www.TheEquicom.com +919200009266 Page 2About TheEquicomTHEEQUICOM is Indias leading Research Tips Providing Company. THEEQUICOM offers all over India’scustomers a unique combination of local insights and global perspectives, delivering independentinformation, opinions and solutions that help them make better informed business and investmentdecisions, improve the efficiency of markets and market participants, and help shape infrastructurepolicy and projects. Its integrated range of capabilities includes research and portfolio management;research on Indias Equity & Commodity market; equity & commodity research; fund services & riskmanagement advisory services.About TheEquicom ResearchTHEEQUICOM Research is Indias largest independent, integrated research house. We leverage ourunique, integrated research platform and capabilities spanning the entire economy-industry-companyspectrum to deliver superior perspectives and insights to over 350 domestic clients, through a range ofsubscription products and customized solutions.DisclaimerTHEEQUICOM Research, a Division of THEEQUICOM Pvt Limited has taken due care and caution inpreparing this Report. Information has been obtained by THEEQUICOM from sources which itconsiders reliable. However, THEEQUICOM does not guarantee the accuracy, adequacy orcompleteness of any information and is not responsible for any errors or omissions or for the resultsobtained from the use of such information. THEEQUICOM is not liable for investment decisions whichmay be based on the views expressed in this Report. THEEQUICOM especially states that it has nofinancial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Report.THEEQUICOM Research operates independently of, and does not have access to information obtainedby THEEQUICOM Research Division, which may, in its regular operations, obtain information of aconfidential nature which is not available to THEEQUICOM Research. No part of this Report may bepublished/reproduced in any form without THEEQUICOM prior written approval.
www.TheEquicom.com +919200009266 Page 3PREFACE:The study represents the figures of Indian Automobile Industry during the period 2005to2013. The study has been conducted considering the segments such as passenger vehicle,commercial vehicle, utility vehicles, multi-purpose, two wheelers and three wheelers. Eachsection concisely explains the current and future market trends, and developments in theIndian automobile market.The methodology used to find the trends and the market share of the Indianautomobile industry. The research takes into account the past and current trends in aneconomy, and more specifically in an industry, to bring out an objective market analysis.Despite economic slowdown, the Indian automobile sector has shown high growth. Theeconomic sustainability and increasing living standards and purchasing powers of the Indiancustomer’s automobile sector has a bright coming future.The Automotive Mission Plan 2006-2016, a ten year plan of action was conceived outof a felt need for a roadmap to steer, coordinate and synergies the efforts of all stakeholdersin order to accelerate and sustain the growth in the automotive sector, by inter alia,removing the impediments coming in the way of its growth.The National Automotive Testing, Research & Development Infrastructure Project (NAT Rip)was approved by the GOI for setting up state of the art automotive testing and R&Dinfrastructure in the country in order to usher in new automotive regulations and for bridgingthe vital automotive testing infrastructure gap necessary for spurring the growth ofautomotive industry in India. The project envisages up-gradation of three existing centers andsetting up four new centers at a total cost of 2288 cr. by July, 2013. The project is in advancestages of completion and certain facilities have been finished and commissioned also.
www.TheEquicom.com +919200009266 Page 4TABLE OF CONTENTS:Introduction. 4Expert Review. 5Indian Automotive Industry - An overview. 6Market Share of Automobile Industries. 7 - 8Key Players in Automobile Industry. 9The Automotive Aftermarket Business in India. 10Q2FY2013 Auto earnings review. 11 - 12Valuation. 13Technical views on Stocks. 14 - 15Conclusion. 16INDEX PAGES
www.TheEquicom.com +919200009266 Page 5INTRODUCTION:Automobile industry in India is an emerging sector and has a potential to improve it. The keyplayers have framed the strategies to tap the sector as per their features of the automotives.The increasing GDP and economical resources have boost up during the last decade which hasincreased purchasing power of the Indian peoples. The car segment in India has emerged asone of the promising sector and has shown growth trends in tremendous sales. Tata Motorshas emerged as key player in Indian automobile industry and its share in Commercial Vehicleshas 63.94%, Passenger Vehicles 16.45%. Tata Motors Limited is India’s largest automobilecompany, with consolidated revenues of USD 14 billion in 2008-09. It is the leader incommercial vehicles and among the top three in passenger vehicles. Maruti Suzuki IndiaLimited, a subsidiary of Suzuki Motor Corporation of Japan, one of the Indias largestpassenger car companies has grabbed a share for over 45% of the domestic car market. Otherkey players in automobile segment of India have contributed significantly and their existencein market has made others players to act actively in India. Despite economic slowdown, theIndian automobile sector has shown high growth. The passenger vehicle market, whichconstitutes around 80% of automobile sales, has immense growth potential as passenger carstock stood at around 18 per 1,000 people in 2012. Anticipating the future market potential,the production of passenger vehicle is forecasted to grow at a CAGR of around 10% from2009-10 to 2012-13.This took the Indian automobile production from 2001-02 to 10.8 Million Units in 2007-08 to 14.6 Million Units 2011-12. The other reasons attracting global auto manufacturers toIndia are the country’s large middle class population, growing earning power, strongtechnological capability and availability of trained manpower at competitive prices. These arethe major findings of our new report, Indian Automobile Sector - A Booming Market” In 2006-07, the Indian automotive industry provided direct employment to more than 300,000 people,exported auto component worth around US$ 2.87 Billion, and contributed 5% to the GDP. Dueto this large contribution of the industry in the national economy.
www.TheEquicom.com +919200009266 Page 6EXPERT REVIEW:Every major shift in policies made by the Indian government, the automotive industry hascome out stronger and better. While the shift in policies seems to have mostly been broughtby chance Events, the Indian government has at least to be credited for making the rightdecisions and implementing them correctly. It is paradoxical that the Indian middle class, themost attractive feature for foreign investment in the liberalization phase, was an outcome ofthe statist ideologies in the regulatory phase. The product innovations of domestic firms likeTata Motors and Bajaj Auto today are the fruits of indigenization and protection policies ofthe regulatory phases.Buyer decision processes are the decision making processes undertaken by consumersin regard to a potential market transaction before, during, and after the purchase of aproduct or service. Consumers have to make different kinds of decisions everyday accordingto their different needs. Some of the decisions are playing critical roles in consumers’ dailylife, for example, purchasing a new home or purchasing a car, whereas sometimes thedecisions are made on a virtually automatic basis. There are not a lot published researcharticles available on the decision-framing process. C. proposed a conceptual model of thebuying decision framing process sees Figure below. This model focuses on the informationsearch phase which includes two reference points: an initial which is internal to the company-expectations and buying objectives, and a final one that takes into account the sales messageand justification/reward of the offer. These two stages lead to the final choice.
www.TheEquicom.com +919200009266 Page 7INDIAN AUTOMOTIVE INDUSTRY- AN OVERVIEW:The Automotive Industry is globally one of the largest industries and a key sector of theeconomy. Owing to its deep forward and backward linkages, it has a strong multiplier effectand acts as one of the important drivers of economic growth 1.2, with the gradualliberalization of the automotive sector in India since 1991, the number of manufacturingfacilities has grown progressively. It produces a wide variety of vehicles: passenger cars, light,medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, two wheelerssuch as scooters, motor-cycles and mopeds, three wheelers, tractors and other agriculturalequipments etc. With a CAGR of over 15% during the last 5-7 years, it is aptly described as thenext sun rise sector of the Indian economy. In fact, in the last ten years, the volumes, exportsand turnover have increased by 3.8, 19.6 and 6 times respectively. The contribution of thissector to the National GDP has risen from 2.77% in 1992-93 to close to 6% now. At present,there are 19 manufacturers of passenger cars & multi utility vehicles, 14 manufacturers ofcommercial vehicles, 16 of 2/3 wheelers and 12 of tractors besides 5 manufacturers of enginesin India. This includes virtually all the major global Original Equipment Manufacturers (OEMs)and also home grown companies. In 2011-12, India surpassed France, UK and Italy to becomethe 6th largest vehicle manufacturer globally. Today, it is the largest manufacturer oftractors, second largest manufacturer of two wheelers, 5th largest manufacturer ofcommercial vehicles and the 4th largest passenger car market in Asia. During 2000-11, Indiaexported 2.35 million vehicles to more than 40 countries which included 0.45 millionpassenger cars and 1.54 million two wheelers. Today, the automobile industry provides directand indirect employment to 13.1 million people. The majority of the population of the countryis young with high aspirations and with rising income levels due to economic growth andready availability of finance, the demand for automobiles in the foreseeable future isexpected to remain buoyant. The Indian automobile industry is dominated by two wheelerswhich account for 75% of the total vehicles sold in the country.
www.TheEquicom.com +919200009266 Page 8MARKET SHARE OF AUTOMOBILE INDUSTRIES:Market Share of Passenger Vehicles Industry:The increasing scenario of passenger car segment has shown positive effect on the sales ofthe segment because of the tourist industry growth. Passenger car production in India isprojected to cross three million units in 2014-15. Sales of passenger cars during the period2015-16 are expected to grow around 10%.Market Share of Commercial Vehicles Industry:Commercial vehicle segment has dominated by the Tata group of motors in India and stoodfirst in automobile industry. It has a share or 63.94 percent.
www.TheEquicom.com +919200009266 Page 9Market Share of Two Wheeler Industry:Hero Honda has a remarkable share in the market of the two wheeler industry of India. Ithas recorded more than 41 percent share in the segment during the period. As per the surveyof the industry, Motorcycle sales will perform positively in future, which will exceed 10 Millionunits by 2012-13.Market Share of Three Wheeler Industry:This research analyzes the Indian market for Motorcycles, Scooters & Mopeds in ThousandUnits by the following product segments: The research analysis shows that Bajaj autodominates the three wheelers market share (58.6%) followed by the Piaggio Vehicle.
www.TheEquicom.com +919200009266 Page 10KEY PLAYERS IN AUTOMOBILE INDUSTRY:Tata Motors-Sales across various sector has been up compared to August last year,exceptions are the medium and heavy vehicles section and thenumbers for Indigo have been down. The frontrunner for Tata hasbeen Nano with record sales of 6,500 in this month alone. Comparedto August 2011 when it was 1,202.Mahindra & Mahindra-XUV 500 has propelled M&M to heights that Tata was initially eyeingwith Sumo and its variants. Passenger vehicles (Verito and UVs) haveregistered a growth of 39.37% and exports are up by 56.12%(compared to August 2011). The surprise has been the facelift versionof Verito which sold 2000+ units.Maruti Suzuki-The month long lockdown at its Manesar plant took its toll. Thevictims have been cars across the spectrum with small car segmentdown by 41.2% and Dzire down by 60.7%. Even exports fell by 72%.Hopefully Maruti gets its HR and the plant in place soon and back onthe track.Bajaj Auto-The industry looks flat because stocks have been put into dealerships-according to our estimates; motorcycle-makers have added about400,000 vehicles into dealership stock. By the end of the year, thegrowth rate of the scooter industry could also fall by 3 percent on ayear-to-year basis.
www.TheEquicom.com +919200009266 Page 11THE AUTOMOTIVE AFTERMARKET BUSINESS ININDIA:The Indian automotive aftermarket is currently estimated at Rs 33,000 Crores, where theglobal market is at Rs 2,70,000 Crores. India has been one of the few markets globally to buckthe recessionary trend and recorded a strong 28.6% volume growth in FY 2011. The growthmomentum continues to be non track with first 11 months of FY 2012, registering a growth of32.8% over the corresponding period in the previous year.The automotive aftermarket for parts in India is a large and growing market thatspans manufacturers, distributors, retailers, service providers and garages. Currently worthINR 19,000 crore to INK 24,000 crore, the market has been growing at 11 per cent, and isestimated to reach INR 39,000 crore to INR 44,000 crore by 2015. The Indian market is valuedat INR 19,000 crore to INR 24,000 crore, of which roughly 30 per cent comprises spuriousparts. The two - wheeler market is the largest at INR 10,000 crore to INR 11,000 crore, or 44percent of the market, and Tamil Nadu, Maharashtra, Gujarat and Uttar Pradesh constituteclose to 45 per cent of the market.
www.TheEquicom.com +919200009266 Page 12Q1FY2013 AUTO EARNINGS REVIEW:Earnings boosted by M&M and Apollo Tyres in Q1FY2013:The aggregate revenues of the automobile (auto) companies under our active coveragereported a revenue growth of 12.7% and a net profit growth of 6.3% as compared with thecorresponding period of the previous fiscal. Given the prevailing tough macro-economicconditions, the performance appears to be robust due to a strong growth reported by bothMahindra and Mahindra (M&M) and Apollo Tyres. Excluding M&M, the aggregate revenuegrowth drops to 4.9% and the earnings decline by 2.5% as most of the other companiesreported a decline at the profit after tax (PAT) level.ALL added to our conviction list on robust Q1FY2013 performance:During the last three months, most of the stocks under our coverage, except M&M, had beenkept on Hold recommendation. We recently added Ashok Leyland Ltd (ALL) to our Buy list dueto an improved growth and margin outlook (refer to our Stock Update on ALL datedNovember 9, 2013).
www.TheEquicom.com +919200009266 Page 13Q1FY2013 results of auto universe:M&M and Tata Motors emerged outperformers on the revenue front in the OEM spacewhile Exide and Apollo Tyres dominated the auto ancillary segment in Q1FY2013. Two-wheeler players amongst the OEMs, and SKF India and Bharat Forge amongst the ancillariesreported a decline in their earnings during the quarterContribution margin improved YoY but remained flat QoQ:The contribution margin improved for most companies on a year-on-year (Y-o-Y) basis. Exidewitnessed the maximum improvement while FAG Bearings and M&M recorded the maximumdeterioration in Q2FY2013 compared with the corresponding period of the previous year.Commodity prices declined sequentially:The prices of commodities declined marginally on a sequential basis during Q2FY2013.However, most companies reported a flattish material cost on quarter on quarter (QoQ) basisas the benefit of the offending raw material prices is felt with a lag.
www.TheEquicom.com +919200009266 Page 14VALUATION:We expect the auto volumes to recover in H2FY2013 on the back of the festive season inQ3FY2013 and an improved economic outlook with the easing of interest rates expected inQ4FY2013. Raw material prices are expected to remain subdued. With a recovery in thevolumes, the benefits of operating leverage are expected to result in a margin improvementin H2FY2013. M&M remains our preferred pick in the auto sector.
www.TheEquicom.com +919200009266 Page 15TECHNICAL VIEWS ON STOCKS:Tata Motors-As per our technical view TATA MOTER has consolidation phase so investors CAN TAKE LONGPOSITION above 290 for the target 315.Mahindra & Mahindra-As per our technical view M&M has consolidation phase & this consolidation is not good forinvestment so investors should not take any long position in m&m.
www.TheEquicom.com +919200009266 Page 16Maruti Suzuki-As per our technical view MARUTI has bullish trend so investors can take long position above1540 for the target 1640Bajaj Auto-As per our technical view BAJAJ AUTO has consolidation phase so investors CAN TAKE LONGPOSITION above 1850 for the target 2080
www.TheEquicom.com +919200009266 Page 17CONCLUSION:This report is based on our best research and various information of different informativesites. The industry has recorded phenomenon growth during the last decade. A market trendis growing at a faster rate. According to CAGR the market will further grow in years to come.The opening of the Indian automobile market for foreign companies the competition isexpected to enhance further. The opportunities can be grabbed through the diversification ofexport basket in untouched foreign destinations. Thus strict quality standards, services anduse of latest technology can provide an edge over competitors across the globe.