eicher motors ltd

Investor Presentation

Eicher Motors Ltd.


In this Presentation

1 Eicher Motors Limited - Journey So far...2 Eicher Motors Limited Overview

3 India’s Economic Growth and Opportunities for Commercial Vehicles

4 Volvo Eicher Commercial Vehicles Limited

Eicher Trucks & Buses

Volvo Trucks India

Eicher Engineering Components & Eicher Engineering Solutions Heavy Duty Breakthrough

Medium Duty Engine Project

5 Royal Enfield

6 Financials

2


1959 1984 1991 1993 2002 2005 2008

Eicher Motors Limited – Journey so far…

India’s first tractor rolls out of Eicher factory in Faridabad

JV with Mitsubishi Motors to make ‘Canter’ trucks

JV with Mitsubishi ended, enters MD bus segment

Divests tractor and allied businesses to focus on CV and motorcycle businesses

Royal Enfield motorcycles acquired

Enters HD trucks segment

Forms JV with AB Volvo of Sweden; transfers CV business to the JV

3


Moving forward...

1 Eicher Motors Limited - Journey So far...

2 Eicher Motors Limited Overview3 India’s Economic Growth and Opportunities for Commercial Vehicles



Volvo Trucks India



5 Royal Enfield

6 Financials

4


EML

Volvo A.B.

Retail Investors Institutional Investors

Promoter Group

Eicher Motors Limited Overview

8.4%

11.8% 24.6%

55.2%

Volvo EicherCommercial Vehicles

RoyalEnfield

45.6%

54.4%

5


Eicher Management Philosophy

An evolved business model with 50+ years of experience in automotive space in India, that:

In-depth customer insights and market understanding

Best-in-class Capital Optimization:

Frugal engineering practices

Extensive knowledge of suppliers

Operational Excellence

Global Quality Standards

Break-through Market Business Model

Fully empowered management teams

Regular board meetings, every two months - full review with management

Strategic quarterly reviews and regular monthly operations review

Product board, Quality board, Customer Satisfaction board, Soft products board (after-market) held every quarter along with other statutory meetings

Established Corporate Governance

Corporate conduct rooted in highest standards of ethics, integrity and transparency

Highly professional work ethic based on mutual respect

Very strong HR and IR culture and brand

Long-term orientation

Long history of institutionalized CSR and community activities

Strong Values

6


Par Ostberg: Non-executive Chairman & Volvo nominated director Bertil Thoren: Volvo nominated director Joakim Hjerpe: Volvo nominated director Siddhartha Lal: Managing Director & Eicher nominated director Raul Rai: Eicher nominated director Prateek Jalan: Eicher nominated director

Established Governance Structure

S Sandilya: Non-executive Chairman

Siddhartha Lal: Managing Director & CEO

RL Ravichandran: Executive Director

Priya Brat: Independent Director

MJ Subbiah: Independent Director

Prateek Jalan: Independent Director

EML Board VECV Board

7


Moving forward...


2 Eicher Motors Limited Overview

3 India’s economic growth and opportunities for Commercial Vehicles



Volvo Trucks India



5 Royal Enfield

6 Financials

8


Govt. proposes 4,500 BINR investment in 12th five year plan‘12 -’17

Targets total Infrastructure spending of 9%of GDP by 2014

Highway construction target of 20 kms a day by 2012 vs current level of 12 kms a day

Targets to construct 35,000 km of highways in five years under the National Highways Development Program.

Plan to increase port capacity - 95% by volume and 70% by value of India’s external trade takes place through ports

Traffic at ports across India projected to grow at 11% CAGR during the new decade (2011 – ’20)

India’s strong and sustained economic growth with

increasing focus on infrastructure...

*Source – CMIE, RBI

Increasing Focus on InfrastructureGDP Growth - Trends

9

4.4

5.8

3.8

8.5

7.5

9.5 9.89

6.77.2 6.9

0

2

4

6

8

10

12


…presents significant opportunities for surge in

commercial vehicles industry

206369

268809290520

345522 352141

306573272434

405259

447318

30.3

8.1

18.9

1.9

-12.9-11.1

48.8

10.4

-20

-10

0

10

20

30

40

50

60

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Sale

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s (U

nit

s)

Bus HD Trucks LMD Trucks Exports Total industry Growth (%)

% G

row

th

10

-11.3

100049 88701

-15

-5

5

15

0

100000

200000

Q2' 2011 Q2' 2012

Sale

s V

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me

(U

nit

s)

% G

row

th


Moving forward...



3 India’s economic growth and opportunities for Commercial Vehicles



Volvo Trucks India

Eicher Engineering Components & Eicher Engineering Solutions

Heavy Duty Breakthrough

Medium Duty Engine Project5 Royal Enfield

6 Financials

11


VECV was established in 2008 with strong parentage

Volvo strengths

Global expertise

Leadership in product

technology

Good infrastructure

facilities

Well-defined processes

and controls

Brand image and

customer relationships

Eicher strengths

Leadership in LD / MD

segments

Specialist skills and

experience in developing

low cost, better

performance products

Wide dealer network

After sales infrastructure

for LD / MD

Cost effective operations

VECV vision

“To be

recognised as

the industry

leader driving

modernisation in

commercial

transportation in

India and the

developing

world” Eicher transferred its CV, components and engineering solutions businesses into VECV

Volvo demerged Volvo Truck India’s sales & distribution business from Volvo India Pvt Ltd.

12


Dec 2007: Signing of Letter of intent

May 2008: Signing of definitive agreements

Jul – Aug 2008: Commencement of JV

Dec 2008: Volvo Board Visit

Mar 2009: Launch of Quality Improvement CSI-1 Initiative

April 2009: Inauguration of the new gear plant at Dewas

Jan 2010: Launch of VE-series of Eicher HD trucks

June 2010: Launch of MDE Project

July 2010: Vinod Aggarwal takes over as CEO

October 2010: Groundbreaking ceremony of MDEP plant site

VECV milestones

May 2008: Signing of definitive agreements

13


VECV Overview


Volvo Trucks India

EicherEngineering Components

EicherEngineering

Solutions


14


Facility located at: Pithampur

State-of-the art manufacturing facility spread over 85 acres

Annual Capacity = 48,000; upgrading to 100,000 Capabilities for machining and assembly of

engines, gearboxes and axles Lean and scalable manufacturing setup Cab weld shop with robotic welding 100% hot test of engines CED Paint shop commissioned for capacity of 90,000

trucks per year

Eicher Trucks and Buses – Ambitions to achieve global benchmarks

in product development and manufacturing capabilities

15

Focus on adopting world class quality standards to become No. 1 in Customer Satisfaction

Product Development- Frugal Engineering driving future technology

R&D expenditure of 2-3 % of net sales

Fully equipped Vehicle & Engine development center with Fatigue lab

Developmental support for technologies of Euro 5 & Euro 6 Volvo Group global requirement

Complete virtual vehicle integration & different simulations to carry out DFA, DFS failures simulations


Eicher Trucks & Buses is its widening product range and further

strengthening its already extensive distribution and after market

network

Product Range

L/MD, 5-12 Ton GVW

Range

HD, 16-40 Ton GVW

Range

Buses, 21 -69 seater

16

Semi Low Floor City Buses 25 Ton tipper

Launched in 2011

Dealerships (141)

Service Centers (62)

Distribution and after

market Network


Eicher Trucks and Buses recorded highest ever volume

in 2010, continues to outgrow industry in 2011

Sale

s V

olu

me

(U

nit

s)

Sale

s V

olu

me

(U

nit

s)

17

1060414175 16258

18961 1970015804 16893

2642631381

953

30183781

32364501

2496 1424

4219

7352

1392

2027

23452773

3857

2942 3282

4819

6496

1114

1232

14551883

2078

2533 2665

2717

310845.4%

16.6%

12.6%

12.2%

-21.1%

2.1%

57.4%

26.6%

-30%

-10%

10%

30%

50%

70%

0

10000

20000

30000

40000

50000

60000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Exports Buses 16 T & above Trucks % Growth

48337

14063

20452

23839

2685330136

23775 24264

38181

8.8%

6641 6472

1407 1906732 702

2127 27840

5000

10000

15000

Q2'2011 Q2' 2012

10907 11864

% G

row

th%

Gro

wth


Volvo Trucks India is the leader in specialised high end

trucks; created high end mining tipper segment

FH520: The most

powerful truck on

Indian roads!

Aviation refueller

Mining Tipper

195

343

543610

802

948900

1104

706

75.9

58.3

12.3

31.518.2

-5.1

22.7

-36.1

-60

-40

-20

0

20

40

60

80

100

0

200

400

600

800

1000

1200

2003 2004 2005 2006 2007 2008 2009 2010 2011

Sale

s V

olu

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s (U

nit

s)Growth (%)

18

122

15224.6

-70

-20

30

0

50

100

150

200

Q2'2011 Q2' 2012

% G

row

th

Sale

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s (U

nit

s)


Volvo Trucks India has a unique distribution and

after market model

19


Location : Delhi, Michigan, Shanghai and Beijing

Design, development and consultation services for customised engineering solutions.

Acquired Design Intent Engineering (DIE), Michigan in 2005 & Hoff & Associates (HAI), Michigan in 2007

Comprehensive product development services (Class A surfacing, CAD, CAE, prototyping) with a strong offshore Delivery model.

Competencies for Volvo Group, VECV, EEC

Overview of EEC & EES

Plants at: Thane, Dewas , Pithampur

Supplier of drive line components and aggregates - gear box assembly, , transmission gears and shafts

Caters to full requirements of Eicher Trucks & Buses and supplier to the Volvo Group

Services a global client base including OEMs e.g., John Deere, Caterpillar, CNH

Eicher Engineering Solutions (EES)Eicher Engineering Components (EEC)

20


Eicher Truck & Buses is widening reach in overseas

markets

1114 12321455

18832078

25332665 2717

3108

0

10.6

18.1

29.4

10.4

21.9

5.2

2.0

14.4

0

5

10

15

20

25

30

35

0

500

1000

1500

2000

2500

3000

3500

2003 2004 2005 2006 2007 2008 2009 2010 2011

Exp

ort

Vo

lum

e (

un

its)

Export Volume % Growth

% G

row

th

21

Exp

ort

Vo

lum

e

(Un

its)

Presence in 22 countries

Homologation in 10 countries

KD Assembly operations in Egypt, Kenya, Bangladesh & Mauritius

Local Bus body building facilities in Egypt, Turkey, Mauritius, Nepal & Bangladesh

Volvo and ETB jointly exploring opportunities in ASEAN and Africa

732 702-4.1

-15-13-11-9-7-5-3-113579111315

0

100

200

300

400

500

600

700

800

900

1000

Q2' 2011 Q2' 2012

% G

row

th


In 2008, an extensive study was initiated in ETB to gather deep insights strategy required in the Heavy Duty segment

The study spanned customers, after market, product and operations

1st phase of insights implemented

HD trucks have rapidly acquired market share since 2010

Breakthrough into Heavy Duty category is critical to

VECV....early success is evident

22

3236

4501

2496

1424

4219

7352

1.7%

2.3%

1.5%1.1%

2.0%

3.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0

1000

2000

3000

4000

5000

6000

7000

8000

2006 2007 2008 2009 2010 2011

Sales Volume

1407

1906

2.7%

4.8%

1%

3%

5%

0

500

1000

1500

2000

2500

Q2' 2011 Q2' 2012


Futuristic global engine platform to power the medium duty range of trucks within Volvo group and Eicher Truck

VECV will manufacture Euro 3 and 4 compliant engines and Euro 5 & 6 base engine. The engines will be of 5 & 8 litre capacity

New facility in Pithampur to be the Global Manufacturing hub and Industrial base

Investment of ~5000 MINR for the state-of-the-art facility

Will be operational by December 2012

Annual Production capacity - 100000 engines.

Medium Duty Engine Project will provide technological

advantage and cushion in times of adverse business cycle

Siddhartha Lal - MD, VE Commercial Vehicles & Peter Karlsten - President & CEO, Volvo Power Train at the MDE Project groundbreaking ceremony, October 2010

23


VECV - Wanted position in 2015

Wanted position 2015: Operations

Long term operating margin target >8% over a business cycle

Customer satisfaction to reach >80%

Wanted position 2015: Strategic

4819

26425

4219

2010

17,500

36,400

44,000

2015

0

100,000

60,000

80,000

Sales in units

40,000

20,00015%

35%

16%

Market

share

(2015)

38181 inclusive of 2717

exports

Bus

LD/MD

HD

Seen as a leading CV

group in India

Recognized competitive advantages

"Best of both"

company culture

Most innovative products

covering entire range

Comprehensive network

Proactive solution / service

provider

Lean organization

Culture incorporating best of

Eicher values and Volvo Way

Professionalism, honesty,

people caring to attract best

talents in industry

Best fuel economy

Reliable products

Superior service quality

Safety and comfort setting

industry standards

24

100,000 including 11000

exports


Moving forward...






Volvo Trucks India



5 Royal Enfield6 Financials

25


Royal Enfield “Bullet” is the longest running model in continuous production. Royal Enfield Motorcycles are unique in terms of the engine character - Single Cylinder, Air-Cooled, Push-rod &Valve operated for the distinctive Bullet beat. The authentic vintage styling , traditional paint schemes, 1950’s style, nacelle and toolboxes contribute to its “distinctive classic” appeal.

Royal Enfield

1901: Royal Enfield rolls out its first Motor Cycle

1955: Enfield India is incorporated.

1994: Eicher Motors acquires Enfield India Ltd.

26


After successfully managing 2010, the year of

transition, Royal Enfield continues to grow and evolve

Bullet Thunderbird Classic Café RaceA future launch

In 2010, Royal Enfield transitioned to Unit Construction Engine, new engine platform

Unrivalled brand image has created unmet demand: 6-10 month waiting period

27

28383 28868 30457 3264236786

43298

51955 52576

74626

4.1 1.75.5

7.212.7

17.7 20.0

1.2

41.9

0

10

20

30

40

50

0

10000

20000

30000

40000

50000

60000

70000

80000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Gro

wth

(*%

)

Sale

s V

olu

me

(un

its)

Sales Volume

Growth (%)18581

27519

48.1

0

10

20

30

40

50

60

70

80

0

5000

10000

15000

20000

25000

30000

35000

40000

Q2 '2011 Q2' 2012

Gro

wth

(%

)

Sale

s V

olu

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(un

its)


Plans being executed for profitable growth

• Enhance production capacity to 100,000 units in 2012

• Expand capacity to 150, 000 by setting up 2nd manufacturing site ; expected to start commercial production in 1st half, 2013

• Focus on cost management

• Exploit significant opportunities that exist in after market

• New product launches planned for 2012 and 2013; New platform under consideration

• Increase reach in India and global markets

• Currently, there are 230 distribution and after market points in India. Exports to more than 30 countries

Enhance production capacity

Improve profitability

New product launches

Distribution and after market footprint

28


Moving forward...






Volvo Trucks India



5 Royal Enfield

6 Financials

29


Consistently improving performance – all time high

sales and margins in Q1’12

5958 6195

8593 8803

10409 1038510984

12435

1389712984

14513

15791

16950

15849

2.8%

6.6%6.8%

5.1%

8.8%8.2%

7.6%

9.7%

11.7%

9.7%

10.4%

9.8%

10.6%

8.8%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12

Ne

t In

com

e (

MIN

R)

Total Net Income (MINR) Operating margin

% O

pe

rati

ng

Mar

gin

30


Optimizing capital deployment through relentless

focus on cash management

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12

Operating Working Capital 825.8 906.2 89.2 -924.1 -1347. -313.6 -405.1 -974.1 -1717. -949.2 -967.8 -1761. -2662. -208.8

-3000.0

-2000.0

-1000.0

0.0

1000.0

2000.0

Operating Working Capital

Operating Capital

Net Block Net SalesSales/ Assets

Sales/ Operating

Capital

EML Consolidated - CY 09 3195 3635 29386 8.1 9.2

- CY 10 2870 3844 43847 11.4 15.3

- CY 11 3283 5044 56775 11.3 17.3

Peers - average 1.5-2.5 1-1.5

31

11 consecutive quarter of negative operating working capital

Best in class capital to turnover drives RoCE to >100%

In MINR

In MINR


VECV well positioned to take advantage of

discontinuities in Indian CV space

Discontinuity Implication VECV Strategy/ Advantage

Continued tightening of emissions and safety norms

Legacy investments of players less meaningful

VECV investing early in fully-built vehicles and higher emission norms

Better enforcement of regulations on overloading

Right-load vehicles; potential to change value-proposition

Products highly suitable for right-load and mild over-load conditions

Better highways and increased road networks

Higher speeds; increased mileage of vehicles/ year

Better and more reliable engines and driveline

Increasing difficulty in sourcing drivers

Drivers will be more influential in purchase decision

Better comfort and features for drivers; plan to build brand with drivers off-product as well

Professionalisation of transportation/ logistics

Total cost of ownership approach to buying vehicles

Value-selling approach; premium products with better efficiency and turnaround time; world-class after-market and vehicle quality

End-use demands on logistics/ supply-chain

Improved dependability of supplies required

Vehicle quality and after-market excellence

Market shifts faster towards ‘premium domestic’ segment

More modern trucks with right cost-structure and value

VE-series is starting point; developing innovative products that are closely aligned to emerging customer needs …will be introduced from 2012

32


Recap…Eicher well poised to succeed

Strongly positioned to gain scale and profitability in Low and Medium through improved offerings

Become meaningful player in Heavy Duty through differentiated products, after markets and brand leverage

Gain volumes and market share in Bus market through better products and market expansion

Increase margins and reduce cyclical business dependency - Grow through soft products, Medium Duty Engine Project , exports using Volvo’s existing distribution strength

Set benchmark in Aftermarket and Quality in India, where general level is poor –establish a strong differentiation for Eicher brand in these areas; maintain lead for Volvo brand

Realise full potential of niche market through capacity expansion, cost optimisation and geographical expansion

33


Disclaimer

Certain statements in the presentation describing the Company’s views about theIndustry, expectations/predictions, objectives etc may be forward looking within themeaning of applicable laws and regulations. Actual results may differ materially fromthose expressed in the statement. Company’s operations may be affected with thesupply and demand situations, input prices and their availability, changes inGovernment regulations, tax laws and other factors such as Industrial relations andeconomic development etc. This presentation also contains references to findings ofvarious reports available in the public domain. Eicher makes no representation as totheir accuracy or that the Company subscribes to those findings. Investors should bearthe above in mind while going through the presentation.


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eicher motors ltd

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