Unnati Sector Presentation

Automobiles and Auto Ancillaries

SSA- Sandeep Srivastava
JSAs- Ameya Bothara, Rishabh Dugar

OVERVIEW

The Indian automobile industry is the seventh largest and the

second fastest growing in the world

The contribution of the automotive industry to GDP has risen from

2.77% in 1992-93 to around 7% now.

This share is expected to increase to increase to 10% by 2016.

The Indian Automotive industry embarked on a new journey in

1991 with delicensing of the sector and subsequent opening up for
100 per cent FDI through automatic route.

Improving income levels ,strong technological capability have been

boosting automobile demand in the country for past few years

The past two years has shown some strain for the industry. The
industry grew at 6.63% in FY13 and projection for FY14 is only 1-2%

PRODUCTION AND COST BREAKDOWN

15.07
4.66
2.95
77.32

4 8
Passenger Vehicles
Commercial Vehicles
Three Wheelers
Two Wheelers

Raw Materials
Manufacturing

3
79

Labour
Sales & Distribution
Other Costs

Two wheelers constitute the major portion of Auto industry with

around 77% of market share followed by passenger vehicles with
15%.
Raw materials constitute for around 79% of the total cost for Auto
industry and varies slightly from company to company.
Source: ICRA research reports

INDIA - AS A MANUFACTURING HUB

Ranking of Indian Automobile industry in various categories in the world

MANFACTURER OF TWO WHEELERS

MARKET FOR THREE WHEELERS

MARKET FOR TWO WHEELERS

MANUFACTURER OF PASSENGER VEHICLES

10

MARKET FOR PASSENGER VEHICLES

MARKET FOR TRACTORS

MARKET FOR COMMERCIAL VEHICLES

INDUSTRY CLUSTERS
The automobile industry is concentrated in 4 key regions
North: Delhi-Gurgaon-Faridabad
West: Mumbai-Pune-Nashik-Aurangabad
East: Kolkata-Jamshedpur
South: Chennai-Bengaluru

Source: ACMA

MARKET SEGMENTS
Motorcycles
Two Wheelers

Scooters
Mopeds

Automobile
s

Goods carriers
Three Wheelers

Passenger
carriers
Passenger cars

Passenger
Vehicles

Utility vehicles
Multi purpose
vehicles

Commercial
Vehicles
Tractors

Light
commercial
vehicles
Medium
commercial
vehicles
Heavy
commercial
vehicles

VALUE CHAIN

Source: Unnati Research

TWO WHEELERS - Overview

Domestic two wheeler industry in India has witnessed a CAGR of 13.8%

over the past five years.
Indias demography continues to remain favorably on its side with average
age of 25 years, which is 9 years younger than China, and more than 12
years and 19 years younger than the US and Japan, respectively.
The Two Wheeler segment slowed down in FY13 growing at only 2.9%
The Two Wheeler is projected to grow at 6-8% this year because of normal
monsoons. However YTD numbers show a degrowth in motorcycles to the
tune of 2% whereas the scooter segment is performing well with growth of
15-16%
Since the average road speeds in India are low, the lower passenger safety
of two-wheelers when compared to cars does not inhibit buyers. India has
become the second largest two-wheeler market in the world with annual
sales of over 13.7 million units.

TWO WHEELER Penetration Levels & Market segments

The urban penetration levels of the

Indian Two Wheeler Market are at
105 per 1000 population, comparable
to other countries except Indonesia.
But the rural market is under
penetrated at around 32 two
wheelers per 1000 population.

Two wheeler market is divided

into three major categories :
Motorcycles
Scooters
Mopeds
Source: Macquairie Research report

KEY GROWTH DRIVERS

Rural Demand
The scope for rural penetration is huge as only 32 per 1000 inhabitants have 2W.
Good monsoon, increased penetration of the players in terms of dealership network
will fuel growth

Favorable demographics
Around 33% of Indias population of 1.2 billion belongs to the age bracket of 20-40
years.

Low sensitivity to interest rate and fuel price changes

The 2W market is less sensitive to interest rate changes because only around 30%
of two wheelers are financed compared to around 70% of financing rate in passenger
vehicle segment

KEY GROWTH DRIVERS Contd.

Growth in Scooter Segment

o Rapid urbanisation and growth in income is causing high sales in scooter segment
witnessing around 15-16% growth. New model launches including Activa i, Yamaha Ray
has helped this segment to grow

Growing reach of established players.

Entry of new players.
Increasing options of consumer finance to aid low income rural consumers.

KEY CONCERNS

Economic scenario of the country

Labour issues at plants of major OEMs
Increased environmental and safety requirement for OEMs
Increasing fuel prices and cost of ownership
Increasing input costs

MARKET SHARE IN TWO WHEELER INDUSTRY

Segment Wise Market
Break-Up:
21.2

Market Share in
2W:

5.7

2.6 5.8 17.7

12.7
18.7
42.5

MotorCycles
Scooters

73.1

Mopeds

Bajaj
Hero Moto
Honda
TVS
Yamaha
Others

Market share in
Scooters:
2.2
15.2

11.8

19.8

Hero
HMSI
TVS

51.0

Yamaha
Suzuki

Source: Macquairie Research report

SALES TREND DOMESTIC

Domestic Sales Trend for Two Wheelers
16,000,000
14,000,000

13,409,150

12,000,000
10,000,000

13,797,095

11,774,243
9,371,062

8,000,000 7,437,754
6,000,000
4,000,000
2,000,000
0
2008-09

2009-10

2010-11

2011-12

2012-13

The Domestic sales for two wheelers have grown at a CAGR of 13.8% over
the past five years from 2008-09 to 2012-13
Two wheelers segment registered a modest growth of only 2.9% in FY13

Source: SIAM

Capacity Utilisation
Capacity Utilisation
120%
100%
80%

98%
87%

83%

60%

57%

56%

Capacity
Utilisation

40%
20%
0%
Hero

Bajaj

Honda

TVS

Others

As evident from the graph, most of the players have not been able to use
their plants to their optimum level. This is due to the overall slowdown in
the industry. Only Honda Motorcyles have been able to utilise its plant by
more than 90%

Source: SIAM

SALES TREND Export

Export Sales Trend
2500000
2000000

1975111
1531657

1500000
1000000

1960938

1004212

1140414
Export Sales Trend

500000
0
2008-09

2009-10

2010-11

2011-12

2012-13

Bajaj Auto is the largest exporter with TVS at number 2 position

After break up with Honda, Hero MotoCorp is increasingly looking
at exports to raise its revenues and plans to have 10% of total
revenues from exports by 2016
Over the past four years exports have grown at CAGR of 14.32%
outpacing the growth in domestic numbers

EXPORTS MARKET AND MARKET SHARE

Exports market should show good growth in FY 2013-14 because of the

rupee depreciation and also increased focus of the players as growth in
domestic market has slowed down
HMSI has also expanded its export base and has a current market share of
7.5%.
A large majority of 2W exports from India are to developing markets like
South Asia, Africa and. Latin America.
Marke t Share of Major Players in Export Marke t

6.9
7.5
8.2

0.6

10.8
Bajaj
Hero
65.9

HMSI
Yamaha
Others
TVS

OUTLOOK

Hero MotoCorp reported a 8% growth while BAL reported a 8% drop in Aug,

2013. Other companies like HMSI and Yamaha have also done pretty well in
the market. New product launches by them have helped them to garner
market share especially HMSI.

But despite the economic slowdown, Indian 2W industry has done well
compared to other major markets of the world. Also, in the long term, rise in
rural demand, increasing urbanization, increasing income, shrinking
replacement cycles, increasing fuel efficiency, favourable demographics,
increasing women consumers boosting scooter demand, rise in exports, and
rise of electric two wheelers will drive the 2W industry to grow at CAGR of
11-12% in the next five years.

THREE WHEELERS - OVERVIEW

India is the worlds foremost producer, consumer and exporter of threewheelers (3W) with domestic sales of 5.38 lakh units & exports of 3.03 lakh
units in the financial year ending March 31, 2013
The domestic demand has grown only 5% whereas the exports have
slumped 16% Y-o-Y.
The tension in Middle East and Sri Lankan governments steep tax
imposition were the main reason for this.
The 3W industry has witnessed11% CAGR volume growth over the last 5
years driven by moderate domestic growth (~9% CAGR) and slowing
exports (~11% CAGR) due to international factors

GROWTH DRIVERS AND CONCERNS

DRIVERS
Greater reach within the area compared to other public transport means
like metro, buses.
Ideal for congested roads of India particularly because of increasing
urbanization.
Inadequacy of public transport to server the last mile transportation needs
of population.
Feasibility of carrying goods from low accessible areas like Tier 3 cities.
Low cost of ownership compared to taxis and small commercial vehicles.
Self-employment opportunity for youth.
Low operating costs both for passenger and goods carriers.
CONCERNS
With the successful launch of four-wheeled Small Commercial Vehicles
(mainly Tata ACE), the industry dynamics have altered especially for the
cargo segment, considerably over the last five years.
Safety concerns due to an open tubular structure in passenger carriers as
well as odd number of wheels which add to instability

MARKET SHARE

Passenger Carriers
The Passenger Carrier segment is
dominated by Bajaj Auto followed by
Atul Auto; 2% Others; 1%
Mahindra & Mahindra; 6%
Piaggio and TVS
TVS; 7%

Piaggio; 19%

Bajaj; 64%

Goods Carriers
Bajaj; 3%

The Goods Carrier segment is

dominated by Piaggio followed by
M&M while Bajaj has a low market
share due to their focusing on
passenger carriers only
Source: Macquairie Research report

Scooters India; 8%
Atul Auto; 15%
Mahindra & Mahindra; 21%

Piaggio; 53%

SALES TREND

Total 3W sales have grown at a CAGR 11% over the past fIVE years from
2008-09 to 2012-13
Export contribution has also risen from 30% in 2008-09 to 36% in 2012-13
with Bajaj Auto being the largest exporter of three wheelers.

TOTAL 3W SALES OVER 5 YEARS

1000000
900000
800000
700000
600000
497793
500000
400000
300000
200000
100000
0
FY09

875034

841379

795992

45%
41%

40%
35%
30%
30%

613606

Source: SIAM

EXPORT CONTRIBUTION IN TOTAL SALES

25%

36%

34%
28%

20%
15%
10%
5%
FY10

FY11

FY12

FY13

0%
FY09

FY10

FY11

FY12

FY13

OUTLOOK
The sector performed badly on the export front due to
tensions in Egypt and sudden increase in the import tariffs in
Sri Lanka. Exports have risen 47% in Q1FY14. This trend will
not be continued and the exports have started to fall back to
the original levels. The situation will continue till stability is
achieved in Egypt, after which the sales will continue to grow.
In the domestic market, the sales are tapering down due to
slowing demand. Although many cities have issued fresh
licenses, the rising fuel bills are curtailing the demand. This
has prompted Bajaj to launch fuel efficient models in the
passenger segment.

PASSENGER VEHICLES - OVERVIEW

Indian passenger industry has seen a drastic change in the post

liberalization era with Indian manufacturers like Maruti Suzuki, Tata Motors,
Mahindra & Mahindra, expanding their operations and global manufacturers
like Hyundai, Honda, Skoda coming up with their range of vehicles from
small cars to SUVs and sedans.
The economic recovery coupled with introduction of new models, easy
availability of finance and aggressive pricing by almost all the players has
helped the industry to post strong growth over the past few years
Favourable tax structure for Sub-4 meters vehicles, introduction of
monocoque structure in utility vehicles has spawned a different league of
automobiles having a SUV in the 7 lac price range, a MPV in a sedan price
territory and a Sedan in a hatchback price range
The domestic PV market has grown at a CAGR of 11.6% in the past five
years and exports growth has slown at a CAGR of 10.6%

GROWTH DRIVERS

LOW PENETRATION LEVELS

Currently the penetration levels in India for passenger vehicles is at 17 per 1000
compared to world average of 144 per 1000
INCREASING PER CAPITA INCOME
GDP growth rate of around 7-8% for the last four years has outpaced the
growth rate of many developed countries has been only next to China in terms of
percentage growth rate.
FAVOURABLE DEMOGRAPHIC PROFILE
Around 40% of Indias population of 1.2 billion belongs to the age bracket of
20-55 years. This young population and changing lifestyles of the consumers,
provide a huge opportunity to OEMs to penetrate and expand their markets.
INCREASING FOCUS ON NORTH EAST
LOW RURAL CONTRIBUTION TO SALES
Rural contribution to sales of passenger vehicles has been on a relatively lower
side (around 11%) compared to two wheelers (around 45%). But as the income of
rural people is on a rise, the rural market provides the opportunity to OEMs to tap
and penetrate the markets. Also, a bountiful monsoon is set to increase the
demand

KEY CONCERNS

HIGH INTEREST RATES

In India ~70% of the cars are financed, which means that any increase in
interest rates for loans will drive away the consumers from passenger vehicles to
two wheelers
HIGH FUEL PRICES

The decontrol of petrol has forced the customer to stay away from petrol
vehicles. However, even vehicles running on diesel and CNG are facing the
brunt of the partial decontrol and increase in prices. This has put the
customer in a dilemma as his running costs will substantially increase .

EXCISE DUTY HIKE

The industry is burdened with high excise duty on the UV category too, forcing
higher price on the consumer which has prompted the consumers to postpone
buying decision in anticipation of new UVs. The only UVs showing growth are
the newly launched products or old products relaunched as facelift whereas
the rest of the UV market has fallen 20%.

HUGE INVENTORIES

The inventories at the dealers end were at an average of 35-40 days locking
the manufacturer as well as the dealers capital. This has forced the OEMs to
have block closures, reduce temporary manpower, or even laying off excess
employees.

SEGMENTATION
CATEGORY
Micro
Mini
Compact
C1
C2
D
E
F

CRITERIA
<= 800cc
<=1000cc
1001cc to 1400cc
1401cc to 1600cc
1601cc to 2000cc
2001cc to 3000cc
3001cc to 5000cc
>5000cc

LENGTH (mm)
<=3200
3200 to 3600
3600 to 4000
4000 to 4250
4250 to 4500
4500 to 4700
4700 to 5000
>5000

UTILITY VEHICLES
There are now five sub-segments : UV1, UV2 and UV3 including UVs that cost up
to Rs 15 lakh. UV4 vehicles are the ones priced at Rs 15-25 lakh. UV5, the ones
price more than Rs 25 lakh.
MULTI-PURPOSE VEHICLES
One box (van/mpv) Omni, Venture, Versa
Two box (hatchback )Alto, Santro, i10, a star, Nano
Three box (sedan/saloon/notchback) - Manza, City, Fiesta, Dzire
Estate/station wagon Indigo Marina, Octavia wagon
SUV (sports utility vehicle) CRV, Safari,XUV500, Pajero
Semi notchback Octavia, Accent Viva

MARKET SHARE
Source: SIAM
Volkswagen; 3%
Others; 3%
Honda; 3% Renault; 2%
Ford; 3%

Maruti; 42%

TChevrolet;
ata; 9% 3%
Toyota;
7% 11%
Mahindra;
Hyundai; 15%

Toyota; 4% Others; 3%
Ford; 5%
Nissan; 18%
Hyundai; 48%

Maruti; 22%

Market Share in Passenger Vehicle

Market Share in Passenger Car - Expor
Volkswagen; 4%
Honda; 4% Others; 5%

Chevrolet; 4% Others; 1%

Chevrolet; 4%
Toyota; 4%
Ford; 4%
Tata; 9%
Hyundai; 21%

Maruti; 46%

Renault; 7%
Tata; 8%
Maruti; 15%

Mahindra; 48%

Toyota; 17%

Market Share in Passenger Cars Market Share in Utility Vehicles

SALES TREND
Source: SIAM

Segment wise distribution

2500000

Domestic PV sales
3000000
2501542

2000000

2629839

2686429

2011-12

2012-13

2500000
UV

1500000

VANS
CARS

1000000

2000000

1951333

1500000 1552703
1000000

500000
500000
0
2008-09

2009-10

2010-11

2011-12

0
2008-09

2012-13

The domestic sales of the passenger cars

have risen at a CAGR of 9.2% over a
period of 5 years though the segment
has suffered a 7% decline YoY. The UV
segment has done considerably better
with an approximate 20% CAGR over last
5 years and a surprising 52% increase in
YoY sales. Even the Van segment has

2009-10

2010-11

The domestic sales have

increased a miniscule 2.15%
YoY and at a
CAGR of 11.6% over the last 5
years.

SALES TREND - EXPORTS

PV Exports
600000
554686
500000
446145

400000
300000

508783
444326
PV Exports

335729

200000
100000
0
2008-09

2009-10

2010-11

2011-12

2012-13

The PV export market is primarily dominated by the Korean &

Japanese automakers commanding a market share above 90%.
The exports have risen 9% YoY at a CAGR of 10% over the last 5 years.

Source: SIAM

OUTLOOK
The Passenger Vehicles has seen Y-o-Y decline for 9 straight
months till July 2013
The Utility Segment was the only growing segment but its
growth is now curtailed due to increased excise duty, high
fuel prices and high interest rates.
Also labor strife at Maruti's Manesar plant which forced the
company management to shut the plant for more than a
month will have a bearing on the growth of this segment.
But in the long term, due to under penetrated market, rise
in per capita income, rural participation, increasing
proportion of exports, new OEMs participation, Indian PV
industry is poised to reach the level of 6 mn units from
current level of ~3 mn units

COMMERCIAL VEHICLES - OVERVIEW

The CV industry is cyclical in nature as the demand depends on the pace of the overall
economic growth (GDP) and industrial activity in particular (IIP). Among segments, M&HCVs
tends to be more influenced by the macro-economic indicators than LCVs.
The current share of freight traffic in India through road is around 65%, which is much higher
when compared to other countries like US & China.
The emergence of a hub and spoke model has also lead to increase in the sub- 3.5 tonne
category which has seen a relatively stable growth than the sudden decline in the M&HCV
volumes.

GROWTH DRIVERS

Emergence of hub-n-spoke model + new models

With the emergence of the hub-n-spoke model and increasing demand for last
mile connectivity, LCV segment continues to register growth. It has in fact been
one of the strongest growing segments in the entire automobile space.
SCVs driving growth in this segment
The SCV segment within LCVs which accounts for over 3/4th of the LCV market
is driving its growth because of Strong demand for transportation of consumer
goods within cities, demand from tier II & III cities rising and replacement demand
from upper-end three wheelers
Goods & Services Tax
GST will be a growth driver for the industry as it will lead to less permits and
check points required for the industry. Also under a stable tax regime, the
economy might perform better which will lead to a growth in the industry.
Launch of new models
The launch of high tonnage multi axle vehicles is well received by the market
indicating need for the better transport solutions but the current slowdown is an
issue.

KEY CONCERNS

Industrial production (IIP) growth to remain low

The IIP has slumped due to reduced mining activity and other industrial activity
affecting demand and the need for transportation

Lack of Skilled Manpower

The shortage of skilled drivers has forced the fleet operators to put a hold on buying

Increasing interest rates having an adverse impact on demand

Almost 70% of commercial vehicles are bank financed. So tightening liquidity is a key
negative for commercial vehicles since demand for trucks and liquidity in the banking
system go hand in hand

Threat of diesel price hike

Diesel prices were last revised in June 2011. Oil marketing companies
are losing Rs 14 on every litre of the diesel sold due to the regulation
by the government. So any hike in diesel price would result in a slow
down in CV sales since almost all of them are diesel driven.
Stagnant freight rates could continue

SALES TREND

Segment wise Distribution

500,000
450,000

437,875

400,000
350,000

361,147

273,126
271,852
300,000

299,334

250,000

SCV Goods Carriers

LCV Goods Carriers
221,712

200,000
150,000
100,000
44,035
50,000
2010-11

50,268
38,861
2011-12

2012-13

Total CV Sales CAGR of 5% over the past 3 years

LCV Sales CAGR of -6% over the past 3 years
M&HCV Sales CAGR of -7% over the past 3 years
SCV Sales CAGR of 17.2% over the past 3 years

Source: ICRA research reports

M&HCV Goods Carriers

OUTLOOK
The commercial vehicle industry has declined around
12% during April-July 2013. These low sales over an
already dismal last year performance shows the gravity
of the situation.
The segment sales are expected to remain in a freefall
till the government provides some support in the form
of an excise duty cut back, stable interest rates and
sound policies which will lift the overall economy.
A pickup in the mining activity will help increase the
sales in the M&HCV segment. The LCV segment, which
was doing reasonably well has also come under
pressure due to fuel rates and also high base.

TRACTORS - OVERVIEW

The Tractor industry has always been a barometer for the state of rural
economy in India. The growth drivers of tractor demand are the scarcity of
farm labor, increase in agri-credit flow and rise in non-agri usage of tractors.
The long-term driver is the support from the Government of India (GOI)
towards rural development and agri-mechanisation.

Although agriculture contributes only 14.1% to Indias GDP, its role remains
critical in Indian economy as it provides employment to 58.2% of the
workforce, which is why this sector remains a strong focus area for the
Government

MARKET SHARE

25.0

11.6 2.4
9.6

5.1

5.7
40.6

Escorts Ltd.
Others
International Tractors Ltd.
Johndeere
Mahindra & Mahindra Ltd.
New Holland India
TAFE

Major Players:
Mahindra & Mahindra
TAFE (Tractors and Farm Equipment Ltd)
Escorts
ITL (Sonalika)
John Deere
New Holland
Source: ICRA research reports

GROWTH DRIVERS

Improvement in monsoons
Rainfall is one of the major determinants of demand for tractors in India. India has
witnessed normal to above normal rainfall during the monsoons which would be a
growth driver for the industry.

Strong replacement demand

Roughly 40% of domestic demand is from the replacement market and is
expected to increase as the average life cycle of a tractor has reduced to ~8-9
years from ~11-12 years.
Promising exports
Outlook for exports also looks promising through inclusion of new export
destinations, increased product offerings in the higher HP segment
Easy credit availability
Credit availability continues to be stable with increasing focus of non-banking
finance companies (NBFCs) on tractor financing. This should lead to increased
demand in this sector.

KEY CONCERNS AND SALES TREND

CONCERNS

Demand from non-agriculture segments set to decrease

Demand from the non-agricultural segment (~20% of sales) is set to
decrease due to the slowdown in construction and infrastructure projects.
Economic Condition
Due to the unfavourable economic conditions and also very high inflation
rates, the farmers are suffering and buying new tractors can be difficult for
them. The purchasing power of farmers are going down and this might
result in lower sales. This is a major concern for the industry.
700000
607663

600000
545108

500000
440208

400000
300000

590915

342820

200000
100000
0
2008-09

Source: ICRA research reports

2009-10

2010-11

2011-12

2012-13

OUTLOOK

After witnessing negative growth of 3% in FY 2013, the tractor industry in

general anticipates the sales to bounceback in the coming fiscal and the
industry is estimated to grow at about 7-10%. The growth this year is
expected due to normal and above normal monsoon all across India. South
and West India is expected to lead the way in growth for this industry. Also,
due to the rupee depreciation, exports of this industry would increase. The
long-term outlook remains stable due to support from the Government of
India (GOI) towards rural development and agri-mechanisation, scarcity of
farm labour especially during the sowing season, increase in credit flow to
agriculture and healthy exports.

GOVERNMENT POLICIES AND REGULATIONS

The Government of India has taken a number of initiatives to promote

growth in the sector

Auto Policy 2002

The policy emphasizes on low emission fuel auto technologies and the
availability of appropriate auto fuels.
The policys 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.

GOVERNMENT POLICIES AND REGULATIONS

Automotive Mission Plan (AMP) 20062016
The AMP 20062016 aims to make India a preferred destination for
designing and manufacturing automobile and automotive
components
The plan envisages additional employment for 25 million people by 2016.
The AMP targets exports worth US$ 4045 billion in 2016, including
component exports worth US$ 2025 billion and outsourced engineering
services worth US$ 22.5 billion
It proposes to increase the output to US$ 145 billion and account for more
than 10 per cent of the countrys GDP.
Ensure a balanced transition to open trade at a minimal risk to the Indian
economy and local Industry.

GOVERNMENT POLICIES AND REGULATIONS

Recommendations of the AMP

Manufacturing and export of small cars, multi-utility vehicles, two and three
wheelers, tractors, components to be promoted.
Care to be taken of negative like and rules of the country with current
negotiation of Free Trade Agreement and Regional Trade agreement with
countries like Thailand, Singapore, Malaysia, China, Korea, Egypt, Gulf etc.
Attractive Tariff Policy which may follow attractive investment.
Specific measures will be taken for expansion of domestic market.
Incremental investment of USD 35 to 40 billion to Automotive Industry
during the next 10 years.
National Road Safety Board to act as the coordinating body for promoting
safety

GOVERNMENT POLICIES AND REGULATIONS

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 by Department of Heavy Industries & Public
Enterprises
The departments activities include the reduction of excise duty on small
cars 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.

GOVERNMENT POLICIES AND REGULATIONS

FDI, licensing & export-import norms
100 per cent Foreign Direct Investment (FDI) is permissible under automatic
route in this sector including passenger car segment.
The import of technology/technological up gradation on the royalty payment
of 5 per cent without any duration limit and lump sum payment of US$ 2
million is also allowed under automatic route in this sector.
The automobile industry is deli censed, and import of components is freely
allowed.
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
Enforcement of Euro IV and Bharat Stage IV emission norms

GOVERNMENT POLICIES AND REGULATIONS

NATIONAL AUTOMOTIVE BOARD (NAB)

The Government of India has proposed setting up of NAB, which will act as a

facilitator between the government and the industry, promote research

and development activities and have a larger role in developing skills for
the growing automobile sector.
It would also act as a think-tank for the government, especially for the
growth of hybrid and electric vehicles in the country.
The board would be set up as an autonomous body and will have
members from the Department of Heavy Industry, Planning
Commission and from various ministries, including Road Transport and
Highways, Science and Technology, Environment and Forests. Besides,
there would be scientists and industry representatives on the board.
The board will be the successor of the National Automotive Testing and
R&D Infrastructure Project (NATRiP), which is a project implementation
body.

SOCIETY OF INDIAN AUTOMOBILE MANUFACTURERS

Society of Indian Automobile Manufacturers (SIAM) is the apex Industry

body representing 46 leading vehicle and vehicular engine manufacturers in
India.
SIAM interacts with worldwide experts to assess the global trends and
developments shaping the Automotive Industry.
SIAM has been striving to keep pace with the socio-economic and
technological changes shaping the Automobile Industry and Endeavour to
be a catalyst in the development of a stronger Automobile Industry in India.
It provides a window to the Indian Automobile industry and aims to enhance
exchanges, communication, expand economics, trade and technical
cooperation between the Automotive Industry and its international
counterparts.

Impact of Budget 2013 on Automobile Sector

Increase in Excise Duty on vehicles exceeding 1500cc and 4000mm with a ground clearance
above 170mm. These vehicles are mainly the Utility Vehicles barring a few exceptions in the sedan
segment. However, the Revenue Department has clarified that the sedans will be charged the
lower value of 27% as against the hiked duty of 30%.

High end imported luxury cars will be taxed more due to the increase in custom duty from 75% to
100%

Motorcycles with engine capacity >=800cc to attract custom duty of 75% as against the earlier
60%

The excise and custom benefits offered to the components of EV and hybrid vehicles have been
extended till March 2015 to promote Eco-friendly vehicles. Custom duty has been exempted on
import of lithium ion batteries

JNNURM Phase II has renewed hopes among the CV players facing huge turmoil in the domestic
market. The mission plans to allocate funds for purchase of 10000 buses.

The excise duty has been reduced on truck chassis from 15% to 13%

Latest happenings and Future trends - Quadricycles

Quadricycle - New segment positioned between a three-wheeler and a four-whe

Government has given approval for recognizing this segment
The idea is to have
Higher mileage
Lower carbon emissions
Greater safety
Lesser price
Popular in Europe, already around 3,00,000 quadricycles are registered on the r
According to the French National Inter ministerial Road Safety Observatory,
they are three times less likely to be involved in an accident than a convention
Maximum speed generally wont exceed 75 km/hr.
Biggest beneficiary - Bajaj Auto as they unveiled the RE60 in the Auto Expo
Top speed of RE60 would be 70 kph and is expected to have a mileage of 35 km
mainly because of the lightweight and robust monocoque metal-polymer hybri
structure.

Increasing number of recalls in the industry

Though there is no Government guideline on the recall of
vehicles, todays OEM has become more proactive and hence
the self declaration of a recall is observed. SIAM data suggests
that Indian OEMs recall an average 11% of the cars sold.
GM recently recalled more than a lakh of their Tavera
vehicles which was perceived to be another recall but
investigation by GM has uncovered a dirty truth. The recall
was essentially for replacement of faulty parts used in the BSIII
and BSIV versions.
Ford has also recently announced recall of 1.6 lakhs of its
Ford Classic and Ford Figo models. This is the biggest recall in
the history of the Automotive industry in India

Increasing number of strikes at Automotive

major plants
The industry is faced with persistent labour
problems, be it the Northern belt or the Western
belt or the Southern belt. Majority of
manufacturers have faced issues in handling
them effectively.
We have seen labour issues happening at
Manesar plant of Maruti
Recently, there has also been labour problems
at Bajaj Autos Chakan plant and also Hero Moto
Corps plants.

MAJOR PLAYERS
Hero Motocorp

Hero is the worlds largest manufacturer of two wheelers by sales. It holds the
leadership position in Indian two wheeler markets with 43% market share
The motorcycle segment accounts for approximately 95% of the companys two
wheeler sales volumes. Within the motorcycle segment, nearly 80% of the volumes
are contributed by the executive segment.
PRODUCT PORTFOLIO
Financial Data
ECONOMY
MODELS
EXECUTIVE
MODELS
PREMIUM
MODELS
SCOOTER
SEGMENT

CD DAWN, CD DELUXE
SPLENDOR, PASSION
KARIZMA R, ZMR, HUNK,
CBZ XTREME, IMPULSE
PLEASURE, MAESTRO

Source: Company data

2010-

2011-

2012-

11
Net Revenues (Rs 19397.9

12
23579.0

13
23768.1

Cr)
3
Cost of production 15446

3
19522.4

1
19710

(Rs Cr)
EBITDA (Rs Cr)
PAT (Rs Cr)
EPS (Rs Cr)
Gross Block (Rs Cr)

9
3983.35
2378.13
111.79
6308.26

3682.86
2118.16
95.87
6685.07

2822.31
1927.9
79.51
5538.46

MAJOR PLAYERS
Bajaj Auto Ltd

Bajaj is the second largest two-wheeler manufacturer in India and third

largest motorcycle manufacturer in world by sales. The companys turnover
has crossed the Rs20, 000 crore mark in FY13.
It exports around 66% of all motorcycle exports from India.

PRODUCT PORTFOLIO
ECONOMY MODELS
EXECTUVIE MODELS

PLATINA, BOXER
PULSAR
135cc,
DISCOVER 125cc
PREMIUM MODELS
PULSAR 150, 180, 220
and 200NS, KTM DUKE,
NINJA, AVENGER
THREE
WHEELERS- RE 4S, GC MAX, RE 600,
GOOODS
AND MEGA MAX
PASSENGER CARRIER

Source: Company data

Financial Data

2010-

Net Revenues (Rs Cr)

11
12
13
16398.2 19528.9 19997.2

Cost

of

2011-

2012-

3
8
5
production 12757.5 15212.9 15573.0

(Rs Cr)
EBITDA (Rs Cr)
PAT (Rs Cr)
EPS (Rs Cr)
Gross Block (Rs Cr)

5
4472.28
3339.73
108.92
3395.16

2
4194.03
3004.05
96.51
3396.06

4
4430.74
3043.57
97.53
3828.85

MAJOR PLAYERS
Mahindra and Mahindra

Mahindra & Mahindra Ltd. is the flagship company of the Mahindra Group,
based in Mumbai
It is the only company in the industry having its presence in all the five subsegments i.e. Two Wheelers, Three Wheelers, PVs, CVs and Tractors
It is the market leader in Utility vehicles with a market share of 47.7% and
tractors with a share of 40.2%.

SEGMENT

PRODUCT

Passenger
vehicles

Verito, Bolero, Scorpio, XUV 500,

Xylo, Quanto
Tractors
Bhoomiputra,
Sarpanch,
Arjun,
Yuvraj
Commercial Gio,Genio,Bolero Maxi Truck
vehicles
Two
Rodeo,
Duro,
Flyte,
Pantero,
wheelers
Centuro
Three
Alfa,Alfa Plus
wheelers
Source: Company data

Key

Financials 2010-11

2011-

201213
9374

(Rs Cr)
Gross Block

5849

12
8063

Net Revenues

23477

31835

40441

EBITDA

3441

3769

4709

PAT

2662

2878

3353

EPS (Rs)

45.33

48.88

56.8

MAJOR PLAYERS
Tata Motors

Tata Motors is India's largest automobile company, a subsidiary of the Tata Group,
based in Mumbai.
It is the leader in nearly all commercial vehicle segments with a market
share of around 58%.
It is also fifth-largest truck manufacturer, fourth-largest bus manufacturer
by volume and fourth-largest passenger vehicle manufacturer
In its last fiscal year, which ended in March, Jaguar Land Rover posted a
18.3% jump in retail sales and became the primary driver of profit for Tata
Motors.

SEGMENT
Passenger vehicles

PRODUCT
Nano,
Indica,
Indigo,Vista,Manza,
Sumo,Safari
Medium
&Heavy Prima,, Construck, Starbus,
Commercial
Divo, City ride
Intermediate
Winger, Winger Platinum
Commercial
Small Commercial

Tata Ace, RX pickup, Xenon

CNG, Magic
Premium
and Defender, Discovery, Range
Luxury
Rover,Evoque
Source: Company data

Key

Financials 2010-

2011-

2012-13

(Rs Cr)
Gross Block

11
21883

12
27111

30312

Net Revenues

47957

54217

44766

EBITDA

4705

4177

1718

PAT

1811

1242

302

EPS (Rs)

28.55

3.91

0.95

MAJOR PLAYERS
Maruti Suzuki India Ltd

MSIL is Indias largest passenger vehicle manufacturer with a market share of around
45.5% at present
Suzuki Motor Corporation (Suzuki) of Japan holds 54.2% stake in the companyMaruti
Suzuki reported a sales of 87323 units in August, 2013 against a sales of 54154 units
in August, 2012. The sales in 2012 were down due to unrest in Manesar plant.
Maruti Suzuki had planned to set up a plant in Gujarat at an investment of Rs 4000
crore. This plant was to be commissioned by 2015-16. However, due to the economic
slump, the company has delayed the construction of the new plant. The plant is not
expected to be commissioned even till FY16

SEGMENT

PRODUCT

Key Financials (Rs 2010-11 2011-

2012-

A1 segment

Maruti 800

Cr)
Gross Block

11737

12
14734

13
19801

Net Revenues

36561

35558

43589

EBITDA

3473

3019

4230

PAT

2288

1635

2392

EPS (Rs)

79.21

56.6

79.19

A2 segment
A3 segment

Alto, Estilo, WagonR, A-star,

Ritz, Swift
Dzire, SX4

A4 segment

Kizashi

Multi utility, Gypsy, Ertiga,Omni

Multi Purpose

Source: Company data

Auto Ancillaries - Sector Overview

2011-12: Auto Component industry in India
recorded USD 43.5 b$ in turnover; growing at
9% YoY
Turnover (CAGR) 2012-17 13% , 2011-21
21%
Over 550 organized & 6000 unorganized
players
The exports markets grew by 25.1% in 201112 over the last year to touch USD 6.8 b$

Sector Overview
Revenue Contribution from
different segments

OEM off-take Segment Wise

16%
5% 2%

16%

OEM

54%

Replacement

68%

Passenger Vehicles

22%
17%

Exports

Commercial Vehicles
Two-Wheelers
Tractors
Three Wheelers

Turnover Auto Ancillary Industry

250000
206267

200000

182100

150000
100000

220800

Turnover Auto
Ancillary
Industry

135700
105700

50000
0
2008-09

Source: ACMA

2009-10

2010-11

2011-12

2012-13

Exports & Imports

Top Importing Nations

Top Exporting Nations

21

USA

56
5

7
6

Turkey
Thailand

UK

South Korea

20

31

China
16
12

Japan
Germany

14

Thailand

Germany

Rest of the World

Rest of the World

60000

56600
51441

50000
40000
30000
20000

38760
31280

33485

30680

34500
Imports
Exports

23712
18400

16048

10000
0
2008-09

Source: ACMA

2009-10

2010-11

2011-12

2012-13

Industry Division

Source: India Brand Equity Foundation

Industry Breakup

Segment Wise Production Breakup

(2012-13)

19%

31%

9%
10%
12%

19%

Engine Parts
Drive, Transmission & Steering
Parts
Suspension and braking parts
Equipment
Electrical parts
Others

Source: ACMA

Major Players by Segment

Component

Major Players

Engine Parts

Bosch, Federal-Mogul Goetze, Samkrg

Pistons, Ucal Fuel Systems

Electrical Parts

Exide, Amara Raja, Denso, Minda,

Motherson Sumi

Drive
Transmission &
Steering Parts

Sona Koyo, ZF Steering, Automotive

Axles, Steel Strips Wheels, Clutch Auto,
Ceekay Daikin

Suspension &
Braking Parts

Amtek Auto, ANG Auto, Sundaram

Clayton, Brakes Auto

Equipment

Fiem Inds, Phoenix Lamps, Lumax

Tyres

Apollo Tyres, MRF Tyres, Ceat, Birla, JK

Tyres

Value Chain

ACMA

ACMA -Automotive Component Manufacturers Association of India

It represents over 600 companies, whose production forms a
majority of the total auto component output in the organized
sector
Activities include participation in international trade fairs, sending
trade delegations overseas and bringing out publications on
various subjects related to the automotive industry.
Represented on a number of panels, committees and councils of
the Government of India through which it helps in the formulation
of policies pertaining to the Indian automotive industry
For exchange of information and especially for co-operation in
trade matters, ACMA has signed Memoranda of Understanding
with its counterparts in Australia, Brazil, Canada, Egypt, France,
Germany, Iran, Italy, Japan, Malaysia, Pakistan, South Africa,
South Korea, Spain, Sweden, Thailand, Tunisia, Turkey, UK, USA
and Uzbekistan.

Impact of Budget 2013 on Auto Ancillaries Sector

The major tariff rates of different segments of the component market remained the
same in this years budget
Allowance of 15% on investments of Rs 1.0 billion and above in plant and
machinery during the period 2013-15 provided to manufacturing entities

Continuation of JNNURM in the 12th Plan; additional sanction towards purchase of

10,000 buses during 2013-14

Non-tax benefits enjoyed by Micro, Small & Medium Enterprises (MSMEs) allowed
for a period of upto three years even after growing out of the MSME status

Refinancing capability of SIDBI for lending to MSMEs enhanced from Rs. 50 billion to
Rs. 100 billion

An amount of Rs. 22 billion allocated for setting-up 15 additional tool room and
technology development centres

An amount of Rs. 10 billion earmarked for skill development schemes for youth

Growth Drivers and Factors of Concern

Growth Drivers:

Replacement Demand
Exports healthy growth of 15-20% - Rupee depreciation
Rising share of revenues from non-automotive segment
Onset of festive season

Factors of Concern:
Auto Demand
Labour Issues at Auto manufacturing plants as also Auto
Components plants
Medium & Heavy Commercial vehicles segment growth concerns
Slower-than-expected recovery in Europe and US auto demand
would delay the growth trajectory for export-oriented companies.
Increasing raw materials cost

Key Players Apollo Tyres

2nd largest tyre manufacturer in India and 17th biggest tyre

manufacturer in the world
Presence in Asia, Europe and Africa, with 9 modern tyre facilities
and exports to over 118 countries
Brands include Apollo, Vredestein, Dunlop, Kaizen, Maloya, Regal
Revenue by
Geography

Revenue by Segment
10%

12%
India

23%
65%

Source: Company data

OEM

Europe
South Africa

24%

66%

Replacement
Export

Tyre Industry - Overview

Indian Tyre Industry accounts for approximately 5% of global tyre

demand
Around 43 players in the industry
Top 10 companies account for 90-92% of total tyre production.
Major Players MRF, Apollo tyres, JK tyres, Ceat, Birla
Market Share
Others; 15%

MRF; 27%

Birla; 11%
Ceat; 12%
JK tyres; 16%

Source: ICRA research reports

Apollo tyres; 19%

Tyre Industry Demand and Revenue Breakup

Demand Breakup

Three Wheelers; 10%

Two Wheelers; 10%

Exports; 16%
OEM; 23%

Revenue Breakup

Replacement market; 61%

Source: ICRA research reports

Passenger Vehicles; 15%

Commercial Vehicles; 65%

Tyre Industry Radialisation

A radial tyre is a particular design of the tyre which reduces the

rolling friction of the tyre
Achieves better fuel efficiency than vehicles with cross-ply tyres.
The current levels of radialisation in India are:

98%

Passenger vehicles

Medium & Heavy

23% Commercial vehicles

In the US, China and Europe, up to 90% of trucks run on radial

tyres
Radial tyres cost 25% more than Crossply(or bias) tyres as the
proportion of synthetic rubber/natural rubber is more for radial
tyres. But the margins from radial tyres are also higher.
Hence it presents a great opportunity for tyre manufacturers
especially in commercial vehicles segment.

Tyre Industry Growth Drivers and Factors of Concern

Growth Drivers:

Natural Rubber price falling

Fall in price of other raw materials
Growth of radialisation

Factors of Concern:

Volatile other raw material prices - Nylon Tyre Cord Fabric, carbon
black and synthetic rubber (PBR+SBR)
Dependency on Medium & Heavy Commercial Vehicles Account
for around 65%
Dependency of MHCV segment

Battery Industry Segment wise Breakup

Automotive battery segment

Auto OEMs contribute about 30-35% of sales. Despite being a lowmargin business, provides for high visibility and brand building for
the players
Replacement demand accounts for 60-65% of sales. Typically, the
life of a battery is about three years and has to be replaced after
that.

Industrial battery segment

Industrial batteries are classified into conventional (lead acid),
valve-regulated lead acid (VRLA) and nickel-cadmium batteries.

Battery Industry Cost Structure and Major Players

INDUSTRY COST STRUCTURE

Others; 2%
Polypropelene / Poleytheylene; 18%

Lead and alloys; 80%

Major Players -Exide industries, Amara Raja Batteries, HBL

Power Systems Ltd Luminous Power Technologies Pvt Ltd, SuKam Power Systems Ltd, Base Corporation Ltd
Virtual duopoly in the industry with the top two players, Exide
and Amara Raja commanding over 80% of the organized market
share
Unorganized sector contributes 60-65% of the replacement
market.
It dominates
the tractor and commercial vehicle
Source:
ICRA research
reports

Battery Industry - Growth Drivers & Factors of Concern

Growth Drivers:
Robust solar equipments and mobile batteries demand
Demand for Tubular batteries five year warranty
Government initiatives 10% of power used by telecom towers
through renewable sources
Electric vehicle sales
Expansion of railways
Factors of Concern:
Low sales growth of automobiles
High and volatile input costs - Lead (80% of the cost)
Large unorganized market

Key Learnings
Automobile and Auto Ancillaries sector
Overview
Revenue, Costs Breakup, Imports, Exports
Industry Cluster, Value Chain
Sub Segments
Overview
Market Share
Growth Drivers
Factors of Concern
Outlook
Industry Bodies SIAM, ACMA, Government Rules and Regulations
Impact of Budget
Latest Trends and Happenings
Key Players
Tyre Industry
Battery Industry

Overall Sector Outlook

Two Wheelers:
Though the macro economic factors are weak,
a bountiful monsoon will help the Two wheeler
industry keep its momentum. On this
backdrop, SIAM expects the sales to grow by
6-8%. However, we are expecting only the
scooter segment to grow at around 10-12%
while the motorcycle segment sales will fall or
remain at the existing levels. The electric two
wheelers will also face an increase in demand
due to increasing fuel prices.

Overall Sector Outlook

Three Wheelers
The exports experienced a sudden jump
of 47% in the Q1 of FY14 which has been
tapering down recently but will still be
posting some growth. The fresh issue of
licenses was supposed to increase the
domestic sales which have, in fact,
decreased by 3.5% in Q1 FY14. We
expect that the segment will be posting a
growth due to exports saving the day.

Overall Sector Outlook

Passenger Vehicles
The segment experienced de-growth of 5% in
the April-August period. The oncoming festive
season, increased rural penetration and a
satisfactory monsoon will aid the demand to be
at the same levels as last year. However, a
further fall in rupee will force the manufacturers
to increase prices curbing the demand. All the
individual segments will not experience growth,
but new product launches will help keep the
customer interest alive in the market.

Overall Sector Outlook

Commercial Vehicles
The CV sales are constantly hitting new lows despite
heavy discounts offered by the OEMs. The new
launches like Tata 3723, Ashok Leyland 3718il, Bharat
Benz 914 & 1217 trucks in the M&HCV category have
failed to lift the sales from the abyss. On the other
hand, the SCV launches like the Mahindra Pik-Up, Tata
Ace facelift and Ashok Leyland Dost have successfully
kept the growth momentum of the category. However,
rising fuel costs and increased cost of operation has
put a stop to the bull run of the LCV category. The
segment is expected to post decline in sales.

Thank You!