to

rising income, middle class, and a

young population is likely to propel

India among the world’s top five auto

manufacturers by 2015

• Growth in export demand is set to

accelerate

Innovation opportunities

• Tata Nano and the upcoming Pixel

have opened up the potentially large

ultra low-cost car segment

• Innovation is likely to intensify

among engine technology and

alternative fuels

Rising investments

• India has significant cost

advantages; auto firms save 10-25

per cent on operations vis-à-vis

Europe and Latin America

• A large pool of skilled manpower

and a growing technology base would

induce greater investments

Policy support

• The government aims to develop

India as a global manufacturing as well

as R&D hub

• There has been a wide array of policy

support in the form of sops, taxes and

FDI encouragement

Advantage India

Source: Automotive Mission Plan (2006–2016) Notes: R&D – Research and Development; FDI – Foreign Direct Investment; FY – Indian Financial Year (April – March); FY16E – Estimated figure for Financial Year

201

FY16E Market

size: USD145 billion

FY10 Market

size: USD57.7 billion

EVOLOLUTION OF INDIAN AUTOMITIVE SECTOR

Automobile Industry in India

• Closed market

• Five players

• Long waiting periods and outdated models

• Seller’s market

• Joint venture (JV): Indian government and Suzuki formed MarutiUdyog; commenced production in 1983

• Component manufacturers entered the market via JV

• Buyer’s market

• Sector de-licensed in 1993

• Major original equipment manufacturers (OEMs) started assembly operations in India

• Imports permitted from April 2001

• Introduction of value- added tax in 2005

• More than 35 market players

• Removal of most import controls

• Indian companies gaining acceptance on a global scale

• Setting up of National Automotive Board to act as facilitator between the government and industry

Before 19820.4 million

units (1982)

1983–920.6 million

units (1992)

1993–200711 million

units (2007)

2008 onwards

20.7 million units (FY13)

Source: Tata Motors, Society of Indian Automobile Manufacturers (SIAM), Aranca Research Note: JV – Joint Venture

THE AUTOMATIVE MARKET IS SPLIT INTO FOUR SEGMENTS

Automobile Industry in India

Automobiles

Two-wheelers Passenger vehicles Three-wheelersCommerce vehicles

Mopeds

Scooters

Motor cycles

Electric two-wheelers

Passenger Cars

Utility vehicles

Multi purpose vehicles

Light commercial vehicles

Medium and heavy commercial vehicles

Passenger carriers

Goods Carriers

ROBUST GROWTH IN REVENUES

Automobile Industry in India

0

10

20

30

40

50

60

70

FY07 FY08 FY09 FY10 FY11

30.533.3

43.3

58.6

Revenue Trend over the past few years (USD millions)

36.6 47.8%

31.8%

20.04%

Trucks Cars Two-wheelers

Market* break-up by revenues (2011)

Total production of automobiles in India (million units)

1.2 1.3 1.8 3 3.1 3.20.4 0.5 0.4 0.8 0.8 0.80.4 0.6 0.5 0.8 0.8 0.8

6.58.5 8.4

13.415.5 15.9

0

5

10

15

20

FY05 FY07 FY09 FY11 FY12 FY13

Passenger Vehicles Commercial Vehicles Two Wheeler Three Wheeler

Source: Society of Indian Automobile Manufacturers (SIAM), Aranca Research

MARKET BREAK-UP BY PRODUCTION VOLUME

Automobile Industry in India

Market share by volume (FY13)

77

51

4 4

Two Wheelers Passenger Vehicles Commercial Vehicles Three Wheelers

5.9

15.3

78.7

Mopeds Scooters Motor Cycles

70.6

29.4

LCV MCV & HCV

81.7

18.3

Passenger Carrier Goods Carrier

80.7

19.7

Passenger Cars Utility Vehicles

Source: Society of Indian Automobile Manufacturers (SIAM), Aranca Research

Market Leaders in each segments

Automobile Industry in India

Source: Society of Indian Automobile Manufacturers (SIAM), Aranca Research

Automobile Industry in India Automobile Industry in India Notable Trends in Indian Automotive Sector

Improving product-development capabilities

• Increasing R&D investments from both

the government and the private sector • Private sector innovation has

been a key determinant of growth in the sector; two good examples are

Tata Nano and Tata Pixel; while the former has

been a success in India, the latter is intended for

foreign markets

• Carmakers such as BMW, Audi, Toyota,

Skoda, Volkswagen and Mercedes-Benz have

started providing customised finance to

customers through NBFCs • Major MNC and Indian corporate houses

are moving towards taking cars on operating lease instead of buying

them

Note: NBFCs - Non-Banking Finance Companies

New product launches Alternative fuels New financing

options

• Large number of products available to consumers across various segments; this has gathered pace with the entry of a number of foreign players • Reduced overall product lifecycle have forced players to employ quick product launches

• In FY11, the CNG market was worth more than USD330 million; CNG cars and taxis are expected to register a CAGR of 28 per cent over FY11–FY14 • The CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in 2009

Automobile Industry in India

1 year 1-5 year 5-10 years

•Increasedaccess tocredit andlowerinterestloans

•InvestmentinInfrastructurespendingcan boostthecommercialvehiclessegment.

•Growing workingpopulation (441 millionpeople in 2015/16)

•Upward migration ofhousehold incomelevels (600 millionpeople have annualincome of more than$10,200)

•Middle classexpanding by 30 - 40million every year

Can propel growth

1 year 1-5 year 5-10 years

•Impact ofdelayedmonsoon (85%of normal,subsequentimpact onpaddycultivation) onrural demand.

•Non-availability ofKey rawmaterial (likeSteel) atcheap price.

•Possibleincrease ofinterest rates(by 2-2.5%BPLR)because ofplannedgovernmentborrowing.

Economic Factors

•Non- availability ofsupplier base withdemanded capability(Quality and Quantity).

•Poor execution ofInfrastructureinvestments.(Construction ofHighways of 16km perday against the target of32 km per day)

•Increase in crude oilprice($ 35/barrel to $ 70/barrel in 14 months).

Can Stunt Growth

Automobile Industry in India

Social Factors

• Rapid Urbanization of semi urban regions

• Rising aspirational levels. Improvement in living standards of middle class

• Increased spending on Fashion & lifestyle comforts.

• Seeking “Value for money”- consumer behavior

• Increasing customer emphasis on aesthetics and comfort.

• A perfect marriage of rise in disposable income and demographic dividend (From US$ 556 per annum US$ 1150 by 2015)

Automobile Industry in India

Frugal Engineering is the way forward

‘Upgradeable’ green cars : Plug and play style engines to replace old ones: the Tata Nano model

Downsize the cars without losing out on interior space. Lower cost, low fuel consumption , less material usage and less pollution

Grants and Incentives for R&D work

100% grant for fundamental research, 75% for pre-competitive technology, 50%for product development

Extension of 150% weighted deduction on R&D expenditure

Developing India as a Testing hub: National Automotive Testing and R&D Infrastructure Project

Investment of INR 17.18 Billion (about USD 380 million) in setting up, inter alia, independent automotive testing centers within the three automotive hubs in the country

Setting up of comprehensive Testing and Validation facilities including Field Tracks for Agricultural Tractors, Trailers, Construction Equipments and various other off-road vehicles at Rae Bareilly in Northern India

Collaborations and Foreign Tie ups for research and technology transfer Developing engines for bio-fuels, electric or hybrid vehicles

Technological Factors

Automobile Industry in India

Strong Policy Support

Auto Policy 2002 NATRiPs Union Budget FY14

Automotive Mission Plan (AMP) 2006–16

Dept. of Heavy Industries & Public Enterprises

• Automatic approval for foreign equity investment up to 100 per cent;

no minimum investment criteria

• Encourage R&D by offering rebates on R&D expenditure

• Set up at a total cost of USD388.5 million to enable the industry to be on par with global

standards • Nine R&D centres of excellence with focus on low-cost

manufacturing and product

development solutions

Industries & Public Enterprises

• Worked towards reduction of excise

duty on small cars and increase budgetary allocation for R&D • Weighted increase in R&D expenditure to

200 per cent from 150 per cent (in-house) and 175 per cent from 125 per cent (outsourced)

• AMP’s vision is to make India a preferred destination for designing and manufacturing of automobiles and achieve a market size of USD154 billion by 2016 • Setting up of a technology modernisation fund focussed on SMEs • Establishment of automotive training institutes, auto design centres and special auto parks

• Proposal to allocate USD2.7 billion for JNNURM to bolster sales volumes of Medium and Heavy Commercial Vehicles (MHCV)• Two wheelers consumption is going to increase to 12% from 8% expected earlier .

Notes: SME – Small and Medium Enterprises, R&D - Research and Development, NATRiP – National Automotive Testing and R&D Infrastructure Project, AMP - Automotive Mission, JNNURM - Jawaharlal

Nehru National Urban Renewal Mission

Key financial ratios of Maruti Suzuki & Tata Motors

Automobile Industry in India

Maruti Suzuki India Ltd

Industry :Automobiles -

passenger cars

Mar-13

Mar-

12

Mar-

11

Mar-

10

Mar-

09

Mar-

08

Mar-

07

Mar-

06

Mar-

05

Mar-

04

Key Ratios

Debt-Equity Ratio 0.08 0.05 0.04 0.07 0.09 0.1 0.06 0.04 0.08 0.11

Long Term Debt-Equity Ratio 0.01 0 0.02 0.05 0.06 0.07 0.06 0.04 0.08 0.11

Current Ratio 0.85 1.08 1.13 1.19 1.22 1.13 1.52 1.73 1.42 1.37

Turnover Ratios

Fixed Assets 2.84 2.98 3.69 3.34 2.9 3.13 3.1 2.95 2.77 2.43

Inventory 26.99 24.6 31.15 30.27 23.89 24.18 21.74 19.06 24.11 23.84

Debtors 41.58 44.83 50.01 36.56 29.1 29.97 24.69 23.69 20.69 16.24

Interest Cover Ratio 14.77 35.74

125.3

5

108.2

4 29.91 43 61.63 86.78 37.25 21.47

PBIDTM (%) 9.5 7.88 10.15 13.93 9.63 14.89 15.05 13.93 13.48 12.91

PBITM (%) 5.71 5 7.67 11.35 6.58 12.19 13.47 12 10.05 8.43

PBDTM (%) 9.12 7.74 10.09 13.83 9.41 14.61 14.83 13.8 13.21 12.52

CPM (%) 8.08 6.58 8.08 10.4 7.68 10.93 10.66 9.99 9.83 10.11

APATM (%) 4.29 3.7 5.6 7.82 4.63 8.23 9.08 8.06 6.4 5.63

ROCE (%) 15.16 12.69 23.15 31.95 15.76 30.51 35.63 34.68 31.28 25.34

RONW (%) 12.48 10.06 17.81 23.58 12.08 22.67 25.38 24.19 21.42 18.59

Source :http://www.capitaline.com

Year

20130

3

20120

3

20110

3

20100

3

20090

3

20080

3

20070

3

20060

3

20050

3

20040

3

No.Of Companies 4 9 9 10 7 8 8 6 5 5

Key Ratios

Debt-Equity Ratio 0.97 0.94 1 1.03 0.9 0.66 0.55 0.57 0.52 0.49

Long Term Debt-Equity

Ratio 0.96 0.92 0.86 0.67 0.52 0.39 0.36 0.5 0.49 0.45

Current Ratio 0.96 0.99 0.77 0.62 0.73 0.92 1.1 1.13 0.99 0.91

Turnover Ratios

Fixed Assets 2.07 2.54 2.41 2.19 2.19 3.22 3.62 3.13 3.04 2.55

Inventory 9.58 11.14 11.49 10.87 9.08 10.74 11.64 11.18 12.58 11.75

Debtors 16.76 18.52 17.09 15.65 17.16 24.55 25.72 20.46 18.98 14.67

Interest Cover Ratio 1.6 2.58 2.77 2.73 1.63 5.79 8.2 7.45 8.69 6.96

PBIDTM (%) 7.2 7.88 9.68 10.72 7.58 9.32 10.18 10.35 10.52 11.56

PBITM (%) 4.07 5.22 7.02 7.95 4.56 7.31 8.31 8.14 8.3 9.08

PBDTM (%) 4.65 5.85 7.15 7.8 4.79 8.06 9.17 9.26 9.56 10.26

CPM (%) 4.56 5.26 6.27 6.75 4.68 6.66 7.25 7.52 7.73 7.41

APATM (%) 1.43 2.61 3.61 3.98 1.66 4.65 5.38 5.31 5.51 4.93

ROCE (%) 6.19 9.02 10.91 10.97 6.83 19.65 27.28 25.74 29.48 31.18

RONW (%) 4.27 8.75 11.2 11.17 4.72 20.63 27.39 26.08 29.57 24.97

Tata Motors Ltd

Industry :Automobiles –

HCVs and MCVs

Current and future outlook of auto industry

Automobile Industry in India

Source : http;//Businesstoday.intoday.in/categorylist/22/1/auto.html and http://economictimes.indiatimes.com/industry/auto/articlelist/13359412.cms

•India will be a Automotive hub, led by small cars and auto component domains•Export of automotive components to ASEAN,BRIC,EU and USA for OEMs as well as Aftermarket•Booming Automobiles (Particularly cars) second sales and remodeling •Increased deployment of IT-enabled Automobile support systems like GPS,ABS,ASR and Safety systems.

•Quality Certification (Deming, Six Sigma,TQM,TS16949) amongst suppliers have attained critical mass and the entire market will follow to get quality certifications.•Will be a hub for optimal cost, high quality vehicular testing and terrain data acquisition services•Alternate fuel (Bio fuel, electricity) and environment friendly green engines (Bharat emission norms)

Auto analysts believe that sales volume of the automobile companies will get a boost after finance minister left more money in hands of salaried employees . Post budget announcement two-wheeler volume likely to grow by 12% from earlier estimate of 8%. Companies such as Hero MotoCorp , Maruti & TVS Motor will be key beneficiary of budget announcement". Luxury cars launch :German luxury car maker BMW launched the all new BMW

ActiveHybrid 7 sedan. German luxury car maker Porsche launched its compact sports utility vehicle Macan in India . Mercedes-Benz launched the AMG version of its sedan CLA 45 .

Bajaj Auto sales rise 3 per cent in June Domestic passenger car sales up 14.76 per cent in June 2014 Volkswagen plans Rs 1500-cr investment in India Bajaj Auto reports marginal rise in Q1 profit at Rs 740 crore Maruti June sales up 33 pc at 1,12,773 units Nissan India sales up over two-fold in May Hero MotoCorp sales up 6 per cent in May Mid range cars launch :Honda launches MPV Mobilio at Rs 6.49 lakh . Nissan rolls

out new Sunny; priced from Rs 7.29 lakh . Ford India launches 2014 Fiesta at Rs 7.69 lakh. Mahindra XUV500 Sportz launched at Rs 13.68 lakh

Domestic car sales up 3.08%, bikes 11.71% in May

Current Scenario Future Trend

Automobile Industry in India

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