M&M 3-2-3 Strategy


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M&M War Room Strategy

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M&M 3-2-3 Strategy

  2. 2. BASE RESEARCH <ul><li>Automotive Industry Analysis </li></ul><ul><li>Global </li></ul><ul><li>India Specific </li></ul><ul><li>Steps towards “Design to Delivery” target </li></ul><ul><li>“ Business to be materialized” - VISION </li></ul><ul><li>Organic & Inorganic routes to growth </li></ul><ul><li>i. Cater to the needs of Truck market Industry </li></ul><ul><li>ii. Non ferrous alloys industry </li></ul><ul><li>iii. Integrating Aftermarket & Systech Integration </li></ul><ul><li>“ Challenges Ahead” </li></ul><ul><li>India Meet the “Just-In time” requirements of Global Automotive components </li></ul>MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM THREE WORDS FOR THE 3-2-3 TARGET “ FOUR STROKE” ©b rahm&company
  3. 3. AUTOMOTIVE INDUSTRY ANALYSIS MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM <ul><li>Stagnant sales except in Asia </li></ul><ul><li>Over capacity in most regions </li></ul><ul><li>Intense product & price competition </li></ul><ul><li>Industry margins under pressure </li></ul><ul><li>Most of the Industry EVA negative </li></ul><ul><li>Global focus on Asia </li></ul>*Precision Engineering Auto Components Industry growing at a faster pace PRODUCT RANGE IN AUTO COMPONENT INDUSTRY “ FOUR STROKE” ©b rahm&company
  4. 4. RANGE OF AUTOMOTIVE PRODUCTS POWERTRAIN MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “ FOUR STROKE” Engine Parts Chassis & body Parts Suspension & Braking Parts ©b rahm&company
  5. 5. AUTO COMPONENTS PRODUCTION STATUS IN INDIA MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM <ul><li>Indian auto component industry growing in all sectors </li></ul><ul><li>Consistent CAGR of 17% observed YOY as projected by McKinsey </li></ul><ul><li>Exports of finished automobiles & auto-components increasing at the CAGR of 25+% </li></ul><ul><li>Automobile & automotive component industry provides an increased output of 15 to 17% to the total Industrial Output. </li></ul><ul><li>**Half a million Indian Commercial Vehicles is 5 th largest in the world </li></ul><ul><li>*** INFRASTRUCTURAL DEVELOPMENT PLANNED </li></ul><ul><li>46000km of road development – US $27bn project in progress – to be completed by Dec-2012 </li></ul><ul><li>Port Infrastructure Up gradation Projects – US $16 Bn. In progress </li></ul>*2008 estimate as in ACMA ** Source: CRIS INFAC ***NHAI / CRIS / EIA / Department of Shipping “ FOUR STROKE” ©b rahm&company
  6. 6. AUTOMOTIVE COMPONENTS INDUSTRY ANALYSIS MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM <ul><li>KEY MARKET DRIVERS </li></ul><ul><li>Linked to the growth of OEM industry </li></ul><ul><li>Highly sensitive to input cost escalation </li></ul><ul><li>Competitiveness driven by </li></ul><ul><ul><li>Manpower – Large pool of qualified engineers & skilled technicians at lower cost </li></ul></ul><ul><ul><li>Lower investment cost – Through appropriate, low cost automation </li></ul></ul><ul><li>KEY TRENDS </li></ul><ul><li>- India’s emergence as low cost global sourcing destination. </li></ul><ul><li>- Indian ancillary manufacturers are shifting focus from global after-market to global OEM supplies. </li></ul><ul><li>- Firms focus on operational excellence to improve quality & reliability of products.(8 Deming Award winners) </li></ul><ul><li>- Increasing relevance of Global Tier 1 suppliers (Bosch, Denso, Visteon, Delphi) </li></ul>“ FOUR STROKE” KEY MARKET ANALYSIS ©b rahm&company
  7. 7. AFTER MARKET TO TIER – I STATUS – COMPLEXITY MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM Aftermarket Tier 2-n supplier Tier 1 supplier Low Medium High Transition Path Customer Complexity “ FOUR STROKE” OPPORTUNITES WIDEOPEN ©b rahm&company Rotating Auto Electricals Tyres & Tubes Heavy Forgings Wheel Rims Small Castings & Forgings Plastic Components Hand Tools Metal bonded & Molded Rubber Parts
  8. 8. APPROACHES – “DESIGN TO DELIVERY” MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM <ul><li>Exports from India </li></ul><ul><li>Castings </li></ul><ul><li>Forgings </li></ul><ul><li>Machined Items </li></ul><ul><li>Rubber Items </li></ul><ul><li>Wheel Rims </li></ul>- Greenfield Overseas Location - Overseas Acquisition ORGANIC GROWTH STRATEGY INORGANIC GROWTH STRATEGIES “ FOUR STROKE” Major Segments to concentrate for supplies to Trucks& Buses worldwide ©b rahm&company
  9. 9. COMMERCIAL VEHICLE BUSINESS APPOACH MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM Indian Commercial Vehicle Industry – Broad Scope - Half million Indian CV market is the fifth largest in the world “ FOUR STROKE” CATER TO THE GROWING DEMAND OF TRUCKS ©b rahm&company Long Distance Haulage >500kms Special Purpose 33000lbs 10 to 250km Application 19501 to 33000lbs 101 to 500km Short Distance Haulage 16001 to 19500 lbs 51 to 500kms Intercity Public Transport 14001 to 16000 <50km Distribution Network 6001 to 14000lbs 51 to 100km Last Mile Haulage 0 to 6000lbs <50kms
  10. 10. EVOLUTION OF TRUCKS & BUS MARKET WITH CHANGING ECONOMIES MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM Indian Bus market shows a high growth rate in the early phases of development driven by Intercity Passenger Market *AT Kearney Database “ FOUR STROKE” Growth in the GDP would fuel the demand for Trucks in India & Asian Countries Growth in GDP would fuel the demand for Trucks ©b rahm&company
  11. 11. BUSINESS TO MATERIALISE MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “ FOUR STROKE” <ul><li>Need for quality products with advanced features is the need of the hour </li></ul><ul><li>Ability to deliver such products of world class should be encouraged. </li></ul><ul><li>Any business started would need to be materialized justifying the investment made on its infrastructural developments. </li></ul><ul><li>Would lead to quicker ROI on the CAPEX(Capital Expenditure) made. </li></ul>BUILDING THE EXPERTISE TO MEET GLOBAL DEMAND ©b rahm&company
  12. 12. VOLUME CONSTRAINTS – IN TRUCKS & BUSES MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM <ul><li>EXPORTS </li></ul><ul><li>It is a wiser option to choose truck market in exports over car segment due to the following reasons, </li></ul><ul><li>i. Abrupt fluctuations in the volumes can be logistically met. </li></ul><ul><li>ii. More profit over the components supplied to car as they are heavy duty components </li></ul><ul><li>iii. Doesn’t undergo frequent design changes. Changes in Truck market can be accommodated easily rather than car market. </li></ul><ul><li>iv. It is always worthy to manufacture cars in the place where it is sold </li></ul><ul><li>v. Varied range of automotive components supplied to trucks. Optimal usage of resources. Varied range of products can be supplied ( which includes Ferrous & Non-Ferrous , Composites, Plastics etc.) </li></ul><ul><li>vi. Installing organically / acquiring inorganically, a Non-ferrous manufacturing base would add value t o its acquisition as non-ferrous alloys replaces the usage of ferrous materials (STRENGTH TO WEIGHT RATIO) </li></ul><ul><li>vii. Wider Global penetration possible as the scope can be extended to Aerospace Industry too with the usage of Magnesium Alloys. </li></ul><ul><li>vii. These advantages would provide a competitive advantage over the existing businesses by “Materialising “ them within a short period. </li></ul>“ FOUR STROKE” “ Business to Materialize” – Steps towards Design to Delivery ©b rahm&company
  13. 13. MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “ FOUR STROKE” - Recycling of dismantled spare parts – cost reduction - Tap the opportunities in the vehicle dismantling industry - Dismantling of spare parts INTEGRATION OF AFTERMARKET - SYSTECH Note : Proposed to start a new unit “MAHINDRA RE-ENGINEERING” needs to be set up ©b rahm&company
  14. 14. MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM <ul><li>CHALLENGES </li></ul><ul><li>Widely Unorganised </li></ul><ul><li>Other big players can enter into this market </li></ul><ul><li>OPPORTUNITIES </li></ul><ul><li>Large scale operation in a vehicle dismantling /reengineering industry </li></ul><ul><li>THE MOVE </li></ul><ul><li>Alternate and cheap source of raw materials </li></ul><ul><li>Greater access to raw materials </li></ul><ul><li>Absence of organised player in vehicle dismantling industry which can bring in positive implications to the society </li></ul><ul><li>Sales potential </li></ul><ul><li>eg. Aluminium components in a vehicle </li></ul><ul><li>Industry Worth ~ US $ 3million p.a </li></ul>“ FOUR STROKE” MARKET ANALYSIS - REENGINEERING ©b rahm&company
  15. 15. MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “ FOUR STROKE” MARKET POTENTIAL – ALUMINIUM SCRAP ©b rahm&company Facts and Efficiency Average weight of aluminium per car 132 Average cost of aluminium 114 Average losses in melting 7% Expected loss in the form of depreciation of aluminium in vehicles over the years 15% Accounting to other expenses 7% Overall expected efficiency 70% Market potential Cost of aluminium per car Cost of product * Average weight * Overall efficiency Rs.10,500 approx Price that customer can realise for aluminium alone in his vehicle Expecting 20% return as profit and 25% as operational expenses and wastage Rs. 6,300 Profit for company 0.2*10,500 Rs. 2,100 Disposable vehicles in market All vehicles produced before Average life expectation - 12 years + 10% produced thereafter 11600 Market potential 10500*11600 121 million INR
  16. 16. MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “ FOUR STROKE” STRATEGIC IMPLEMENTATION PROCESS <ul><li>- Evaluate of the vehicle condition by First Choice </li></ul><ul><li>- Vehicles in disposal stage will be handed over to the dismantling industry (Mahindra Dismantlers) </li></ul><ul><li>- Spare parts of the vehicles will be examined will be categorised in the following ways: </li></ul><ul><li>- Undamaged and re usable spares </li></ul><ul><ul><li>Produced by Mahindra </li></ul></ul><ul><ul><li>Not produced by Mahindra </li></ul></ul><ul><li>- Highly damaged and cannot be re used spares </li></ul><ul><li>- Spares unavailable in the market </li></ul><ul><li>- Spares that cannot be used for Systech </li></ul><ul><li>- Undamaged spares and spares that are of variable degree of quality </li></ul> ©b rahm&company
  18. 18. MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM “ FOUR STROKE” CHALLENGES AHEAD <ul><li>- Indian Auto Industry likely to retain Low cost advantage for a sizeable </li></ul><ul><li>Period. </li></ul><ul><li>- Attractive collaboration opportunities between Indian CV industry / Auto </li></ul><ul><li>component manufacturing with global OEMs and the Supply Chain majors </li></ul><ul><li>- Great opportunity to partner & use India’s competitive advantages for </li></ul><ul><li>sourcing and setting up collaborative operations. </li></ul><ul><li>Meet the JIT requirements of global automakers – possible by efficient logistics setup. </li></ul> ©b rahm&company
  19. 19. MOVING UP THE VALUE CHAIN - SYSTECH WAR ROOM THANK YOU “ FOUR STROKE” ©b rahm&company b rahm&company Originality! The mark of Genius Copyright @2010 b rahm&company. All rights reserved. Dilip Krishnan Founder & CEO