Indian Automobile Market


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  • The growth in domestic demand is driven by a number of factors including Overall economic growth Rising income levels Low cost of finance and easy availability of finance Auto sector is key to the Indian economy from the perspective of economic contribution and employment Auto sector contributes to around 5 % of GDP and employs 13 million people Auto sector contributes to around 17% of direct taxes kitty
  • About 400 organised sector players and 5000 unorganised sector players The Indian auto component industry is characterised by Strong backward and forward linkages Many technically capable companies Increasing success in tapping export markets
  • The 3 auto hubs - Chennai, Manesar and Pune account for around 90 % of the total industry Most of the major auto components manufacturers have multiple facilities ( spread across the country) to service the OEMs in the regions Other key auto production areas include Pithampur and Uttaranchal, where a number of auto companies are establishing bases taking advantage of the tax holiday for the region.
  • Total value of export was around USD 6 bn in 2005-06, of which vehicle exports contributed to around USD 4 bn Key export markets were SAARC countries, EU, North America and Middle East
  • Growth in income levels and availability of easy finance have increased consumer demand for auto products. Increased consumer awareness and closer linkages with the global auto trends have resulted in the companies introducing contemporary products in the Indian market. The stable government economic policies adopted by successive governments s have contributed to the overall economic growth including growth of the auto sector. In addition, the government has stake specific policy initiatives such as lower excise duties on smaller cars, etc to boost local demand India is targeting to emerge as the manufacturing hub for small cars. It has already been recognised as low cost source for components and vehicle and is expected to capitalise on the increase in outsourcing to low cost countries.
  • Two wheelers would lead the growth, with an estimated sales of 28 million units by 2016 The contribution of the automotive sector to the Indian GDP is expected to double from the present level of 5 - 6 % Total export in the auto sector would be around USD 30 – 35 bn, of which component exports would account for USD 20 - 25 bn and vehicle exports for the rest The total employment generated in the auto sector would d be around 25 million by 2016 ( including indirect employment)
  • The Government has identified the Auto sector as an important growth engine Measures such as reduction in duties on inputs for the auto sector have been taken in the past to make the industry globally competitive
  • India has joined WP 29 as an observer
  • The total investments in this project is around Rs.1,700 crore. The project is to be implemented in 2 phases - Phase 1 starting from 2008 and Phase II from 2010 - 11 In addition, 6 centres of excellence providing facilities for advanced developmental activities are being planned in Chennai, Manesar and Pune. This project is aimed to assist the Indian auto industry to develop product development capabilities and help them compete on a global basis.
  • Successive governments in India have continued the economic reforms process started in the early ‘90s. This has ensured stability in overall economic policies shaping the country. Recently, the government has declared that it would support the Indian auto industry in its efforts to emerge as the manufacturing hub for small cars The consumer demand coupled with the economic growth is expected to grow the Indian auto industry at over 10 % p.a in the future. In addition to low cost advantage, the Indian auto industry also offers a number of other advantages including technological capabilities and adherence to the highest quality standards.
  • The high domestic growth coupled with the advantage offered by India make India an attractive destination for investments in the auto sector. The large domestic market, coupled with export opportunities provide a number of opportunities to both Indian and global players
  • Indian Automobile Market

    1. 1.
    2. 2. Contents <ul><li>Market Overview </li></ul><ul><li>Government regulations & policy </li></ul><ul><li>India Advantage and business opportunities </li></ul>
    3. 3. Market Overview <ul><li>Market Overview </li></ul><ul><li>Government regulations & policy </li></ul><ul><li>India Advantage and business opportunities </li></ul>
    4. 4. Profile: Indian Automotive Industry <ul><li>The industry has grown at a CAGR of 14% p.a over the last 5 years , with sales of 9 million vehicles in 2005-06 </li></ul><ul><li>With the potential to emerge as one of the largest in the world. Presently, India is </li></ul><ul><ul><li>2 nd largest two wheeler market in the world </li></ul></ul><ul><ul><li>4 th largest commercial vehicle market in the world </li></ul></ul><ul><ul><li>11 th largest passenger car in the world and is expected to be the 7 th largest market by 2016 </li></ul></ul><ul><li>The industry has emerged as a key contributor to the Indian economy </li></ul>Source : SIAM Market Overview Size of around US$ 34 billion in 2006
    5. 5. Auto components industry has also grown at a rapid pace ... <ul><li>The Indian auto components industry has grown at 17% CAGR over the last few years to reach a size of around US$ 10 billion in 2005-06 </li></ul><ul><li>Market breakup: OEM demand ~ 54%, replacement market ~30%, exports ~16% </li></ul>Source : ACMA FY refers to Financial Year – April to March Market Overview 17%
    6. 6. Players: Indian auto industry Global OEM Indian OEM Indian Suppliers Global Suppliers Engineering & Development Companies Indian Auto Industry <ul><li>GM </li></ul><ul><li>Toyota </li></ul><ul><li>Ford </li></ul><ul><li>Hyundai </li></ul><ul><li>Maruti Suzuki </li></ul><ul><li>Honda </li></ul><ul><li>Skoda </li></ul><ul><li>Volvo </li></ul><ul><li>Mercedes </li></ul><ul><li>Tata Motors </li></ul><ul><li>Mahindra & Mahindra </li></ul><ul><li>Bajaj Auto </li></ul><ul><li>TVS Motors </li></ul><ul><li>Hero Honda </li></ul><ul><li>Bajaj Tempo </li></ul><ul><li>Ashok Leyland </li></ul><ul><li>Bharat Forge </li></ul><ul><li>Sundram Fasteners </li></ul><ul><li>Rane Group </li></ul><ul><li>Shriram Pistons </li></ul><ul><li>RICO Auto </li></ul><ul><li>Sono Koyo Steering </li></ul><ul><li>Delphi </li></ul><ul><li>Visteon </li></ul><ul><li>Bosch </li></ul><ul><li>Denso </li></ul><ul><li>Valeo </li></ul><ul><li>Thyssen Krupp </li></ul>The Indian auto industry is highly competitive with a number of global and Indian auto companies present Market Overview
    7. 7. Automotive clusters in India <ul><li>Ashok Leyland Enfield </li></ul><ul><li>Ford Greaves </li></ul><ul><li>Hindustan Motors Hyundai </li></ul><ul><li>Mahindra & Mahindra Tatra </li></ul><ul><li>Toyota Kirloskar TVS Motors </li></ul><ul><li>Volvo </li></ul>South Source: SIAM, IMaCS analysis Major automotive clusters - Mumbai-Pune-Nasik-Aurangabad (West), Chennai -Bangalore-Hosur (South) and Delhi-Gurgaon-Faridabad (North) Market Overview Delhi-Gurgaon-Noida- Ghaziabad Kolkata Mumbai-Pune-Nasik Aurangabad Jamshedpur Chennai Bangalore Hosur Rajkot-Halol Hyderabad Ludhiana Haridwar Pitampur Ashok Leyland Eicher Force Motors Hero Honda Hindustan Motors Honda Honda SIEL ICML Kinetic LML Majestic Maruti Suzuki Piaggio Yamaha Swaraj Mazda Tata Motors North / Central Ashok Leyland Atul Auto Bajaj Auto Daimler Chrysler FIAT Force Motors GM Greaves Kinetic M & M Premier Skoda Tata Motors West Hindustan Motors Tata Motors East
    8. 8. Exports are rising - India has the potential to become the global outsourcing hub <ul><li>Indian vehicle exports have grown at a scorching rate of over 40 % over the last few years , while component exports have grown at around 25 % per annum. Key exporters include: </li></ul><ul><ul><li>Maruti, Tata Motors, M & M and Hyundai for Passenger Cars and MUVs </li></ul></ul><ul><ul><li>Tata Motors and Ashok Leyland for LCV / M & HCVs </li></ul></ul><ul><ul><li>Bajaj, TVS Motors and Hero Honda for 2 wheelers </li></ul></ul>Market Overview 25%
    9. 9. Growth drivers for the Indian automotive industry Market Overview <ul><li>Contemporary products </li></ul><ul><li>Shorter life cycle </li></ul><ul><li>Growth in Income levels </li></ul><ul><li>Easier financing </li></ul>Government Policies New product launches Indian Automotive Industry Increasing consumer demand Cost Competitiveness <ul><li>Overall economic growth </li></ul><ul><li>Lower duties & taxes </li></ul><ul><li>Export Competitiveness </li></ul><ul><li>Reduced cost to consumer </li></ul><ul><li>India emerging as a manufacturing hub </li></ul>
    10. 10. Growth potential of the Indian automotive industry <ul><li>The size of the Indian automotive industry is expected to grow at 13% p.a over the next decade to reach around USD 120 - 159 bn by 2016. </li></ul><ul><li>The total investments required to support the growth is estimated at around USD 35 - 40 bn </li></ul><ul><li>The Indian auto component industry is well positioned to capitalise on the growth in outsourcing to low cost countries </li></ul><ul><li>Exports would lead the growth in the component industry, which is expected to be around USD 33- 40 bn by 2015 </li></ul>Projected size of Auto Components industry - 2015 Source: AMP Vision, ACMA Vision Market Overview USD 20 - 25 bn USD 13 - 15 bn
    11. 11. Government regulations and policy <ul><li>Market Overview </li></ul><ul><li>Government regulations & policy </li></ul><ul><li>India Advantage and business opportunities </li></ul>
    12. 12. Policies relating to the sector: Auto Policy <ul><li>In 2002, the Indian government formulated an auto policy that aimed at promoting integrated, phased, enduring and self-sustained growth of the Indian automotive industry </li></ul><ul><li>allows automatic approval for foreign equity investment upto 100% in the automotive sector and does not lay down any minimum investment criteria. </li></ul><ul><li>lays emphasis on R & D activities carried out by companies in India </li></ul><ul><li>Weighted tax deduction of upto 150% for in-house research and R & D activities </li></ul><ul><li>Formulation of an appropriate auto fuel policy to ensure availability of adequate amount of appropriate fuel to meet emission norms </li></ul><ul><li>confirms the government’s intention on harmonising the regulatory standards with the rest of the world </li></ul>Government regulations & policy
    13. 13. Automotive regulations in India Indian automotive regulations are closely aligned to the ECE regulations. The table below shows the level of alignment of the Indian regulations with the ECE regulations Source: IMaCS Analysis <ul><li>The key regulations that are likely to impact the auto industry in the future are: </li></ul><ul><ul><li>Crash Related Regulations </li></ul></ul><ul><ul><li>Introduction of Bharat Stage IV norms </li></ul></ul>Government regulations & policy
    14. 14. Trends in future regulations – Safety and Emission related <ul><li>Crash requirements aligned with EU </li></ul><ul><li>Mandatory Airbags </li></ul><ul><li>Bharat Stage IV in Metros and Bharat Stage III in rest of the country </li></ul><ul><li>India is expected to align its crash requirements and emission standards with European standards in the 2008 / 09 timeframe </li></ul><ul><ul><li>Presently Bharat Stage III ( Equivalent to Euro III) is mandated in Metros and other large cities and Bharat Stage II ( Equivalent to Euro II) for the rest of the country </li></ul></ul><ul><ul><li>Bharat Stage IV ( equivalent to Euro IV) is expected to be introduced in the large Indian metros around 2009 and Bharat Stage III in the rest of the country </li></ul></ul><ul><li>Approach </li></ul><ul><li>Harmonization with ECE standards </li></ul><ul><li>Homologation and Certification testing agencies and centres </li></ul><ul><li>Regulation Road Map Targets </li></ul><ul><li>Industry challenges to development </li></ul><ul><li>Better vehicles: safer and more environment friendly </li></ul>Government regulations & policy 2009 2008 2006 2004 200 7 2005 2010
    15. 15. State-of-the-art test facilities will support the growth of the auto industry <ul><li>The Government of India is promoting National Automotive Testing and R&D Infrastructure Project (NATRIP) to support the growth of the auto industry in India </li></ul><ul><li>NATRIP envisages setting up of five independent and up gradation of existing test centres </li></ul><ul><ul><li>Testing centres at Manesar (Haryana), Chennai (Tamil Nadu), Pune (Maharashtra) </li></ul></ul><ul><ul><li>Proving ground at Indore (MP) </li></ul></ul><ul><ul><li>Tractor testing facility at Rae Bareilly (UP) </li></ul></ul><ul><ul><li>Hill Driving Training Centre at Silchar (Assam) </li></ul></ul>New testing & homologation center at MANESAR Up-gradation of VRDE at AHMEDNAGAR Up-gradation of ARAI at PUNE New testing center for tractors & off-road vehicles, accident data analysis and specialised driving training at RAE BAREILLY New test & homologation center near CHENNAI New complete proving ground at INDORE Hill Area driving training center and Regional In-Use vehicle management center at SILCHAR Government regulations & policy
    16. 16. India Advantage and business opportunities <ul><li>Market Overview </li></ul><ul><li>Government regulations & policy </li></ul><ul><li>India Advantage and business opportunities </li></ul>
    17. 17. Attractiveness of the Indian automotive industry <ul><li>Large and growing domestic demand </li></ul><ul><li>Demand growth expected to be around 10 % CAGR making India one of the fastest growing markets </li></ul><ul><li>Proven product Development capabilities </li></ul><ul><li>Capabilities to develop complete vehicles and systems </li></ul><ul><li>More than 125 Fortune 500 (including large auto companies) have R&D centres in India </li></ul><ul><li>Companies can leverage India’s acknowledged leadership in the IT industry </li></ul><ul><li>Stable economic policies </li></ul><ul><li>Continuity in reforms and policies </li></ul><ul><li>India targets to emerge as the “manufacturing hub” for small cars </li></ul><ul><li>Competitive manufacturing cost </li></ul><ul><li>Implementation of VAT, has positioned India as one of the leading low cost manufacturing sources </li></ul><ul><li>High quality standards </li></ul><ul><li>12 Indian component manufacturers have won the Deming Prize for quality </li></ul><ul><li>Most leading component manufacturers are QS and ISO certified </li></ul><ul><li>Export Potential </li></ul><ul><li>Increased outsourcing has led to a large potential to export components and vehicles to other markets </li></ul>Indian Auto Industry India Advantage and business opportunities
    18. 18. Opportunities in the Indian automotive sector Global outsourcing Opportunities <ul><li>Potential investors can capitalise on opportunities both in the domestic </li></ul><ul><li>and export oriented segments </li></ul><ul><li>Investment potential of upto USD 35 - 40 bn in this sector over the next 10 years </li></ul><ul><li>Investments in the Indian automotive industry can be in various forms </li></ul><ul><ul><li>100 % subsidiary - 100 % FDI through automatic route allowed in this sector </li></ul></ul><ul><ul><li>JVs with local firms </li></ul></ul><ul><ul><li>Technology support or sharing agreements </li></ul></ul>India Advantage and business opportunities <ul><ul><li>Participate in domestic growth opportunities </li></ul></ul><ul><ul><li>Exports of vehicles </li></ul></ul><ul><ul><li>Exports of components </li></ul></ul><ul><ul><li>Engineering and Design Services </li></ul></ul>Indian Automotive Sector Domestic Opportunities
    19. 19. Key players in the Indian auto industry - Passenger Cars and CVs The largest player in the Indian industry. Plans to launch new and exciting products in the Indian markets, including the ‘100,000’ car Suzuki’s JV in India and the largest passenger car manufacturer in India The third largest passenger car manufacturer in India and one of the largest exporters of vehicles. Has established India as one of its manufacturing bases in the world. Is planning to invest heavily to boost exports from India Has vision of capturing 10 % share of the Indian passenger car market by 2010 One of the leading players in the Indian premium cars segment One of the leading players in the Indian premium cars segment India Advantage and business opportunities
    20. 20. Key players in the Indian auto industry - Passenger Cars and CVs One of the leading players in the Indian premium cars segment. Plans to enter the small car segment by re-launching the Matiz One of the largest players in the UV / MUV segment The 2nd largest CV manufacturer in India Other global players who are in India / have plans for India include - Volvo, Daimler Chrysler, BMW and Nissan Motors India Advantage and business opportunities
    21. 21. Key players in the Indian auto industry - Two wheelers The largest 2 wheeler manufacturer in the world The 2nd largest 2- wheeler manufacturer in India and the largest 3 wheeler manufacturer. Has plans for establishing a manufacturing facility in Indonesia The third largest 2 wheeler manufacturer in India. Has plans for establishing a manufacturing facility in Indonesia Has recently entered the Indian market through its direct subsidiary ( in addition to its JV – Hero Honda) Has recently entered the Indian market through its direct subsidiary India Advantage and business opportunities
    22. 22. The India Brand Equity Foundation is a public-private partnership between the Ministry of Commerce & Industry, Government of India and the Confederation of Indian Industry. The Foundation’s primary objective is to build positive economic perceptions of India globally India Brand Equity Foundation c/o Confederation of Indian Industry 249-F Sector 18, Udyog Vihar Phase IV Gurgaon 122015, Haryana, INDIA Tel +91 124 401 4087, 4060 - 67 Fax +91 124 401 3873 Email Web
    23. 23. Disclaimer This publication has been prepared by ICRA Management Consulting Services (IMaCS) for the India Brand Equity Foundation (“IBEF”). All rights reserved. All copyright in this publication and related works are jointly owned by IBEF and IMaCS. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication), modified or in any manner communicated to any third party except with the written approval of IBEF. This publication is for information purposes only. While due care has been taken during the compilation of this publication to ensure that the information is accurate to the best of knowledge and belief of IBEF and IMaCS, the content is not to be construed in any manner whatsoever as a substitute for professional advice. IBEF and IMaCS neither recommend nor endorse any specific products or services that may have been mentioned in this publication and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this publication. IBEF or IMaCS shall in no way, be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this publication. ICRA Management Consulting Services Limited