india automotive market review forecast 2014

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India automotive market

review – forecasts to 2014

January 2010



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© 2010 All content copyright Aroq Ltd. All rights reserved.

India automotive market review –

forecasts to 2014

January 2010

By Modus Priori

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Page iv Contents


Contents

Single-user licence edition............... ..................... .................... ...................... ..................... ....... ii Copyright statement............. ..................... ..................... .................... ...................... .............. ii Incredible ROI for your budget – single and multi-user licences .................. .................... ....... ii just-auto.com membership.... .................... ..................... .................... ...................... ..............iii

Contents.................. ..................... ..................... ..................... ...................... .................... ........... iv List of tables .................. ...................... .................... .................... ...................... ..................... .. viii Chapter 1 Introduction ..................... ..................... .................... ...................... ..................... ....... 1 Chapter 2 Key market drivers ................. ..................... .................... ...................... .................... . 3

Market penetration..... .................... ..................... .................... ...................... ..................... .... 3 Price sensitivity and positioning .................... .................... .................... ...................... ........... 3 Fuel prices................... ...................... .................... .................... ...................... .................... .. 4 High economic growth rate .................... .................... ..................... ...................... ................. 4 Taxation................ ..................... ..................... .................... ....................... .................... ........ 5 Increasing urbanisation levels...... .................... ..................... .................... ...................... ....... 5 Strong domestic consumption......... ..................... .................... .................... ...................... .... 6 Demographics............................ ..................... ..................... ...................... .................... ........ 6 Vehicle finance .................... ..................... .................... .................... ...................... ............... 7 Infrastructure development .................... .................... ..................... ...................... ................. 7

Chapter 3 Light vehicle sales trends ..................... .................... ..................... ...................... ...... 9

Segment classification................... ..................... ..................... ...................... .................... .... 9 Vehicle sales.............................. ..................... .................... ...................... .................... ......... 9 Market share analysis... ..................... ..................... .................... ...................... ................... 15 Market share analysis... ..................... ..................... .................... ...................... ................... 18

Compact car segment....................... ..................... .................... ...................... ............ 18 Mid-size car segment........................ ..................... .................... ...................... ............ 20 Executive car segment ................. ..................... ..................... .................... ................. 22 Premium car segment....................... ..................... .................... ...................... ............ 23 Luxury car segment ................... ..................... .................... .................... ..................... 25

Chapter 4 Light vehicle export trends ................... .................... ..................... ...................... .... 27 Chapter 5 Commercial vehicle sales trends..................... .................... ...................... .............. 29 Chapter 6 Commercial vehicle export trends...................... .................... ...................... ........... 31 Chapter 7 Vehicle sales forecasts .................. ..................... .................... ...................... ........... 33 Chapter 8 OEM profiles .................... ..................... .................... ...................... .................... ...... 42

Maruti Suzuki India .................... ..................... ..................... .................... ...................... ...... 42 Hyundai Motor India...... ..................... ..................... .................... ...................... ................... 44



Page v Contents


Tata Motors ................. ..................... ..................... .................... ...................... .................... 45 Mahindra & Mahindra...................... ..................... .................... ...................... .................... .. 48 Toyota .................. .................... ...................... .................... ...................... .................... ....... 50 Honda.. ..................... .................... ..................... ..................... ...................... .................... ... 52 Ford.................. ..................... ..................... ..................... ...................... .................... .......... 53

General Motors .................... ..................... .................... .................... ...................... ............. 54 Volkswagen .................. .................... ..................... .................... ...................... .................... 56 Reva Electric Car Company........ ..................... .................... .................... ...................... ...... 57

Chapter 9 Supplier profiles ..................... ..................... .................... ...................... ................... 59 Bharat Forge................. .................... ..................... .................... ...................... .................... 59 Bosch ................... .................... ...................... .................... ...................... .................... ....... 60 Tata Auto Component Systems .................... ..................... .................... ...................... ........ 62 Lumax Industries .................... ..................... ..................... .................... ...................... ......... 63 Sona Koyo................... ..................... ..................... .................... ...................... .................... 64 Anand Automotive Group...... .................... ..................... .................... ...................... ............ 65 Motherson Sumi Systems .................. ..................... .................... .................... ..................... 66 Apollo Tyres........................ ..................... ..................... .................... ...................... ............. 68 JK Tyres & Industries........... ..................... .................... .................... ...................... ............. 69 Subros .................. .................... ...................... .................... ...................... .................... ....... 70



Page vi List of figures


List of figures

Figure 1: Passenger car production in India, 2004-2008 (in vehicle units).. .................... .............. 10 Figure 2: Passenger car sales in India, 2004-2008 (in vehicle units) .................... ..................... ... 10 Figure 3: Sales of passenger vehicles by category, 2004-2008 (in vehicle units) ................... ...... 11 Figure 4: Growth in vehicles sales across categories, 2006-2008 (in % terms) ................. ........... 12 Figure 5: Growth in passenger vehicles sales across segments, 2006-2008 (in % terms)... ......... 14 Figure 6: Growth in UV sales, 2006-2008 (in % terms)................................ ...................... ........... 14 Figure 7: Manufacturer market shares across all vehicle categories, 2005-2009* (in % terms)..... 15 Figure 8: Manufacturer market shares for compact car segment, 2005-2008 (in % terms)........... 19 Figure 9: Manufacturer market shares for mid-size car segment, 2005-2008 (in % terms) ........... 20 Figure 10: Manufacturer market shares for executive car segment, 2005-2008 (in % terms)........ 22 Figure 11: Manufacturer market shares for premium car segment, 2005-2008 (in % terms)......... 24 Figure 12: Manufacturer market shares for luxury car segment, 2005-2008 (in % terms) ............. 26 Figure 13: Vehicle exports across all light vehicle categories, 2004-2008 (in vehicle units) .......... 28 Figure 14: Growth in vehicle exports across all light vehicle categories, 2005-2008 (in % terms). 28 Figure 15: Commercial vehicle production, 2004-2008 (in vehicle units) ..................... ................. 29 Figure 16: Commercial vehicle sales (domestic), 2004-2008 (in vehicle units) ................... .......... 30 Figure 17: Growth in commercial vehicle sales (domestic), 2005-2008 (in % terms) .................... 30 Figure 18: Commercial vehicle exports, 2004-2008 (in vehicle units)................... ..................... ... 31 Figure 19: Growth in commercial vehicle exports, 2005-2008 (in % terms) .................... .............. 32 Figure 20: Sales forecast across all light vehicle categories, 2009-2014 (in vehicle units)............ 33 Figure 21: Growth in sales of light vehicles, 2009-2014 (in % terms).......................... .................. 33 Figure 22: Sales forecast for minicars, 2009-2014 (in vehicle units).......... ..................... .............. 34 Figure 23: Growth in sales of minicars, 2009-2014 (in % terms)................ .................... ............... 34



Page vi List of figures


Figure 24: Sales forecast for compact cars, 2009-2014 (in vehicle units) .................... ................. 35 Figure 25: Growth in sales of compact cars, 2009-2014 (in % terms)........ .................... ............... 35 Figure 26: Sales forecast for mid-sized cars, 2009-2014 (in vehicle units) .................. ................. 36 Figure 27: Growth in sales of mid-sized cars, 2009-2014 (in % terms).................... ..................... 36 Figure 28: Sales forecast for executive cars, 2009-2014 (in vehicle units)................... ................. 36 Figure 29: Growth in sales of executive cars, 2009-2014 (in % terms) .................... ..................... 37 Figure 30: Sales forecast for premium cars, 2009-2014 (in vehicle units)................ ..................... 37 Figure 31: Growth in sales of premium cars, 2009-2014 (in % terms) ................. ...................... ... 38 Figure 32: Sales forecast for luxury cars, 2009-2014 (in vehicle units).................... ..................... 38 Figure 33: Growth in sales of luxury cars, 2009-2014 (in % terms)............ .................... ............... 39 Figure 34: Sales forecast for UVs, 2009-2014 (in vehicle units) ................... ..................... ........... 39 Figure 35: Growth in sales of UVs, 2009-2014 (in % terms).................. .................... ................... 40 Figure 36: Sales forecast for MPVs, 2009-2014 (in vehicle units).................. ..................... .......... 40 Figure 37: Growth in sales of MPVs, 2009-2014 (in % terms) .................. .................... ................ 40



Page vi List of tables


List of tables

Table 1: Car penetration levels and per capita income in various countries, 2008..................... ..... 3 Table 2: Real GDP growth rate in India, 2007-2012 ................... ..................... ...................... ......... 4 Table 3: Industrial production growth rate in India, 2007-2012.................. .................... ................. 5 Table 4: Private consumption growth rate in India, 2008-2012 .................. .................... ................. 6 Table 5: Population growth rate in India, 2008-2012 ................... .................... ...................... ......... 7 Table 6: Vehicle classification by length and weight................... ..................... ...................... ......... 9 Table 7: Market share analysis for various brands in India, 2005-2009 ................... ..................... 17

Note: data in some tables may not sum due to rounding.



Page 1 Chapter 1 Introduction


Chapter 1 Introduction

India’s passenger car industry has been growing at a robust pace fuelled by a

rapid increase in disposable household incomes.

In the fiscal year 2008/09, the automotive industry accounted for xx% of India’s

overall GDP and roughly xx% of manufacturing GDP. During the year, the

automotive industry directly employed 600,000 people and indirectly

accounted for the livelihood of xx people in India.

During 2008/09, exports accounted for approximately xx% of India’s vehicle

production. This includes passenger cars, utility vehicles (UVs), commercial

vehicles, two wheelers and three wheelers.

Between 2008 and 2012, it is estimated that OEMs and vendors will invest

US$18bn into creating new production capacity and upgrading their existing

facilities.

Most global OEMs already have a presence in India, however, the supply base

is still restricted. A key reason behind the relatively smaller presence of global

suppliers is low production volumes. Maruti Suzuki, Hyundai and Tata Motors

together account for xx% of the passenger car market (in terms of volume).

Hence, suppliers with strong linkages to South Korean and Japanese OEMs

find it easy to procure orders.

The commercial vehicle market is dominated by Tata Motors and Ashok

Leyland which together account for roughly xx% of total demand. Commercial

vehicle sales are value-driven in the upper segments and price-driven in thelower segments. In a fragmented market, where pricing is the critical decision

factor, high-value products have a limited market and acceptability. Hence new

entrants are restricted to small niches such as mining and inter-city bus

operations, whereas high value, high price vehicles can be profitably operated

on a multiple trip/multiple-shift basis.

In 2008/09, India’s automotive industry generated an aggregate turnover of

US$xx. This included vehicle sales of US$xx and component, tyre and

aftermarket sales of US$xx. In value terms, passenger cars accounted for



Page 3 Chapter 2 Key market drivers


Chapter 2 Key market drivers

Market penetration

Passenger car penetration in India is amongst the lowest in the world at xx

cars per xx.

Table 1: Car penetration levels and per capita income in various countries, 2008

Countries Cars per xx person Per capita income (US$)

USA 4xx 44,710

UK 4xx 40,560

Japan 4xx 38,630

Germany 5xx 36,810

Mexico 1xx 7,830

Brazil 1xx 4,710

Chin 1xx 2,000

India 9xx 820

Source: just-auto

Price sensitivity and positioning

The Indian car market is highly price sensitive. This presents difficulties in

pricing and positioning. The market leader, Maruti Suzuki has largely used its

pricing power to maintain its dominance in the A and B segments where it

prices most of its products lower than its peers. Strong volumes generated

from lower pricing also help Maruti Suzuki in maintaining an upper hand over

its suppliers. This pricing strategy has worked effectively for players with a

product line-up with potential customers who do not overlap. The affordable

pricing of the Maruti Alto (fifth generation Suzuki Alto), which is the highest

selling car in India (2009), has largely cannibalised the sales of the Maruti 800

(second generation Suzuki Alto).

Similarly, clever pricing strategies have helped Mahindra in creating new

segments without cannibalising its existing sports-utility vehicle (SUV) offering.

In 2009, Mahindra launched the Xylo, an entry level multi-utility vehicle (MUV)

priced below competing offerings from Toyota and Tata Motors.



Page 9 Chapter 3 Light vehicle sales trends


Chapter 3 Light vehicle sales trends

Segment classification

Light vehicles sold in India are classified by length and application. They are

primarily classified into three categories: passenger cars, UVs (utility vehicles)

and MPVs (multi-purpose vehicles). The passenger car category is further

divided into six segments based on the length of the vehicle as illustrated

below.

Table 6: Vehicle classification by length and weight

Vehicle category Vehicle segment Length (in mm) By weight

Passenger car Minicar Up to 3,400 -

Passenger car Compact 3,400-4,000 -

Passenger car Mid-size 4,001-4,500 -

Passenger car Executive 4,501-4,700 -

Passenger car Premium 4,701-5,000 -

Passenger car Luxury > 5,001 -

Utility Vehicles (UV) <5T

Multi-purpose

vehicles (MPV)

<3.5T

Source: just-auto

Vehicle sales

Between 20xx

and 20xx

, five major OEMs entered the Indian market (BMW,Nissan, Renault, Volkswagen and Volvo) and approximately 110 new car

models and variants were introduced. During this period, the passenger car

industry in India registered a CAGR (compound annual growth rate) of xx%

as illustrated below.



Page 27 Chapter 4 Light vehicle export trends


Chapter 4 Light vehicle export

trends

The concept of using India as an export hub is underpinned by its low labour

and engineering costs. Actual export volumes of vehicles are considerably

below potential numbers, however, due to component quality issues and lack

of shipping facilities. Moreover, most OEMs have focused largely on

establishing a domestic market first. Hyundai and Maruti together account for

the majority of vehicle exports.

While Hyundai’s facilities are close to its shipping ports of Chennai and

Ennore, Maruti primarily exports through Mundra port in Gujarat. In 2008,

Maruti Suzuki invested in a dedicated rail wagon train which ferries its export

production to a dedicated car terminal it has set up at the port of Mundra.

Both Hyundai and Maruti see India as a major export centre and are actively

pursuing global production programs. Hyundai exclusively manufactures the

i10 and i20 models in India. Suzuki manufactures the seventh generation

Suzuki Alto (sold as the Maruti Suzuki A-Star domestically) exclusively in India

at Maruti Suzuki’s Manesar facility. Maruti Suzuki also supplies the seventh

generation Alto (A-Star) to Nissan which markets the car as the Nissan Pixo in

Europe. Between 2004 and 2008 passenger car exports grew at a CARG of

18%. The following chart illustrates the growth in light vehicle exports from

India between 2004 and 2008.



Page 29 Chapter 5 Commercial vehicle sales trends


Chapter 5 Commercial vehicle sales

trends

The commercial vehicle market in India is dominated by Tata Motors and

Ashok Leyland. Together they account for 85% of commercial vehicle sales.

The growth in commercial vehicle production in India is illustrated by the graph

below.

Figure 15: Commercial vehicle production, 2004-2008 (in vehicle units)

Source: just-auto

Commercial vehicle sales decreased by xx% in 2008. This was attributed to

lack of credit availability and the withdrawal of vehicle financing companies

from the market during the latter half of the year. Sales of commercial vehicles

improved substantially in the first half of 2009 after the government introduced

stimulus schemes that allowed buyers to claim accelerated depreciation on

commercial vehicles purchased within a three-month window ending in March

2009. Moreover, the government directed public sector banks to resume

lending to commercial vehicle makers. This was followed by a one-time

allocation of funds to promote purchase of commercial vehicles by city

transport corporations under the JNNURM (Jawaharlal Nehru National Urban

Renewal Mission) scheme.



Page 31 Chapter 6 Commercial vehicle export trends


Chapter 6 Commercial vehicle

export trends

Ashok Leyland and Tata Motors export commercial vehicles from India. Their

major export destinations include the Middle East and North Africa (MENA),

South Africa and Central Africa. Demand for commercial vehicles weakened in

2008 following the emergence of the global financial crisis. As seen in the

chart below, commercial exports contracted by xx% in 2008, representing the

first decline in the last decade.

Figure 18: Commercial vehicle exports, 2004-2008 (in vehicle units)

Source: just-auto



Page 33 Chapter 7 Vehicle sales forecasts


Chapter 7 Vehicle sales forecasts

Between 2009 and 2014 the Indian passenger vehicle and UV industry is

expected to register a CAGR of xx% as illustrated in the chart below.

Figure 20: Sales forecast across all light vehicle categories, 2009-2014 (in vehicle units)

Source: just-auto

As shown in the chart below, growth in car sales is expected to register two-

digit growth rates in 2011 and 2013. In general the global economy is expected

to recover completely by 2011/12.

Figure 21: Growth in sales of light vehicles, 2009-2014 (in % terms)

Source: just-auto



Page 42 Chapter 8 OEM profiles


Chapter 8 OEM profiles

Maruti Suzuki India

Maruti Udyog was incorporated in February 1981 as a xx% joint venture

between Suzuki and the Indian Government. However, in 2008 the Indian

Government sold the majority of its holding to Suzuki with the remaining being

offloaded to the public after a listing on the Indian stockmarket. Subsequent to

this arrangement, the company was renamed Maruti Suzuki.

At the time of its entry into India, the company faced modest competition

primarily from Hindustan Motors and PAE, which produced vintage models

borrowed from Austin and Fiat, respectively. The introduction of the company

was launched through its immensely successful model, the Maruti 800, which

was based on the first generation Suzuki Alto platform. Maruti Suzuki

continues to sell the 800 after several facelifts despite the introduction of

several rebadged-Alto platforms. At the moment, the company markets three

Suzuki Alto platforms in the Indian market.

The Maruti 800 caught the imagination of the Indian consumer and quickly

gained acceptance because of its modern product and design mix and vastly

improved component quality in comparison with its competitors’ offerings. The

company then introduced its off-road vehicle (the Suzuki Jimny re-badged as

the Maruti Gypsy), a microvan (Maruti Omni) and a subcompact sedan, (the

Maruti 1000/Esteem, a re-badged variant of the Suzuki Baleno). Between 1983

and 1998, Maruti Udyog faced little competition and developed sales and

service points across India in order to deepen product penetration. The

company gradually increased its plant capacity from 20,000 vehicles per year one 1m cars in 2008-09.

Despite the entry of several new OEMs, Maruti Suzuki is still the largest

automaker in India, cornering a 46.5% market share in 2008/09, and is ranked

as the market leader both in terms of volume and revenue. The company

focuses largely on sub-compact and compact cars, which account for the bulk

of its sales. Maruti Suzuki was the first company to introduce used car sales

dealerships and commands significant presence in the second hand car

market.



Page 59 Chapter 9 Supplier profiles

© 2010 All content copyright Aroq Ltd All rights reserved

Chapter 9 Supplier profiles

Bharat Forge

Established in 1961, Bharat Forge is the flagship company of the Kalyani

Group. The Kalyani Group has interests in alloy steels, steel-based products,

forgings and automotive components. Bharat Forge is the second largest

forging company in the world and has a manufacturing presence in India,

Germany, the US, Sweden, the UK and China. The company holds a xx%

market share in the global axle market. Bharat Forge’s Indian operations cater

to both the domestic and global market, with significant exports to North

America and Europe. The company has become the preferred supplier of

many global automotive companies.

Currently, Bharat Forge has operations across three continents: Europe, North

America and Asia. With manufacturing facilities spread across 12 locations in

six countries – four in India, three in Germany, one each in Sweden, Scotland

and the US, and two in China – the company manufactures a wide range of

safety and core components for passenger cars, SUVs, light, medium & heavy

commercial vehicles, tractors and diesel engines. Bharat Forge also engagesin the production of specialised components for the aerospace, power, energy,

oil & gas, rail & marine, mining & construction equipment, and other industries.

Bharat Forge derives xx% of its total revenue from India, while the balance is

derived from its international operations.

Over the last few years, the company has made several acquisitions, including

Carl Dan Peddinghaus and CDP Aluminiumtechnik (in Germany), Imatra Kilsta

(in Sweden), together with its 100% subsidiary Scottish Stampings Limited

(also known as the Bharat Forge Kilsta Group) and Federal Forge in the US.

BFL also has a majority stake in a joint venture with First Auto Works (FAW),

called FAW Bharat Forge (Changchun) Company Limited, which operates in

China.

Bharat Forge has been working on a dual-shore supply model, which is based

on establishing engineering and design expertise, close to its international

customers and production bases in low cost markets. To this end, Bharat

Forge has successfully acquired companies in critical automotive markets of

North America and Europe and has gained access to new customers and

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