The Indian Automobile Industry

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    THE INDIAN AUTOMOBILE INDUSTRYA PERSPECTIVE

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    Automobile Industry in India

    Automobile Industry in India has witnesseda tremendous growth in recent years.

    Come a long way since the first car ran onthe streets of Bombay in 1898.

    It employs more than 10 million people.After independence Indian automobile

    industry was plagued by unfavourablegovernment policies. All it had to offer inthe passenger car segment was a 1940sMorris model called the Ambassador anda 1960s Suzuki-derived model called theMaruti 800.

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    The automobile sector in Indiaunderwent a metamorphosis as a

    result of the liberalization policiesinitiated in the 1991

    Measures such as relaxation of theforeign exchange and equityregulations, reduction of tariffs onimports, and refining the bankingpolicies played vital role.

    after the sector opened to foreigndirect investment in 1996 globalmajor moved in.

    Matured in last few years and offers

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    Today Scenario

    1) India is on every major globalautomobile player's radar.2) Indian automobile industry is also

    fast becoming an outsourcing hub forautomobile companies worldwide, asindicated by the zooming automobileexports from the country.

    3)Due to rapid economic growth andhigher disposable income it is

    believed that the success story of theIndian automobile industry is notgoing to end soon.

    4)Today, Hyundai, Honda, Toyota, GM, Ford

    and Mitsubishi have set up theirmanufacturin bases in India

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    Major characteristics of Indian automobilesector

    Second largest two-wheeler market inthe world.

    Fourth largest commercial vehicle market

    in the world.11th largest passenger car market in theworld

    Expected to become the world's thirdlargest automobile market by 2030,behind only China and the US.

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    Indian automobile sector-A boomingmarket

    Allowance of 100% FDI in 2002 made theindustry easily attractive for the globalplayers. Japanese, Korean, European, andAmerican OEMs entered the Indianmarket and added more than 1 Millionfour-wheelers during 2005-06.

    The production of 2-wheelers grew at a

    CAGR of 14.6% from FY2001 to FY 2006.In passenger car segment, rise indisposable incomes has opened theroads for luxury cars too in India.

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    Key findings

    It is expected that per head disposal income in India will grow atCAGR of 12.11% from fiscal year (FY) 2007 to FY 2010. It is likelyto boost purchasing powers of population, and consequently, the sale ofmotorcycles and compact cars will increase.

    In commercial vehicles segment, light commercialvehicles are expected to register a higher growth rate than the heavy

    and medium commercial vehicles from FY2007 to FY 2010.

    India had the lowest penetration rate of motorcycles in comparison toIndonesia, Thailand and Malaysia in 2005, indicating good growthprospects for the motorcycle manufacturers.

    Car stock per 1000 population is expected to increase at a CAGR of9.14% during the forecasted period from FY2007 to FY2010. * Newpassenger car registration is expected to grow at a CAGR of 11.41%during the forecasted period.

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    A U TO M O B ILE

    2 W H E E L E R 3 W H E E L E RPA S S E N G E R

    V E H IC LE

    C O M M E R C IA LV E H IC LE

    M O T O R C YC LE S C O O T E R S S C O O T E R E T T E S M O P E D S

    . . .I C V . . .M C V . . .H C V

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    Segment wise market share

    The industry has not experienced much change in its structure over the last 6years

    -Two wheelers form the major share of domestic sales

    ( . %)Passenger vehicles lead the exports market 57 4

    ,2 wheelers form the bulk of exports as well but are losing share to Passengervehicles

    The growth in the two wheeler market is driven by the motorcycle market and- %is expected to grow at 14 15 YOY

    Growth Rates of different segme

    23.5

    11.314.3 14 14.2

    0

    5

    10

    15

    20

    25

    Commercial

    Vehicles

    Passenger

    Vehicles

    Two

    wheelers

    Three

    wheelers

    total

    Automobiles

    Segments

    4yearCAGR

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    Key players

    Commercialvehicles TATA Motors, Ashok Leyland, Swaraj

    Mazda,Mahindra & Mahindra ,Force motors,Eicher Motors

    PassengervehicleTATA Motors, Maruti Udyog, Honda Motors, Toyota,Skoda, Mahindra & Mahindra, Daimler Chrysler,Hindustan Motors.

    TwoWheeler Hero Honda, Bajaj Auto, Honda Motors, TVS Motors,

    Yamaha , Kinetic MotorsThreeWheeler Bajaj Auto, Piaggio India

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    A r a i c o u p e

    TATA E leg a n te In d ig o A d ve n t

    TA TA In d iv aC ro ss O ve r

    C O N C E PT C A R S

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    Market share of two wheelers

    Bajaj Auto,24.4%

    TVS Motors,17.7%

    Yamaha,

    3.8%

    Others, 5.8%

    Honda

    Motors, 8.5%

    Hero Honda,

    39.8%

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    Passenger vehicles market share

    Maruti, 50.37

    Hyundai, 19.17

    Tata Motors,

    17.19

    Honda, 5.33

    Others, 5.73

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    Favorable Demographics

    Improving income curve

    Reducing interest rates

    Cost Pressure High Expectations

    Inadequate InfrastructureDevelopment

    EY CHALLENGESEY ENABLERS

    ey Focus Areas Product development( , )includes collaboration new products developed Vendor base ( , , .) quality of vendors skill levels size etc

    Manufacturing capability

    ( , & ,quality levels productivity skill levels

    )technology Service levels Supply chain Labor law Leverage IT

    ey Features of Future Auto PolicyForeignDirectInvestmentImporttariffIncentives ( & )for Research and Development R DEnvironmentalAspects Other measures

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    HANKS YOUHANKS YOU