India : Automobile Sector Report_August 2013


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India : Automobile Sector Report_August 2013

  1. 1.       
  2. 2. 15.9 29.1 FY13 FY20 Two wheelers (million units) Source: Aranca Research; Note: E – Estimate By 2020, India's share in the global passenger vehicle market to double to 8 per cent from 4 per cent over 2010–11 Third-largest automobile industry by 2020E Two–wheeler sales to rise from 15.9 million in FY2013 to 29.1 million by FY2020E World’s second-largest two wheeler manufacturer Passenger vehicle sales to increase from 3.2 million in FY2013 to 9.0 million in FY2020E Passenger vehicle sales to nearly triple by 2020E CAGR: 9% 4% 8% 2010 2020 India's share in global passenger vehicle market 3.2 9.0 FY13 FY20 Passenger vehicles (million units) CAGR: 16%
  3. 3. • The engineering sector is delicensed; 100 per cent FDI is allowed in the sector • Due to policy support, there was cumulative FDI of USD14.0 billion into the sector over April 2000 – February 2012, making up 8.6 per cent of total FDI into the country in that period Growing demand Source: Automotive Mission Plan (2006–2016) Note: R&D – Research and Development; FDI – Foreign Direct Investment; FY – Indian Financial Year (April – March); FY16E – Estimated figure for Financial Year 2016 Growing demand • Strong growth in demand due to rising income, middle class, and a young population is likely to propel India among the world’s top five auto manufacturers by 2015 • Growth in export demand is set to accelerate Innovation opportunities • Tata Nano and the upcoming Pixel have opened up the potentially large ultra low-cost car segment • Innovation is likely to intensify among engine technology and alternative fuels Policy support • The government aims to develop India as a global manufacturing as well as R&D hub • There has been a wide array of policy support in the form of sops, taxes and FDI encouragement Rising investments • India has significant cost advantages; auto firms save 10-25 per cent on operations vis-à-vis Europe and Latin America • A large pool of skilled manpower and a growing technology base would induce greater investments FY10 Market size: USD57.7 billion FY16E Market size: USD145 billion Advantage India
  4. 4. Source: Tata Motors, Society of Indian Automobile Manufacturers (SIAM), Aranca Research Note: JV – Joint Venture • Closed market • Five players • Long waiting periods and outdated models • Seller’s market • Joint venture (JV): Indian government and Suzuki formed Maruti Udyog; commenced production in 1983 • Component manufacturers entered the market via JV • Buyer’s market • Sector de-licensed in 1993 • Major original equipment manufacturers (OEMs) started assembly operations in India • Imports permitted from April 2001 • Introduction of value- added tax in 2005 • More than 35 market players • Removal of most import controls • Indian companies gaining acceptance on a global scale • Setting up of National Automotive Board to act as facilitator between the government and industry 0.4 million units (1982) 0.6 million units (1992) 11 million units (2007) 20.7 million units (FY13) Before 1982 1983–92 1993–2007 2008 onwards
  5. 5. Automobiles Two-wheelers Mopeds Scooters Motorcycles Electric two- wheelers Passenger vehicles Passenger cars Utility vehicles Multi-purpose vehicles Commercial vehicles Light commercial vehicles Medium and heavy commercial vehicles Three-wheelers Passenger carriers Goods carriers
  6. 6. Revenue trends over the past few years (USD million) Source: SIAM, Datamonitor, Aranca Research Note: * Does not include three wheelers The gross turnover of automobile manufacturers in India expanded at a CAGR of 17.7 per cent over FY07-11 Excluding three wheelers, trucks accounted for the largest share of revenues (47.8 per cent in 2011) Market* break-up by revenues (2011) 30.5 36.6 33.3 43.3 58.6 FY07 FY08 FY09 FY10 FY11 47.8% 31.8% 20.4% Trucks Cars Two Wheelers CAGR:17.7%
  7. 7. Total production of automobiles in India (million units) Source: SIAM, Aranca Research Note: CAGR – Compound Annual Growth Rate Production of automobiles increased at a CAGR of 12.2 per cent over FY05-13 Passenger vehicles was the fastest growing segment, representing a CAGR of 15.4 per cent 1.2 1.3 1.3 1.6 1.8 2.4 3.0 3.1 3.2 0.4 0.4 0.5 0.6 0.4 0.6 0.8 0.8 0.8 0.4 0.4 0.6 0.5 0.5 0.6 0.8 0.8 0.8 6.5 7.6 8.5 8 8.4 10.5 13.4 15.5 15.9 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers
  8. 8. Market share by volume (FY13)Two wheelers dominate production volumes; in FY13, the segment accounted for about three quarters of the total automotive production in the country India is the world’s second-largest two wheeler manufacturer and fourth-largest producer of commercial vehicles 77% 15% 4% 4% Two Wheelers Passenger Vehicle Commercial Vehicle Three Wheelers Source: SIAM, Aranca Research
  9. 9. Share in production of passenger vehicles (FY13) Share in production of commercial vehicles (FY13) 80.7% 19.3% Passenger cars Utility vehicle 29.4% 70.6% MCV & HCV LCV Source: SIAM, Aranca Research Note: LCV – Light Commercial Vehicle; MCV – Medium Commercial Vehicle; HCV – Heavy Commercial Vehicle
  10. 10. Share in production of three-wheelers (FY13) Share in production of two-wheelers (FY13) 18.3% 81.7% Goods Carrier Passenger carrier 5.9% 78.7% 15.3% Mopeds Motocycles Scooters Source: SIAM, Aranca Research
  11. 11. Exports of automobiles from India (million units) Automobile export volumes increased at a CAGR of 19.1 per cent over FY05–13 Two-wheeler segment reported the fastest growth (22.2 per cent) followed by three-wheelers (16.3 per cent) over FY05–13 0.2 0.2 0.2 0.2 0.3 0.5 0.5 0.5 0.5 0.0 0.0 0.1 0.1 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.3 0.4 0.3 0.4 0.5 0.6 0.8 1.0 1.1 1.5 2.0 2.0 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers Source: SIAM, Aranca Research
  12. 12. Exports shares by volume (FY13)Two wheelers accounted for the largest share in exports (by volume) at 67 per cent in FY13 Passenger vehicles comprised a sizeable 19 per cent of overall exports Exports of passenger vehicles registered the highest growth at 9.02 per cent in FY13 19% 3% 11% 67% Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers Source: SIAM, Aranca Research
  13. 13. Growth forecast for sales Source: SIAM, Aranca Research Note: E – Estimate, UV – Utility Vehicle Auto sales across categories are estimated to rise 6-8 per cent in FY14 Passenger vehicles are projected to grow 5-7 per cent in FY14 Passenger car segment is estimated to expand 3-5 per cent SUVs are projected to increase 11-13 per cent Commercial vehicles are forecast to rise 7-9 per cent LCVs are estimated to grow 10-12 per cent MCVs and HCVs are projected to increase 1-3 per cent Three wheelers are estimated to rise 3-5 per cent in FY14 Two-wheelers are expected to grow 6-8 per cent in FY14 4% 27% 28% 12% 3% 8% FY09 FY10 FY11 FY12 FY13 FY14E Auto sales growth Growth forecast for the auto segment 13% 33% 25% 3% 2% 7% -33% 50% 33% 0% -2% 9% 0% 20% 33% 0% 5% 5% 5% 25% 28% 16% 3% 8% FY09 FY10 FY11 FY12 FY13 FY14E Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers
  14. 14. 16.8 22.0 30.0 FY13 FY15 FY20 Two & three wheelers (million units) 0.8 1.4 2.2 FY13 FY15 FY20 Commercial vehicles (million units) 3.2 5.0 9.0 FY13 FY15 FY20 Passenger vehicles (million units) Passenger vehicles to increase at a CAGR of 16 per cent during FY2013–20 Commercial vehicles expected to register a CAGR of 16 per cent during FY2013–20 Two and three wheelers projected to expand at a CAGR of 9 per cent during FY2013–20 CAGR: 16% CAGR: 16% CAGR: 9% Source: SIAM, Vision 2020, Aranca Research
  15. 15. The Indian luxury car market expanded at a CAGR of 30 per cent, with 23,000 units in 2011 (about 1 per cent of the passenger vehicle market in India). The market is dominated by players such as BMW, Mercedes, Audi, Jaguar India has the world’s 12th-largest HNI population, with a growth of 20.8 per cent (highest among the top 12 countries) With expansion in the education and realty sectors, and increasing wealth of IT professionals, more consumers aspire to own luxury cars The Indian luxury car market is estimated to expand at a CAGR of 25 per cent during 2012–20 and reach 150,000 units by 2020 (accounting for 4 per cent of the estimated 6.8-million-unit domestic car market) The luxury SUV segment is growing at about 50 per cent, while luxury sedans are increasing 25–30 per cent Scenario Key drivers Notable Trends Source: World Wealth Report (2011) of Merrill Lynch Wealth Management and Capgemini, Aranca Research Note: HNI - High Networth Individuals
  16. 16. Source: SIAM, Aranca Research Note: Data is for FY10 The automotives industry is concentrated with leaders in each segment commanding a share of over 40 per cent Market Leader Others Passenger Vehicles 45% 20% 10% 4% MCVs & HCVs 63% 23% 7% LCVs 59% 30% 4% 4% Three Wheelers 41% 40% 10% Motorcycles 59% 24% 7% 6% Scooters 51% 21% 14% 10%
  17. 17. New product launches • Large number of products available to consumers across various segments; this has gathered pace with the entry of a number of foreign players • Reduced overall product lifecycle have forced players to employ quick product launches Improving product- development capabilities • Increasing R&D investments from both the government and the private sector • Private sector innovation has been a key determinant of growth in the sector; two good examples are Tata Nano and Tata Pixel; while the former has been a success in India, the latter is intended for foreign markets Alternative fuels • In FY11, the CNG market was worth more than USD330 million; CNG cars and taxis are expected to register a CAGR of 28 per cent over FY11–FY14 • The CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in 2009 New financing options • Carmakers such as BMW, Audi, Toyota, Skoda, Volkswagen and Mercedes-Benz have started providing customised finance to customers through NBFCs • Major MNC and Indian corporate houses are moving towards taking cars on operating lease instead of buying them Note: NBFCs - Non-Banking Finance Companies
  18. 18. Strong government support Growing demand Inviting Resulting in Growing demand Increasing investments Policy support Rising income, young population Greater availability of credit and financing options Strong growth in exports Goal of establishing India as an auto- manufacturing hub R&D focus; GOI has set up a technology modernisation fund Policy sops, FDI encouragement Rising investments from domestic and foreign players Greater product innovation; market segmentation Demand projected to remain strong, making returns attractive Note: GOI – Government of India
  19. 19. Increasing income and middle-class population • GDP per capita is estimated to have grown from USD 1369.54 in 2010 to USD 1,591.57 in 2012, and is expected to reach USD 2,428.45 by 2017 • Apart from the impact of rising incomes, widening of the consumer base will also be aided by expansion of the middle class, increasing urbanisation, and changing lifestyles • A young population is boosting demand for cars • Demand for commercial vehicles increased due to the development of roadways and greater market access Changing income dynamics of India’s population Source: McKinsey Quarterly, Aranca Research 1 3 72 6 17 12 25 29 35 40 32 50 26 15 2008 2020 2030 Globals (>18412.8) Strivers (9206.4-18412.8) Seekers (3682.5 - 9206.4) Aspirers (1657-3682.5) Deprived (<1657) Million Household,100% 222 273 322
  20. 20. Easy availability of credit • Greater access to credit eases the purchase of passenger and commercial vehicles • The auto finance penetration has increased at a CAGR of 16.6 per cent to USD15.5 billion during FY07-11 • BMW, Audi, Toyota, Skoda, Volkswagen and Mercedes- Benz have started providing customised finance to customers, dealers and suppliers through dedicated non-banking finance companies (NBFCs) Indian auto finance market size (USD billion) Source: Kotak Mahindra Prime, Aranca Research Note: Greater distributional efficiencies, increasing demand (especially from rural areas) due to rising disposable incomes have created new markets for products within the country 11.3 14.1 12.4 15.3 21.6 8.5 10.2 8.1 10.7 15.5 FY07 FY08 FY09 FY10 FY11 Car Industry sales volume Vehicle Finance Penetration
  21. 21. Design and Engineering skills Manufacturing skills Manpower costs Supplier base Raw materials East Asia Korea China Thailand Indonesia Vietnam Central & Eastern Europe Czech Republic Romania Poland Slovakia Russia Hungary Turkey Latin America Brazil Mexico Less competitive than India In competition with India Source: ACMA, Aranca Research
  22. 22. Auto Policy 2002 • Automatic approval for foreign equity investment up to 100 per cent; no minimum investment criteria • Encourage R&D by offering rebates on R&D expenditure Automotive Mission Plan (AMP) 2006–16 • AMP’s vision is to make India a preferred destination for designing and manufacturing of automobiles and achieve a market size of USD154 billion by 2016 • Setting up of a technology modernisation fund focussed on SMEs • Establishment of automotive training institutes, auto design centres and special auto parks NATRiPs • Set up at a total cost of USD388.5 million to enable the industry to be on par with global standards • Nine R&D centres of excellence with focus on low-cost manufacturing and product development solutions Dept. of Heavy Industries & Public Enterprises • Worked towards reduction of excise duty on small cars and increase budgetary allocation for R&D • Weighted increase in R&D expenditure to 200 per cent from 150 per cent (in-house) and 175 per cent from 125 per cent (outsourced) Note: SME – Small and Medium Enterprises, R&D - Research and Development, NATRiP – National Automotive Testing and R&D Infrastructure Project, AMP - Automotive Mission, JNNURM - Jawaharlal Nehru National Urban Renewal Mission Union Budget FY14 • Proposal to allocate USD2.7 billion for JNNURM to bolster sales volumes of Medium and Heavy Commercial Vehicles (MHCV)
  23. 23. • Business Description Vehicles Research & Development Establishment (VRDE), Ahmednagar • Research, design, development and testing of vehicles • Centre of excellence for photometry, electromagnetic compatibility (EMC) and test tracks Indore — National Automotive Test Tracks (NATRAX) • Complete testing facilities for all vehicle categories • Centre of excellence for vehicle dynamics and tyre development Automotive Research Association of India (ARAI), Pune • Services for all vehicle categories • Centre of excellence for power-train development and material Chennai Centre, Tamil Nadu • Complete homologation services for all vehicle categories • Centre of excellence for infotronics, EMC and passive safety Rae Bareilly Centre • Services to agri-tractors, off-road vehicles and a driver training centre • Centre of excellence for accident data analysis International Centre for Automotive Technology (iCAT), Manesar • Services to all vehicle categories • Centre of excellence for component development, noise vibration and harshness (NVH) testing Silchar Centre, Assam • Research, design, development and testing of vehicles • Centre of excellence for photometry, EMC and test tracks
  24. 24. Source: ACMA, Aranca Research Delhi–Gurgaon– Faridabad Kolkata– Jamshedpur Chennai– Bengaluru– Hosur Mumbai–Pune– Nashik– Aurangabad List of companies North West East South • Ashok Leyland • Force Motors • Piaggio • Swaraj Mazda • Amtek Auto • Eicher • Honda SIEL • Maruti Suzuki • Tata Motors • Bajaj Auto • Hero Group • Ashok Leyland • Bajaj Auto • FIAT • GM • M&M • Eicher • Skoda • Bharat Forge • Tata Motors • Volkswag en • Renault- Nissan • M&M • Tata Motors • Hindustan Motors • Simpson & Co • Internatio nal Auto Forgings • JMT • Exide • Ashok Leyland • Ford • M&M • Toyota Kirloskar • Volvo • Sundaram Fasteners • Enfield • Hyundai • BMW • Bosch • TVS Motor Company • Renault- Nissan
  25. 25. Source: Aranca Research Note: All figures as of 2011-12 WEST: Maharashtra, and Gujarat are hubs for heavy and light vehicle manufacturing EAST: Jamshedpur is the site for Tata’s heavy vehicle manufacturing NORTH: Delhi is a hub for light vehicle manufacturing, whereas Haryana and Uttarakhand are hubs for heavy vehicle manufacturing SOUTH: Chennai hosts manufacturing plants for heavy and light vehicles NORTH WEST: Rajasthan is a major hub for light vehicle manufacturing Heavy Vehicle Manufacturing Plant Light Vehicle Manufacturing Plant
  26. 26. Revenue trends over the past few years (USD million) Source: Department of Industrial Policy & Promotion (India), Aranca Research FDI inflows in the automotives sector aggregated USD8.1 billion (4.2 per cent of the total FDI) over April 2000 – February 2013 1.2 1.2 1.3 0.9 1.5 FY09 FY10 FY11 FY12 FY13 FDI in automobile industry (USD billion) Delhi–Gurgaon– Faridabad Kolkata– Jamshedpur Chennai– Bengaluru– Hosur Mumbai–Pune– Nashik– Aurangabad Ahmedabad
  27. 27. Source: Respective Company Websites, News Articles, Aranca Research Global car majors have been ramping up investments in India to cater to the growing domestic demand. Also, these manufacturers plan to leverage India’s competitive advantage to set up export-oriented production hubs • Chennai plant nearly doubled production to 250,000 cars • Completed 80 per cent investment at Oragadam, a car plant near Chennai • Launched an automatic transmission variant for its petrol model of the sedan, Fiesta • Laid the foundation for an USD1-billion plant at Sanand in March 2012 • Increased annual output at the Chennai plant to 11,000 units in Jun 2011 from 10,000 units earlier • Plans to raise the number of car offerings in the sub USD46,729 category • Plans to launch up to eight models over the next 5–6 years • Aims to invest USD167 million at the fourth unit in Karnataka in 2012 • Plans to set up a greenfield diesel engine factory at its second industrial location in Rajasthan • Expects to invest another USD163 million at Bidadi plant near Bengaluru • Plans to increase capacity to 310,000 units by 2013 with an investment of USD187 million • Aims to invest USD89.6 million for a diesel engine plant in India which would be operational from 2013 • Plans to invest USD71 million at the Pune plant to launch five compact cars
  28. 28. Source: Company Website, Aranca Research 1983 1994 1997 2001 2004 2006 2007 2008 2009 2010 2011 2012 Roll-out of people’s car (Maruti 800) Capacity expansion Enhanced R&D capability Increased productivity Product portfolio expansion Continuing market leadership Product portfolio comprising 16 passenger vehicle models Accounted for 45 per cent share in the Indian car market Plans to produce 1.7 million cars by 2013 2011 Roll-out of 10 millionth car 1994 Production of 1 millionth car In the process of establishing Suzuki’s largest R&D facility outside Japan 2012 Total sales crossed 1million units in FY12
  29. 29. Source: Company Website, Aranca Research 1945 1954 1961 1977 1982 1986 1991 1998 2005 2008 2010 2012 Joint ventures Acquisitions Enhancing R&D capability Product portfolio expansion Market expansion Disruptive innovation JV with Daimler AG Production of first indigenously designed LCV Acquisition of Jaguar and Landrover Acquired stake in Hipo Carrocera SA Launched Indica, India's first fully indigenous passenger car Establishment of Tata Engineering & Locomotives Launch of the first indigenous CV Introduction of Megapixel, an electric vehicle Launched Tata Nano
  30. 30. Tata Nano sales FY 2010-13 (units) Source: Company Website, Aranca Research Note: YOY – Year on Year Tata Nano ranked among the top 10 best-selling cars of 2012. It was recently declared the most trusted four-wheeler brand by ‘The Brand Trust Report, India Study 2013’ Nano was the only petrol car among the top-selling cars of 2012 to post a positive yoy growth. Tata adopted a different marketing pitch and launched the 2012 Tata Nano, which offered a lot of new features for no extra charge Sales of the Nano more than doubled to 73,848 units in FY13 from its launch in FY10 Currently, Tata exports Nano to Sri Lanka and Nepal and has plans to export the car to Bangladesh. The company is likely to add new export markets such as Africa, South America, and Southeast Asia Tata expects to launch two new variants of the Nano in 2013 to augment sales. A CNG variant would be launched in the first half of 2013, while a diesel version is likely to be launched in the latter half 30,763 70,432 74,527 73,848 FY10 FY11 FY12 FY13 Sales
  31. 31. M&M Auto sales – Domestic and export (‘000 units) Source: Company Website, Aranca Research M&M has been the market leader in utility vehicles in India for over 50 years since building the first Willys jeep in 1947 Manufactures passenger vehicles, utility vehicles, light commercial vehicles (including three-wheelers) Produces 15 passenger vehicle models and 8 commercial vehicle models, noteworthy among which are Scorpio, Thar, Xylo, XUV 500 Global player in exporting products to several countries in North America, Europe, Africa, South America, South Asia, and the Middle East; exported 32,457 units in FY13 Recorded segment revenue of USD3.6 billion in 9MFY13 Launched Verito Refresh, Quanto, and Rexton in FY2013 Launched the e20 electric car in March 2013 after acquiring carmaker Reva Technology In 2013, inked a partnership with online shopping portal to sell its two-wheelers 65 87 117 145 149 178 231 230 298 377 483 563 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Sales CAGR: 22%
  32. 32. Note: M&M – Mahindra & Mahindra • Strong support from the government; setting up of NATRiP centres • Private players, such as Hyundai, Suzuki, GM, keen to set up R&D base in India • Strong education base, large skilled English-speaking manpower • Comparative advantage in terms of cost • The world’s cheapest car (Tata Nano) has directed focus on the low-income market • Bajaj Auto, Hero Honda and M&M plan to jointly develop a technology for two-wheelers to run on natural gas • Electric cars likely to be a sizeable market segment in the coming decade • Tata Motors to launch MiniCAT, a car running on compressed air, thereby stepping into the next era where cars would not require any fossil fuel and emissions would be almost nil • General Motors, Nissan and Toyota announced plans to make India their global hub for small cars • Light vehicle sales estimated to cross 3 million by the end of 2012 • Strong export potential in ultra low-cost cars segment (to developing and emerging markets) India is fast emerging as a global R&D hub Opportunities for creating sizeable market segments through innovations Small-car manufacturing hub
  33. 33. Society of Indian Automobile Manufacturers (SIAM) Core 4-B, 5th Floor, India Habitat Centre Lodhi Road, New Delhi – 110 003 India Phone: 91 11 24647810–2 Fax: 91 11 24648222 E-mail:
  34. 34. CAGR: Compound Annual Growth Rate CV: Commercial Vehicle FDI: Foreign Direct Investment FY: Indian financial year (April to March) So FY10 implies April 2009 to March 2010 GOI: Government of India HCV: Heavy Commercial Vehicle INR: Indian Rupee LCV: Light Commercial Vehicle OEM: Original Equipment Manufacturers PV: Passenger Vehicle SIAM: Society of Indian Automobile Manufacturers
  35. 35. ULCC: Ultra Low Cost Car USD: US Dollar Wherever applicable, numbers have been rounded off to the nearest whole number
  36. 36. Year INR equivalent of one USD 2004-05 44.95 2005-06 44.28 2006-07 45.28 2007-08 40.24 2008-09 45.91 2009-10 47.41 2010-11 45.57 2011-12 47.94 2012-13 54.31 Exchange Rates (Fiscal Year) Year INR equivalent of one USD 2005 45.55 2006 44.34 2007 39.45 2008 49.21 2009 46.76 2010 45.32 2011 45.64 2012 54.69 2013 54.45 Exchange Rates (Calendar Year) Average for the year
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