automotives - india brand equity foundation

1

AUTOMOTIVESNovember 2010

2

Advantage India

Market overview

Industry infrastructure

Investments

Policy and regulatory framework

Opportunities

Industry associations

Contents

AUTOMOTIVES November 2010

3

Sources: ―Fact sheet on FDI‖ Society of Indian Automobile Manufacturers (SIAM) website, http://dipp.nic.in/fdi_statistics/india_FDI_August2010.pdf, accessed

19 November 2010; ―Industry Statistics,‖ SIAM website, www.siamindia.com/scripts/industrystatistics.aspx, accessed 19 November 2010; Ernst & Young

research.

ADVANTAGE INDIA

Advantage India

Product-development capabilities

Proximity to

emerging

markets

Export potential

Growing domestic demand

Increasing interest among foreign players

Availability of skilled

manpower

India as an

automotive

hub

• There are more than 125 Fortune 500 companies in India.

• India is an emerging global manufacturing hub for low-cost compact cars.

• In India, 0.4 million engineers graduate every year.

• As many as 7 million people enter the workforce every year.

• The cost of an entry-level engineer is around US$ 8,000.

• The cost of engineering talent in India is 45 per cent lower than that in the US.

• Changing demographics, rising disposable income and the entry of several new players has expanded the domestic market for passenger vehicles (PVs).

• India’s low manufacturing costs due to economies of scale and low R&D and sourcing costs are increasing affordability and driving domestic demand.

• Vehicle production grew to 14 million in 2009–2010.

• India’s proximity to emerging markets such as Asia and Africa is another advantage.

• Shipments to Europe from India are more cost-effective than those from Brazil and Thailand.

• The Government of India (GoI) has permitted 100 per cent foreign equity investments.

• FDI inflow in 2009–2010 for the auto components sector was recorded at US$ 1.2 billion.

• FDI inflow in the same period was 4 per cent of the total FDI inflow in the country.

• Sourcing from low-cost countries has

increased, which, in turn, has

enhanced India’s potential as an

automotive hub.

• The value of vehicle exports is

estimated to reach between US$ 8

billion and US$ 10 billion by 2015.

Automotives November 2010

http://dipp.nic.in/fdi_statistics/india_FDI_August2010.pdf

http://www.siamindia.com/scripts/industrystatistics.aspx

4

Advantage India

Market overview


Investments


Opportunities


Contents


5

• The industry turnover is estimated to reach US$ 145 billion by 2016.

• Automobile production increased from 8.5 million units in 2004–05 to 14.1 million units in 2009–2010 at a compound annual growth rate (CAGR) of 10.7 per cent.

• Domestic vehicle sales increased at 26.8 per cent y-o-y, from 9.7 million units in 2008–09 to 12.3 million units in 2009–2010.

• Between April 2000 and August 2010, cumulative foreign direct investment (FDI) inflow to the automotive sector, including both automobile and auto components, totaled US$ 4,710 million.

• FDI inflow in 2009–2010 for the auto components sector was recorded at US$ 1.2 billion, which was 4 per cent of the total FDI inflow in the country in the same period.

Sources: ―Fact sheet on FDI‖ Society of Indian Automobile Manufacturers (SIAM) website, http://dipp.nic.in/fdi_statistics/india_FDI_August2010.pdf,

accessed 19 November 2010; ―Industry Statistics,‖ SIAM website, www.siamindia.com/scripts/industrystatistics.aspx, accessed 19 November 2010;

―Automotive Mission Plan (AMP) 2006–2016,‖ Department of Heavy Industry website, www.dhi.nic.in/Final_AMP_Report.pdf, accessed 19 November

2010.

MARKET OVERVIEW

Market overview … (1/4)

8.5

9.7

11.1

10.9

11.2

14.1

0.63

0.81

1.01

1.24

1.53

1.81

0.0 5.0 10.0 15.0 20.0

2004–05

2005–06

2006–07

2007–08

2008–09

2009–2010

Production Exports

Automobile production and exports

million units


6

MARKET OVERVIEW

Ran

kin

gs

It is Asia’s third-largest PV market.

India is the world’s fourth-largest commercial vehicle

(CV) market.

India is the world’s second-largest two-wheeler market

The country is the world’s fifth-largest bus and truck

market (by volume).

Sources: ―Automotive Mission Plan (AMP) 2006–2016,‖ Department of Heavy Industry website, www.dhi.nic.in/Final_AMP_Report.pdf, accessed 19

November 2010; ―Industry Statistics,‖ SIAM website, www.siamindia.com/scripts/industrystatistics.aspx, accessed 19 November 2010.


74.8%

16.7%

4.4%4.0%

Two-wheeler

Passenger vehicles

Three-wheelers

Commercial vehicles

Automobile production in 2009–2010, by segment


7

1983–1993

MARKET OVERVIEW

• Closed market

• Growth of market

limited by supply

• Outdated models

• Number of players:

five

• Joint venture (JV)

between the GoI and

Suzuki to form Maruti

Udyog.

• Number of players: six

• Sector delicensed in 1993

• Major original equipment

manufacturers (OEMs) started

assembly in India

1983–1993

• Implementation of value-

added tax (VAT)

• Imports allowed from

April 2001

• Number of

players:>35

Evolution of automobile industry from five players to more than 35 players



8

• Tata Motors’ acquisition of Jaguar and Land Rover and the launch of the world’s most inexpensive car, the Tata Nano, has placed the Indian automobile market on the global automotive map.

• The growing availability of small and affordable cars has helped expand the PV market in India.

• The Indian automotive industry is expected to be the world’s seventh-largest automobile market by 2016 and the third largest by 2030, only behind China and the US.

MARKET OVERVIEW

1983–1993


Source: ―Automotive Mission Plan (AMP) 2006–2016,‖ Department of Heavy Industry website, www.dhi.nic.in/Final_AMP_Report.pdf,

accessed 19 November 2010.


9

• Ashok

Leyland

• Force

Motors

• Piaggio

• Swaraj

Mazda

• Amtek

Auto

• Eicher

• Honda SIEL

• Maruti

Suzuki

• Tata

Motors

• Bajaj Auto

• Hero

Group

• Ashok

Leyland

• Bajaj Auto

• FIAT

• GM

• M&M

• Eicher

• Skoda

• Bharat

Forge

• Tata

Motors

• Volkswagen

• Renault-

Nissan

• M&M

• Tata Motors

• Hindustan Motors

• Simpson & Co

• International Auto

Forgings

• JMT

• Exide

• Ashok

Leyland

• Ford

• M&M

• Toyota

Kirloskar

• Volvo

• Sundaram

Fasteners

• Enfield

• Hyundai

• BMW

• Bosch

• TVS Motor

Company

• Renault-

Nissan

Indian automotive clusters

Source: Industry sources

M&M: Mahindra & Mahindra

MARKET OVERVIEW

Delhi–Gurgaon–

Faridabad

Kolkata–

Jamshedpur

Chennai–

Bengaluru– Hosur

Mumbai–

Pune–

Nashik–

Aurangabad

North

West

East

South


10

Market segments

Automobiles

Two-wheelers

Mopeds

Scooters

Motorcycles

Electric two-wheelers

PVs

Passenger cars

Utility vehicles

Multi-purpose vehicles

CVs

Light commercial vehicles (LCVs)

Medium and heavy commercial vehicles

(MCVs and HCVs)

Three-wheelers

Passenger carriers

Goods carriers

MARKET OVERVIEW


11

Two-wheelers — market overview … (1/2)

• The production of two-wheelers has grown steadily at a CAGR of 10 per cent, from 6.5 million units in 2004–05 to 10.5 million units in 2009–2010.

• The motorcycle segment constitutes more than 80 per cent of the two-wheeler market.

• The growth of scooter sales can be attributed to the launch of fuel-efficient gearless scooters.

Source: ―Flash Report,‖ SIAM website, www.siamindia.com/scripts/production-trend.aspx, accessed 19 November 2010.

MARKET OVERVIEW

5.19

6.20

7.11

6.50

6.80

8.45

0.99

1.02

0.94

1.07

1.16

1.50

0.35

0.38

0.38

0.43

0.44

0.57

0.00 2.00 4.00 6.00 8.00 10.00 12.00

2004–05

2005–06

2006–07

2007–08

2008–09

2009–2010

Motorcycle Scooter Moped

Two-wheeler production in 2009–2010

million units


http://www.siamindia.com/scripts/production-trend.aspx



12

MARKET OVERVIEW

14.20%

5.43%

80.33%

0.02%

Scooters

Mopeds

Motorcycles

Electric two-wheelers

Source: SIAM

Key in

sigh

ts

Hero Honda Motors Limited, the market leader in India, is the world’s largest two-wheeler company.

India’s two-wheeler industry is the second largest in the world after China.

Growth is driven by rural demand, new product launches and low interest rates.

Source: Ernst & Young analysis

Two-wheeler production, by segment

(2009–2010)

Two-wheelers — market overview … (2/2)

Source: ―Flash Report,‖ SIAM website, www.siamindia.com/scripts/stastical-service.aspx, accessed 19 November 2010.


http://www.siamindia.com/scripts/stastical-service.aspx



13

0.37

0.51

0.62

0.82

1.00

1.14

0.00 0.50 1.00 1.50

2004–05

2005–06

2006–07

2007–08

2008–09

2009–2010

Two-wheeler exports• Two-wheeler exports from India have grown at a CAGR of around 25.2 per cent between 2004–05 and 2009–2010, crossing the one-million mark in 2009.

• Motorcycles constitute 96.7 per cent of two-wheeler exports.

Source: SIAM

CAGR

25.2%

Two-wheelers — exports … (1/2)

MARKET OVERVIEW

Million units

Source: ―Flash Report,‖ SIAM website,

www.siamindia.com/scripts/stastical-service.aspx, accessed

19 November 2010.





14

• The developing economies of South Asia and Latin America are India’s principle export markets.

• Bajaj Auto is the market leader in exports, with a share of 63.7 per cent, followed by TVS Motor Company and Hero Honda Motors Limited.


MARKET OVERVIEW

Two-wheelers — exports … (2/2)

Increasing presence, especially in

small towns and rural areas

Increasing replacement demand

Growing

disposable

income

Wider choice

of offerings

Primary growth

drivers

63.7%

14.5%

8.6%

6.9%6.3%

Bajaj Auto

TVS Motor Company

Hero Honda Motors

Honda Motorcycle & Scooter India

Others

Two-wheeler exports by company

(2009–2010)


Source: SIAM





15

• Hero Honda Motors Limited is the largest two-wheeler manufacturer in the world.

• Bajaj Auto is the second-largest two-wheeler manufacturer in India.

• TVS Motor Company is the leading player in the moped segment and the third-largest two-wheeler manufacturer in India.

• Foreign players such as BMW, Harley Davidson and Ducati have ventured into the Indian market with a range of high-end motorcycles.

Two-wheelers (motorcycles) — dominated by domestic players

… (1/2)

MARKET OVERVIEW

58.5%

24.3%

6.7%

6.2%3.0%

1.3%Hero Honda

Bajaj Auto

TVS Motors

Honda Motorcycles & Scooters

Yamaha

Others

Motorcycles: market share in 2009–2010

(by volume)

Source: SIAMSource: ―Flash Report,‖ SIAM website,

www.siamindia.com/scripts/stastical-service.aspx, accessed 19 November

2010.





16

New entrants

• Honda Motorcycles & Scooters is the largest player in India in the scooter segment with a 50.6 per cent market share in 2009–2010. TVS Motors is the second-largest player, with 20.5 per cent and Hero Honda ranks third, with a 14.3 per cent market share in 2009–2010.

• Mahindra & Mahindra is a recent entrant in the segment through its acquisition of Kinetic Motors.

Source: SIAM

MARKET OVERVIEW

50.6%

20.5%

14.3%

9.6%

4.8%

0.3% Honda Motorcycles & Scooters

TVS Motors

Hero Honda

Suzuki Motorcycles

Mahindra two-wheelers

Bajaj Auto

Scooters: market share in 2009–2010

(by volume)

Two-wheelers (scooters)— dominated by domestic players

… (2/2)


www.siamindia.com/scripts/stastical-service.aspx, accessed 19

November 2010.





17

1.02

1.11

1.32

1.52

1.62

2.08

0.18

0.20

0.22

0.24

0.22

0.27

0.00 0.50 1.00 1.50 2.00 2.50

2004–05

2005–06

2006–07

2007–08

2008–09

2009-10

Cars Utility vehicles

Passenger vehicles (PVs) — market overview … (1/2)

• Production of PVs have grown at a CAGR of 14.4 per cent from 1.2 million units in 2004–05 to 2.4 million units in 2009–2010.

• Passenger cars, accounting for 88.5 per cent of the total PVs produced, grew at a CAGR of 15.3 per cent in 2009–2010.

• This segment is expected to grow at 12–13 per cent in 2010–11.

Source: SIAM

CAGR

14.4 %

MARKET OVERVIEW

Production of PVs



November 2010.

Million units





18

88.5%

11.5%

Passenger cars

Utility vehicles/ Multi purpose vehicles

Key in

sigh

ts

India is primarily a small-car market, with small cars constituting around 75 per cent of the total production.

The production of PVs in India has grown more than threefold over the last decade.

India is estimated to become the sixth-largest PV market and the fifth-largest PV producer in the world by 2014.

PV segment share in 2009–2010

Passenger vehicles (PVs) — market overview … (2/2)

MARKET OVERVIEW

Source: SIAM



November 2010.





19

0.17

0.18

0.20

0.22

0.34

0.45

0 0.1 0.2 0.3 0.4 0.5

2004–05

2005–06

2006–07

2007–08

2008–09

2009–10

• PV exports have grown at a CAGR of 21.9 per cent from 1.7 million units in 2004–05 to 4.5 million units in 2009–2010.

• Major export destinations include Algeria, Italy, Mexico, South Africa and Sri Lanka.

Source: SIAM

CAGR

21.4 %

Passenger vehicles (PVs) — exports … (1/2)

MARKET OVERVIEW

Million units



November 2010

PV exports from India





20

MARKET OVERVIEW

64.0%

33.1%

1.5% 1.4%

Hyundai Motor

Maruti Suzuki

Tata Motors

Others

Greater market access (wider

dealer network and better reach

of financers)

Improvements in road

infrastructureGrowing

disposable

income

Changing

consumer

behaviour

Primary growth

drivers


PV exports — market share of key players

(2009–2010)

Source: SIAM

• Hyundai Motor India Ltd is the largest exporter in the country, with a 64 per cent share in 2009–2010.

Passenger vehicles (PVs) — exports … (2/2)






21

Innovative capabilities

• Tata Motors’ launch of the Tata Nano

revolutionised the industry by creating a new

ultra low-cost car (ULCC) segment.

Passenger vehicles (PVs) — domestic and global players

Source: SIAM

MARKET OVERVIEW

Market share of key players in 2009–2010

44.7%

16.2%

14.7%

6.9%

4.5%

13.2%

Maruti Suzuki

Hyundai Motor

Tata Motors

Mahindra & Mahindra General Motors

Others



November 2010.





22

0.14

0.17

0.23

0.25

0.22

0.32

0.21

0.22

0.29

0.29

0.19

0.25

0.00 0.20 0.40 0.60

2004–05

2005–06

2006–07

2007–08

2008–09

2009–2010

LCVs MCVs and HCVs

Commercial vehicles (CVs) — market overview … (1/2)

• CV production has grown at a CAGR of 10.1 per cent from 0.35 million units in 2004–05 to 0.57 million units in 2009–2010.

• Domestic players such as Tata Motors, Ashok Leyland, M&M and Eicher Motors dominate the industry.

• Increased industrial activity and the growing reach of roads are likely to increase CV sales to 1million units by 2020.

Source: SIAM

CAGR

10.1 %

MARKET OVERVIEW

Million units



November 2010.

CV production





23

MARKET OVERVIEW

Key

insi

ghts

Presently, CVs account for more than 60 per cent of total freight movement in India.

India is the fourth-largest CV market in the world.

Domestic players dominate the industry, constituting 90 per cent of the total segment.

Commercial vehicles (CVs) — market overview … (2/2)

Industry composition by segment (2009–2010)


8.1%

36.0%

6.1%

49.7%

MCV and HCV passenger carriers

MCV and HCV goods carriers

LCV passenger carriers

LCV goods carriers


Source: SIAM





24

0.030

0.041

0.050

0.059

0.043

0.045

0.000 0.020 0.040 0.060 0.080

2004–05

2005–06

2006–07

2007–08

2008–09

2009–2010

• In 2009–2010, LCVs accounted for an export share of 55 per cent, while MCVs and HCVs accounted for 45 per cent of CV exports.

• CV exports have grown at a CAGR of 8.4 per cent from 0.03 million units in 2004–05 to 0.045 million units in 2009–2010.

• Major export destinations include Bangladesh, Mauritius, Nepal, South Africa, Sri Lanka and the Gulf countries.

• Trucks are mainly exported to Bangladesh, Nepal and Africa and passenger carriers to Sri Lanka and the Gulf countries. Source: SIAM

CAGR

8.4 %

Commercial vehicles (CVs) — exports … (1/2)

MARKET OVERVIEW

CV exports from India

Million units



November 2010.





25

Increased substitution of three-

wheelers by one-tonnage vehicles

Improvements in road

infrastructure Increase in

overall freight

and passenger

movementGrowing

industrial and

agriculture

production

Primary growth

drivers


61.7%

16.7%

13.3%

5.9%

2.4%

Tata Motors

M&M

Ashok Leyland

Eicher Motors

Others

Export share of key players in 2009–2010• Tata Motors accounts for 61.7 per cent of CV exports, whereas Ashok Leyland and M&M cumulatively account for 30 per cent.

Commercial vehicles (CVs) — exports … (2/2)

MARKET OVERVIEW

Source: SIAM






26

• Tata Motors, the market leader and accounts for 63.3 per cent of the total production.

• Tata Motors entered the sub-one tonne segment through the launch of Tata Ace in 2006.

• Entry of global players is likely to drive the focus of domestic manufacturers on R&D initiatives and product development activities.

• Recently, new players such as Daimler, Piaggio, MAN AG and Hino have entered the CV segment.

Source: SIAM

Commercial vehicles (CVs) — dominated by domestic

manufacturers … (1/2)

MARKET OVERVIEW

M & HCVs — domestic market share

(production) in 2009–2010

63.3%

23.3%

8.6%

4.8%

Tata Motors

Ashok Leyland

Eicher

Others


http://www.siamindia.com/scripts/stastical-service.aspx, accessed 19

November 2010.


27

58.5%

30.0%

4.0%

3.9%

3.6%

Tata Motors

M&M

Force

Piaggio VehiclesOthers

• Tata Motors is the market leader, accounting for 58.5 per cent of total production.

• Mahindra & Mahindra, the second-largest player in the LCV segment, plans to enter the MHCV segment with Navistar.

• Ashok Leyland, the third-largest player in the CV segment, plans to enter the LCV segment with Nissan.

Source: SIAM

MARKET OVERVIEW

Commercial vehicles (CVs) — dominated by domestic

manufacturers … (2/2)

LCVs — domestic market share (production) in 2009



November 2010.





28

Three-wheelers — market overview and exports• Three-wheeler production has grown at a CAGR of 10.9 per cent from 0.37 million units in 2004–05 to

0.62 million units in 2009–2010.

• Exports of three-wheelers touched 0.17 million units in 2009–2010, registering a CAGR of 19.4 per cent over the last five years.

• Bajaj Auto, the market leader in the domestic three-wheeler segment, accounted for 95 per cent of exports in 2009–2010. The company exports to Sri Lanka, Egypt, Nepal and Bangladesh, among other countries.

MARKET OVERVIEW

0.37

0.43

0.56

0.50

0.50

0.62

0.07

0.08

0.14

0.14

0.15

0.17

0.00 0.20 0.40 0.60 0.80

2004–05

2005–06

2006–07

2007–08

2008–09

2009–2010

Production Exports

Production and export trends Industry composition by segment (2009–2010)

85.6%

14.4%

Passenger carriers

Goods carriers


Source: SIAMSource: SIAM

Million units





29

• Piaggio Vehicles, the market leader in the three-wheeler segment, launched its 1.3-tonne three-wheeler Ape in India.

• Mahindra & Mahindra recently launched its three-wheeler passenger vehicle Alpha Passenger in India.

• Bajaj Auto has the second-largest market share in the three-wheeler segment.

• Force Motors, a joint venture between Bajaj Tempo and Germany-based MAN AG, is a leading player in the goods carrier segment.

41.1%

40.0%

10.1%

8.9%

Piaggio

Bajaj Auto

M&M

Others

Source: SIAM

Three-wheelers — market share

MARKET OVERVIEW

Three-wheelers: market share in 2009–2010 (by volume)



November 2010.





30

Advantage India

Market overview


Investments


Opportunities


Contents


31

Growth

Drivers

Cost

competitive

ness

Increasing

consumer

demand

New

product

launches

An enabling

regulatory

environment

Easy

financing

schemes

Growth drivers

Growth in

the road

sector

• Per capita income is increasing.

• The country’s working

population is growing.

• The market reach of vehicles

is low.

• The Indian middle class is

growing and is estimated to

grow from 50 million currently

to 550 million by 2025.

• Disposable income in the rural

agriculture sector is increasing.

• The demand for Indian

automobiles and auto

components is increasing

globally.

• The availability of low-cost

skilled manpower is

widespread.

• Focus on R&D and product

development is increasing.

• The country has design

capabilities.

• Overall economic growth

has been sustained.

• Taxes and duties are low.

• Infrastructure development

is thriving, with investments

of US$ 500 billion in the

sector expected by 2013.

• Interest loans have declined

and access to credit has

increased.

• The entry of global players in

the market offers a large

number of products in

various segments.

• Product lifecycles are

reducing, and players are

employing quick product

launches.

• Most Indian auto players are

focusing on the small car

segment.

INDUSTRY INFRASTRUCTURE


32

Alternative fuels

• The industry has around 30 two-wheeler and four-wheeler manufacturers offering a range of more than 100 models across various segments.

• Exchange outreach ranges from 15 to 20 per cent in India. In some developed economies, it is as high as 90 per cent.

• The organised sector of the Indian auto retail market comprises 6,500 automobile dealerships and their workshops, employing more than 0.4 million people directly.

• The number of CNG vehicles has been growing at a CAGR of 60 per cent in the last two years.

• CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in 2009.

Vehicle retailing

Key trends … (1/2)



33

Growth of auto-financing activity

in India

Key trends … (2/2)

Improving product-development

capabilities

• Increased investments in R&D operations and the establishment of laboratories to conduct activities such as analysis and simulation and engineering animations are needed.

• There are more than 35 financers in the market today, with the State Bank of India being the leader.

• Easy availability of finance has been one of the most important growth drivers for the auto industry since 2003.

• Reduction of policy rates by the Reserve Bank of India is further expected to augment the growth of the industry.



34

Key players — Indian

Company Segment Manufacturing locations

Tata MotorsPassenger cars, utility vehicles, trucks, commercial passenger carriers and defence vehicles

Jamshedpur (1), Pune (1), Lucknow (1), Sanand (1) and Uttarakhand (1)

Mahindra & Mahindra

Passenger cars, utility vehicles, two-wheelers and commercial passenger carriers

Mumbai (1), Nasik (1), Igatpuri (1), Haridwar (1) and Zaheerabad (1)

Bajaj Auto Two-wheelers and CVsAurangabad (1), Chakan (1) and Pant Nagar (1)

Ashok Leyland CVs, engines, defence and special vehiclesEnnore (1), Hosur (2), Alwar (1), Bhandara (1) and Pantnagar (1)

Maruti Suzuki PVs Gurgaon (1) and Manesar (1)

TVS Motor Company

Two-wheelersHosur (1), Mysore (1) and Himachal Pradesh (1)

Hindustan Motors PVs Chennai (1) and Kolkata (1)

Eicher CVs and two-wheelers Madhya Pradesh (1) and Chennai (1)

Force Motors CVs and three-wheelers Pune (1) and Madhya Pradesh (1)

Sources: Industry sources; www.siamindia.com, members database, 2009

Note: This is an indicative list.



http://www.siamindia.com/

35

Company Segment Manufacturing locations

Toyota Motors PVs Bengaluru (1)

Volkswagen AG PVs Pune (1)

General Motors PVs Gujarat (1) and Pune (1)

Ford Motors PVs Chennai (1)

Honda Motors PVsUttar Pradesh (1) and Rajasthan (1)

Daimler AG PVs and CVs Pune (1) and Chennai (1)

Fiat PVs Pune (1)

Hyundai Motors PVs Chennai (2)

Renault PVs Chennai (1) and Nashik (1)

Piaggio Vehicles Two-wheelers and three-wheelers Maharashtra (1)

Key players — international

Sources: Industry sources; www.siamindia.com, members database, 2009

Note: This is an indicative list.



http://www.siamindia.com/

36

Advantage India

Market overview


Investments


Opportunities


Contents


37

Investments … (1/3)

• Between April 2000 and August 2010, cumulative FDI inflow to the automotive sector, including both automobile and auto components, totaled US$ 4,710 million.

• FDI inflow for the auto components sector in 2009–2010 was recorded at US$1.2 billion, which was 4 per cent of the total FDI inflow in the country during the same period.

• Leading global carmakers such as Honda, Volkswagen, Mercedes and Ford are now shifting their manufacturing plants and units from China to India.

Sources: ―Fact Sheet On FDI‖, Department of Industrial Policy &

Promotion website, www.dipp.nic.in, accessed 25 November 2010;

Economic Survey, 2009–2010, http://indiabudget.nic.in/es2009-

10/esmain.htm

INVESTMENTS

248

708

937

0 200 400 600 800 1000

2007–08

2008–09

2009–2010

FDI in the automobile industry

US$ million


http://www.dipp.nic.in/

http://indiabudget.nic.in/es2009-10/esmain.htm



38

Nissan has almost doubled the production of its small car Micra to 500 units per day in an attempt to clear its

backlog of 2,500 unit orders. At the company’s Chennai-based plant, which is under a joint venture with French

parent Renault, there are plans to invest US$ 938 million (INR 45 billion). The plant will have an annual capacity of

0.4 million units when completed.

Ford India has doubled production at its Indian manufacturing facility in Chennai following an increase in domestic

demand. Production at the company’s Chennai-based facility has been increased from 200 units to 400 cars per day.

BMW Group has stepped up investments and has hiked the production capacity of its Indian facility to 5,400 to

cope with the growing automobile market. The group also plans to double the size of its sales network to 22

dealerships by 2011 to cater to growing customer demand.

General Motors Company has planned an investment of US$ 250 million to expand its factory in Halol, Gujarat. The

investment is aimed at the launch of five new car models in India.

Global passenger car companies are taking advantage of India as a manufacturing base


INVESTMENTS


39

Honda Siel plans to invest US$ 52 million (INR 2.5 billion) in its Rajasthan-based plant, which is expected to

become operational with the production of body panels, engine blocks and cylinder heads. These parts will be used

in the production of small cars.

Toyota is set to double its production capacity in India at its new plant in Bengaluru with an investment of nearly

US$ 680 million. The plant will have an annual production capacity of 70,000 units.

Hyundai Motors has shifted the production of Atos Prime to its Chennai-based plant. The company is also setting

up a US$ 40-million computer-aided design centre in Hyderabad. Further, there are plans to invest US$ 250 million

in India by 2013, thereby raising the company’s cumulative investment in the country to around US$ 1 billion.

INVESTMENTS


Global passenger car companies are taking advantage of India as a manufacturing base


40

Advantage India

Market overview


Investments


Opportunities


Contents


41

Policy and regulatory framework — policy initiatives … (1/4)

The National Strategy for Manufacturing, drawn by the National Manufacturing Competitiveness Council (NMCC), has identified the automobiles sector as a priority area. The GoI has taken a number of initiatives to promote growth in the sector.

Auto Policy 2002

• The policy emphasises on low emission fuel auto technologies and the availability of appropriate auto fuels.

• The policy’s objective is to establish India as an international hub for manufacturing small, affordable passenger cars and a key global centre for manufacturing tractors and two-wheelers.

• The policy provides for the automatic approval for foreign equity investment of up to 100 per cent for the manufacture of auto components.

POLICY AND REGULATORY FRAMEWORK


42

Automotive Mission Plan (AMP) 2006–2016

• The AMP targets exports worth US$ 40–45 billion in 2016, including component exports worth US$ 20–25 billion and outsourced engineering services worth US$ 2–2.5 billion. The AMP targets a total turnover of US$ 145 billion by 2016.

• Recommendations of the AMP

• Setting up a technology modernisation fund, with special emphasis on SMEs and encouragement to establish development centres for SMEs

• Increasing exports and related infrastructure and streamlining training/research institutions around auto hubs

• Setting up automotive training institutes and auto design centres, special auto parks and auto component virtual SEZs.




43

National Automotive Testing and R&D Infrastructure Project (NATRiP)

• The NATRiP was set up at a total cost of US$ 388.5 million to enhance and upgrade the testing and validation infrastructure and establish centres of excellence for automotive R&D.

Department of Heavy Industries & Public Enterprises

• The department’s activities include the reduction of excise duty on small cars, the increase of budgetary allocation for R&D activities and reductions in the duty regime in general.

• The department has announced a weighted increase in in-house R&D expenditure from 150 per cent to 200 per cent and from 120 per cent to 175 per cent on outsourced R&D expenditure.




44

Incentive regimes

• The Union Budget 2010–11 announced the implementation of new tariffs on vehicles:

• The ad valorem component of the excise duty is increased to 22 per cent on large cars, multi-utility vehicles and sports utility vehicles.

• Excise duty on electric cars is reduced from 8 to 4 per cent, and customs duty is fully exempted.

• Automobile exports are being promoted through the Focus Market Scheme (FMS) and the Focus Product Scheme (FPS), wherein automakers receive cash incentives of up to 5 per cent upon the shipping of specified vehicles to specified countries such as Africa, Eastern Europe, Latin America and the Commonwealth of Independent States*.

• Through the enforcement of Euro IV and Bharat Stage IV emission norms and standards, the GoI is trying to ensure that emission norms and environmental standards are in line with that of the developed world.

* Commonwealth of Independent States (CIS) includes the former Soviet Republic (Russia, Ukraine, Kazakhstan, Belarus, Azerbaijan, Uzbekistan,

Turkmenistan, Georgia, Armenia, Tajikistan, Kyrgyzstan and Moldova).




45

Advantage India

Market overview


Investments


Opportunities


Contents


46

Opportunities

Source: Automotive Component Manufacturers Association of India (ACMA)

OPPORTUNITIES

Favourableregulatory policies

Establishment of R&D centresin India by international players

• Increasing production costs, short product lifecycles and the growing trend of geographic expansion to de-risk dependence on one market are key factors that influence companies to outsource.

• India’s vast and available pool of low-cost skilled and educated manpower, proven product-development capabilities, and geographic advantage due to its proximity to emerging markets present significant growth opportunities in the country.

• Government policies, including a weighted tax deduction of up to 200 per cent for in-house R&D activities in the country, have given impetus to investment in R&D.

• Department of Heavy Industries & Public Enterprises is dedicated for activities such as reduction of excise duty on small cars, the increase of budgetary allocation for R&D activities and reductions in the duty regime in general.


47

R&D plans of some foreign players

OEM/Tier-1

suppliers

R&D plans in India

Hyundai Hyundai’s management plans to make the company’s Indian R&D centre a hub

for the development of small cars such as the i10 and the i20 for global markets

at an investment of US$ 50 million.

General Motors General Motors has set up an R&D centre in Bengaluru, the company’s first

outside the US, at an investment of more than US$ 21 million. This is expected

to cater to the needs of countries in the Asia-Pacific region.

Volkswagen Volkswagen plans to set up its global R&D centre in India and produce vehicles

for the global market by 2015.

Suzuki Motorcycle

India

The company aims to set up its R&D facilities in the country and integrate its

R&D activities with those of Maruti Suzuki.


OPPORTUNITIES

Opportunities - India an emerging R&D destination … (1/2)


48

NATRiP centre — North India

Rae Bareilly centre • Services to agri-tractors, off-road vehicles and a driver training centre

• Centre of excellence for accident data analysis.

International Centre

for Automotive

Technology (iCAT),

Manesar

• Services to all vehicle categories

• Centre of excellence for component development and noise vibration and harshness (NVH) testing

NATRiP centre — West India

Vehicles Research

& Development

Establishment

(VRDE),

Ahmednagar

• Research, design, development and testing of vehicles

• Centre of excellence for photometry, electromagnetic compatibility (EMC), test tracks

Indore —

National

Automotive Test

Tracks (NATRAX)

• Complete testing facilities to all vehicle categories

• Centre of excellence for vehicle dynamics and tyre development

Automotive

Research

Association of India

(ARAI), Pune

• Services to all vehicle categories

• Centre of excellence for power train development and material

NATRiP centre — East India

Silchar

centre,

Assam

• Research, design, development and testing of vehicles

• Centre of excellence for photometry, electromagnetic compatibility (EMC), test tracks

OPPORTUNITIES

Manesar

Rae Bareilly

Indore

Ahmednagar

Pune

Chennai

Silchar

NATRiP centre — South India

Chennai

centre,

Tamil

Nadu

• Complete homologation services to all vehicle categories

• Centre of excellence for infotronics, EMC, passive safety

Opportunities - India an emerging R&D destination … (2/2)


49

OPPORTUNITIES

Opportunities - Product-development capabilities … (1/2)

• The development of the US$ 2,250 Nano and India’s first electric car, the Revashowcased India’s ability to innovate and design. Companies such as M&M and Hero Group are also planning to develop electric cars in India.

• Tata Daewoo, a subsidiary of Tata Motors, recently developed an LPG-based MCV (4.5 tonnes), the Novus, which conforms to Euro V emission norms.

• Ashok Leyland has developed India’s first six-cylinder CNG engine for buses using the multipoint fuel injection system, which conforms to Euro IV emission standards.

• Two-wheeler manufacturers Bajaj Auto, Hero Honda Motors Limited and Mahindra & Mahindra are planning to jointly develop technology that enables two-wheelers to run on natural gas instead of gasoline.

• France-based Dassault Systems has collaborated with Argentums Engineering Design’s Centre for Excellence to train automobile engineers in designing, testing and validating and manufacturing vehicle models.


50

OPPORTUNITIES

Opportunities - Product-development capabilities … (2/2)

Examples of indigenous product-development capability

• Design and development cost — US$ 140 million

• Infrastructure and production facility — US$ 200 million

• Design and development cost — US$ 60 million

• Infrastructure and production facility — US$ 60 million


51

OPPORTUNITIES


Opportunities - India as a manufacturing hub … (1/2)

• The number of global players moving to India has been increasing on the back of the GoI permitting 100 per cent foreign equity investments.

• The manufacturing sector accounts for two-thirds of the country’s total exports.

• Export revenues are estimated to increase from US$ 40 billion in 2002 to US$ 300 billion in 2015, thereby increasing its share from 0.8 percent to 3.5 per cent.

• Currently, small cars, which warrant low manufacturing costs, are leaders in the completely built units (CBUs) sourcing space in India.

• Hyundai currently exports 40 per cent of its small cars produced in India, including the Santro, which sells in 97 countries across the world and is produced only in India.


52

Examples of companies setting up their manufacturing facilities in India

Company Sourcing plans

Renault - Nissan • The company plans to set up a combined assembly line in Chennai for its two

alliance companies, Nissan and Renault.

Ford • Ford seeks to expand the engine production capacity of its plant in Chennai to

250,000 per year by 2010.

• The company is looking to make India its manufacturing hub for engines

manufactured specifically for the Asia-Pacific region and Africa.

Volkswagen • Volkswagen intends to set up a plant in Chakan, Maharashtra with an annual

capacity of 110,000 cars and at an investment of US$ 730 million.

Honda • Honda has set up a power train facility project in Rajasthan at an investment of

US$ 115 million.

• The company also plans to set up an injection-moulding plant to manufacture a

range of plastic parts used in instrument panels and bumpers.

Toyota Motors • There are plans to set up a plant to produce Toyota-branded compact cars for

the Indian market. The plant will have an annual capacity of 100,000 cars at an

investment of US$ 32 billion.


OPPORTUNITIES

Opportunities - India as a manufacturing hub … (2/2)


53


OPPORTUNITIES

Opportunities - The upcoming small car segment

Companies that have recently launched or are in the process to launch small car models in India

Brand Model Launch

Bajaj Auto/Renault/Nissan Small car Early 2011

Fiat Low-cost car 2010

Ford Small car 2010

General Motors Mini car 2010

Hindustan Motors/Mitsubishi I-Miev 2011

Hyundai Motors Small car 2012

• Light vehicle sales in India are estimated to cross the three-million mark by 2012.

• The launch of the Tata Nano, India’s first rear-engine, rear-wheel-drive car, revolutionised the industry by creating the new ULCC segment.

• General Motors, Nissan and Toyota have also announced plans to make India their hub for new global small car platforms.


54

Advantage India

Market overview


Investments


Opportunities


Contents


55


Society of Indian Automobile Manufacturers (SIAM)

Core 4-B, 5th Floor, India Habitat Centre

Lodhi Road, New Delhi –110 003

India

Phone: 91 11 24647810–2

Fax: 91 11 24648222

E-mail: [email protected]

INDUSTRY ASSOCIATIONS


mailto:[email protected]

56

Note

Wherever applicable, numbers in the report have been rounded off to the nearest whole number.

Conversion rate used: US$ 1= INR 48.

NOTE


57

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