InAlliance Consulting : Indian Automotive Sector snapshot

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India's automotive sector is booming and represents serious growth potential for Western Tier 1 and Tier 2 suppliers. Several decisions face such new entrants however, including whether to sell directly or assemble / manufacture locally, and whether to do this alone or with a local partner.

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InAlliance Consulting : Indian Automotive Sector snapshot

  1. 1. InAlliance Consulting | www.inalliance.eu Indian automotive sector snapshot 18th November 2010 | Version : IA_auto_sector_V3.3 | Click here for latest updates
  2. 2. India's Automotive sector snapshot | Nov. 2010 | 2InAlliance Consulting | www.inalliance.eu Private vehicles market potential No vehicle Car Motorbike Bicycle Vehicle ownership in India, 2010 Compiled from various sources Only 1 % of Indian households own a private car, 10 % a motorbike Very low saturation, coupled with high disposable income growth and distribution, point to a large potential for private vehicles. 200820072006200520042003200220012000 400 600 800 1000 1200 GDP (US$), India, 1990-2008 Source : United Nations • 83000 millionaires (in USD) in India in 2009, up 20% from 2008 • India's growth expected to overtake China's before 2015 • Per capita income expected to overtake UK, US, by 2040 CAGR : 12.1 % 1985 1995 2005 2015 2025 « Globals » : > € 80k « Strivers » : € 40k - 80k « Seekers » : € 15k - 40k « Aspirers » : € 7k - 15k « Deprived » : < € 7k Household annual income, 2010, PPPPopulation in income bracket
  3. 3. India's Automotive sector snapshot | Nov. 2010 | 3InAlliance Consulting | www.inalliance.eu Trends, vehicle type distribution 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 0 2 000 000 4 000 000 6 000 000 8 000 000 10 000 000 12 000 000 14 000 000 Total vehicles sales - India Source : SIAM, November 2010 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 0 500 000 1 000 000 1 500 000 2 000 000 2 500 000 Passenger vehicles sales trends - India Source : SIAM, November 2010 Passenger Vehicles 1 949 776 Commercial Vehicles 531 195 Three Wheelers 440 368 Two Wheelers 9 371 231 Sales by vehicle type - India - FY 2009-2010 Source : SIAM, November 2010 CAGR : 13.7% CAGR : 10.3% The Indian automotive sector has witnessed healthy growth for the past 7 years, and the industry considers this to be sustainable for another 10 years at least. Car sales grow faster thant other categories, but motorcycles still accounts for 75% of the market today.
  4. 4. India's Automotive sector snapshot | Nov. 2010 | 4InAlliance Consulting | www.inalliance.eu Market shares distribution (cars only) The 4 largest players (Maruti, Hyundai, Tata, Mahindra) hold 83% of market shares. The next 4 (GM, Honda, Toyota, Ford) hold 12% 95% of the market is in the hands of 8 manufacturers (none of which are European...) Maruti Suzuki 45% Hyundai 16% Tata 14% Mahindra 8% GM 4% Honda 3% Toyota 3% Ford 2% Fiat 1% Skoda 1% Others 2% Market shares distribution Source : SIAM, 12/2009
  5. 5. India's Automotive sector snapshot | Nov. 2010 | 5InAlliance Consulting | www.inalliance.eu European cars : manufacturing and marketing set-up = European brands dealers = population density > 250 = European brands dealers = wealthiest areas 35 BMW 17 CKD / SKD (Chennai) 14 62 38 FIAT 110 Some European manufacturers set-up Dealerships Manufacturing Mercedes CKD / SKD (Pune) Audi CKD / SKD (Pune) Skoda CKD / SKD (Pune) Volkswagen CKD / SKD (Pune) CKD / SKD (Pune) Import duty on complete cars (« CBU ») = 100% Import duty on SKD and CKD parts = 10% Except for luxury vehicles (low volumes, less rivalry), the route to the Indian market for foreign manufacturers is either the KD model or complete localisation.
  6. 6. India's Automotive sector snapshot | Nov. 2010 | 6InAlliance Consulting | www.inalliance.eu Main automotive industry clusters Mumbai - Pune – Nasik – Aurangabad - Gujarat (non exhaustive) Chennai – Bangalore - Hyderabad (non exhaustive) NCR – Punjab – Rajasthan - Madhya Pradesh (non exhaustive)
  7. 7. India's Automotive sector snapshot | Nov. 2010 | 7InAlliance Consulting | www.inalliance.eu Some decisions facing foreign Tier 1 and 2 entrants Which location ? Northern cluster ? (Suzuki, Honda...) Western cluster ? (EU manufacturers) Southern cluster ? (Ford, Hyundai...) Alone ? With a local partner ?Local assembly ? Transaction = sale of components + + Direct export ? Transaction = sale of products + + Local manufacturing ? Transaction = Sale / licensing of know-how + + + - ● Could create a competitor ● Partner choice conditions success ● …. ● Faster ramp-up ● Lower investment ● Access to partner's network ● …. + - ● Slower ramp-up ● HR and finance hungry ● …. ● Total control ● No revenue sharing ● Gain precise market knowledge ● ….
  8. 8. India's Automotive sector snapshot | Nov. 2010 | 8InAlliance Consulting | www.inalliance.eu 33, avenue Philippe Auguste 75011 Paris France Tel : +33 1 44 64 10 35 Fax : +33 1 44 64 10 36 www.inalliance.eu info@inalliance.eu | Accueil | Notre mission | Notre approche | Pourquoi choisir InAlliance ? | Références | Autres panoramas sectoriels | | Home | Our mission | Our approach | Why choose InAlliance ? | References | Other sector snapshots | | Home | La nostra missione | Il nostro approcio | Perchè scegliere InAlliance ? | Referenze | Altri documenti utili | InAlliance Consulting, specialists of the Indian market Direct links to further information :
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