India's share in global passenger vehicle market 34.0 CAGR: 11% Two wheelers (million units) 8.6 CAGR: 13%

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3 Third-largest automobile industry by 2016E 8% 4% India's share in global passenger vehicle market By 2020, India's share in the global passenger vehicle market to double to 8 per cent from 4 per cent over World s second-largest two wheeler manufacturer 15.9 CAGR: 11% 34.0 Two wheeler sales to rise from 15.9 million in FY2013 to 34.0 million by FY2020E FY13 FY20 Two wheelers (million units) Passenger vehicle sales to nearly triple by 2020E 3.2 CAGR: 13% 8.6 Passenger vehicle sales to increase from 3.2 million in FY2013 to 8.6 million in FY2021E FY13 FY21 Passenger vehicles (million units) Source: IHS, NEMMP 2020, ACMA, Aranca Research; Note: E Estimate

4 FY10 Growing demand Innovation opportunities FY16E Market size: USD57.7 billion 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 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 Market size: USD145 billion Advantage India Rising investments India has significant cost advantages; auto firms save 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 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 Source: Automotive Mission Plan ( ) Notes: R&D Research and Development; FDI Foreign Direct Investment; FY Indian Financial Year (April March); FY16E Estimated figure for Financial Year 2016

5 11 million units (2007) 20.7 million units (FY13) 0.6 million units (1992) 2008 onwards 0.4 million units (1982) Before 1982 Closed market Five players Long waiting periods and outdated models Seller s market Joint venture (JV): Indian government and Suzuki formed Maruti Udyog; commenced production in 1983 Component manufacturers entered the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 valueadded 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 Source: Tata Motors, Society of Indian Automobile Manufacturers (SIAM), Aranca Research Note: JV Joint Venture

6 Automobiles Two-wheelers Passenger vehicles Commercial vehicles Three-wheelers Mopeds Passenger cars Light commercial vehicles Passenger carriers Scooters Motorcycles Utility vehicles Multi-purpose vehicles Medium and heavy commercial vehicles Goods carriers Electric twowheelers

7 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) Revenue trends over the past few years (USD million) Market* break-up by revenues (2011) CAGR: 17.7% % 47.8% Trucks Cars 31.8% Two Wheelers FY07 FY08 FY09 FY10 FY11 Source: SIAM, Datamonitor, Aranca Research Note: * Does not include three wheelers

8 Production of automobiles increased at a CAGR of 11.8 per cent over FY05-13 Passenger vehicles was the fastest growing segment, representing a CAGR of 12.9 per cent Total production of automobiles in India (million units) FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers Source: SIAM, Aranca Research Note: CAGR Compound Annual Growth Rate

9 Two wheelers dominate production volumes; in FY13, the segment accounted for about three quarters of the total automotive production in the country Market share by volume (FY13) India is the world s second-largest two wheeler manufacturer and fourth-largest producer of commercial vehicles 15% 4% 4% Two Wheelers Passenger Vehicle Commercial Vehicle 77% Three Wheelers Source: SIAM, Aranca Research

10 Share in production of passenger vehicles (FY13) Share in production of commercial vehicles (FY13) 19.3% Passenger cars 29.4% MCV & HCV Utility vehicle LCV 80.7% 70.6% Source: SIAM, Aranca Research Notes: LCV Light Commercial Vehicle; MCV Medium Commercial Vehicle; HCV Heavy Commercial Vehicle

11 Share in production of three-wheelers (FY13) Share in production of two-wheelers (FY13) 18.3% 15.3% 5.9% Goods Carrier Passenger carrier Mopeds Motorcycles Scooters 81.7% 78.7% Source: SIAM, Aranca Research

12 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 Exports of automobiles from India (million units) FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers Source: SIAM, Aranca Research

13 Two wheelers accounted for the largest share in exports (by volume) at 67 per cent in FY13 Exports shares by volume (FY13) Passenger vehicles comprised a sizeable 19 per cent of overall exports 19% Passenger Vehicle Exports of passenger vehicles registered the highest growth at 9.02 per cent in FY13 67% 3% 11% Commercial Vehicle Three Wheelers Two Wheelers Source: SIAM, Aranca Research

14 -33% 0% 3% 0% 0% 2% -2% 5% 3% 5% 7% 5% 13% 9% 20% 25% 16% 8% 25% 33% 33% 33% 28% 50% 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 Growth forecast for sales 28% 27% 12% Passenger car segment is estimated to expand 3-5 per cent 4% 3% 8% SUVs are projected to increase per cent Commercial vehicles are forecast to rise 7-9 per cent LCVs are estimated to grow per cent FY09 FY10 FY11 FY12 FY13 FY14E Auto sales growth Growth forecast for the auto segment 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 FY09 FY10 FY11 FY12 FY13 FY14E Source: SIAM, Aranca Research Note: E Estimate, UV Utility Vehicle Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers

15 Passenger vehicles to increase at a CAGR of 16 per cent during FY CAGR: 16% FY13 FY15 FY20 Passenger vehicles (million units) Commercial vehicles expected to register a CAGR of 16 per cent during FY CAGR: 16% FY13 FY15 FY20 Commercial vehicles (million units) Two and three wheelers projected to expand at a CAGR of 9 per cent during FY CAGR: 9% FY13 FY15 FY20 Two & three wheelers (million units) Source: SIAM, Vision 2020, Aranca Research

16 Scenario 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 Key drivers India has the world s 12 th- 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 Notable Trends The Indian luxury car market is estimated to expand at a CAGR of 25 per cent during 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 per cent Source: World Wealth Report (2011) of Merrill Lynch Wealth Management and Capgemini, Aranca Research Note: HNI - High Networth Individuals

17 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% Source: SIAM, Aranca Research Note: Data is for FY10

18 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 productdevelopment 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

19 Growing demand Policy Strong support government support Increasing investments Rising income, young population Goal of establishing India as an automanufacturing hub Rising investments from domestic and foreign players Greater availability of credit and financing options Inviting R&D focus; GOI has set up a technology modernisation fund Resulting in Greater product innovation; market segmentation Strong growth in exports Policy sops, FDI encouragement Demand projected to remain strong, making returns attractive Note: GOI Government of India

20 Increasing income and middle-class population GDP per capita has grown from USD1, in 2010 to USD1, in 2012, and is expected to reach USD1, by 2018 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 Million Household,100% Globals (> ) Strivers ( ) Seekers ( ) Aspirers ( ) Deprived (<1657) Source: IMF, McKinsey Quarterly, Aranca Research

21 Easy availability of credit Greater access to credit eases the purchase of passenger and commercial vehicles The auto finance industry has grown at the rate of 13 per cent over FY08-13; the car finance penetration has increased from 68 per cent 70 per cent in FY08-10 to 70 per cent 72 per cent in FY11-13 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 car finance market size FY09 FY10 FY11 FY12 FY13 Car industry sales volume (mn) Car finance industry (USD bn) 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

22 Design and engineering skills Manufacturing skills Manpower costs Supplier base Raw materials Korea China East Asia Thailand Indonesia Vietnam Czech Republic Romania Central & Eastern Europe Poland Slovakia Russia Hungary Turkey Latin America Brazil Mexico Less competitive than India In competition with India Source: ACMA, Aranca Research

23 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) 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 Dept. of Heavy Industries & Public Enterprises 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 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) Union Budget FY14 Proposal to allocate USD2.7 billion for JNNURM to bolster sales volumes of Medium and Heavy Commercial Vehicles (MHCV) Notes: 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

24 Business description Vehicles Research & Development Establishment (VRDE), Ahmednagar Indore National Automotive Test Tracks (NATRAX) Automotive Research Association of India (ARAI), Pune Chennai Centre, Tamil Nadu Rae Bareilly Centre International Centre for Automotive Technology (icat), Manesar Silchar Centre, Assam Research, design, development and testing of vehicles Centre of excellence for photometry, electromagnetic compatibility (EMC) and test tracks Complete testing facilities for all vehicle categories Centre of excellence for vehicle dynamics and tyre development Services for all vehicle categories Centre of excellence for power-train development and material Complete homologation services for all vehicle categories Centre of excellence for infotronics, EMC and passive safety Services to agri-tractors, off-road vehicles and a driver training centre Centre of excellence for accident data analysis Services to all vehicle categories Centre of excellence for component development, noise vibration and harshness (NVH) testing Research, design, development and testing of vehicles Centre of excellence for photometry, EMC and test tracks

25 List of companies Delhi Gurgaon Faridabad North Ashok Leyland Force Motors Piaggio Swaraj Mazda Amtek Auto Eicher Honda SIEL Maruti Suzuki Tata Motors Bajaj Auto Hero Group Mumbai Pune Nashik Aurangabad Kolkata Jamshedpur West East Ashok Leyland Bajaj Auto FIAT GM Tata Motors Hindustan Motors M&M Eicher Skoda Bharat Forge Simpson & Co Internatio nal Auto Tata Nissan Motors M&M Volkswag en Renault- Forgings JMT Exide Chennai Bengaluru Hosur South Ashok Leyland Ford M&M Toyota Kirloskar Volvo Sundaram Fasteners Enfield Hyundai BMW Bosch TVS Motor Company Renault- Nissan Source: ACMA, Aranca Research

26 NORTH WEST: Rajasthan is a major hub for light vehicle manufacturing NORTH: Delhi is a hub for light vehicle manufacturing, whereas Haryana and Uttarakhand are hubs for heavy vehicle manufacturing WEST: Maharashtra, and Gujarat are hubs for heavy and light vehicle manufacturing EAST: Jamshedpur is the site for Tata s heavy vehicle manufacturing Heavy Vehicle Manufacturing Plant SOUTH: Chennai hosts manufacturing plants for heavy and light vehicles Light Vehicle Manufacturing Plant Source: Aranca Research Note: All figures as of

27 FDI inflows in the automotives sector aggregated USD8.3 billion (4.3 per cent of the total FDI) over April 2000 March 2013 Revenue trends over the past few years (USD billion) Delhi Gurgaon Faridabad Ahmedabad Mumbai Pune Nashik Aurangabad Kolkata Jamshedpur 0.9 FY09 FY10 FY11 FY12 FY13 FDI in automobile industry (USD billion) Chennai Bengaluru Hosur Source: Department of Industrial Policy & Promotion (India), Aranca Research

28 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 Planning to double its current investment level of about USD2.5 billion over the next five years Aims to raise its market share from 1.5 per cent in FY13 to 10 per cent by FY17 Investing in Chennai and Sanand plants to raise capacity to 0.44 million cars & 0.61 million engines by FY14 Long term strategy to export 25 per cent of vehicles and to make India compact car global production base Is in the process of expanding its dealer network from 33 in January 2013 to 50 by 2014 end Plans to raise the number of car offerings in the sub USD46,000 category Plans to launch up to eight models over the next 5 6 years Aims to invest USD460 million in Rajasthan plant by 2014 to build a new assembly line for cars This will include a new diesel engine component production and a forging plant 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 Plans to invest USD million over the next two to three years to develop new products Plans to infuse USD46 million to double India capacity to 20,000 vehicles by the end of CY13 Source: Respective Company Websites, News Articles, Aranca Research

29 Continuing market leadership Product portfolio expansion Increased productivity Enhanced R&D capability Capacity expansion Roll-out of people s car (Maruti 800) Product portfolio comprising 16 passenger vehicle models 1994 Production of 1 millionth car Accounted for 45 per cent share in the Indian car market In the process of establishing Suzuki s largest R&D facility outside Japan Plans to produce 1.7 million cars by Roll-out of 10 millionth car Plans to setup two facilities in Gujarat 2012 Total sales crossed 1million units in FY Source: Company Website, Aranca Research

30 Disruptive innovation Market expansion Product portfolio expansion Enhancing R&D capability JV with Daimler AG Launch of the first indigenous CV Production of first indigenously designed LCV Launched Indica, India's first fully indigenous passenger car Acquired stake in Hipo Carrocera SA Acquisition of Jaguar and Landrover Introduction of Megapixel, an electric vehicle Acquisitions Joint ventures Establishment of Tata Engineering & Locomotives Launched Tata Nano Source: Company Website, Aranca Research

31 Tata Nano ranked among the top 10 best-selling cars of 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 30,763 Tata Nano sales FY (units) 70,432 74,527 73,848 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 has launched a new variant of the Nano in 2013 and is in the process of launching a new variant in 2014 to augment sales. A CNG variant was launched in the second half of 2013, while the diesel version is likely to be launched in the first half of 2014 FY10 FY11 FY12 FY13 Sales Source: Company Website, Aranca Research Note: YOY Year on Year

32 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 8MFY14 M&M has been the market leader in utility vehicles in India for over 50 years since building the first Willys jeep in 1947 M&M auto sales domestic and export ( 000 units) 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 FY CAGR: 22% Recorded four wheeler revenue of USD3.3 billion in FY13 Launched Verito Refresh, Quanto, and Rexton in FY2013 Source: Company Website, Aranca Research Launched the e20 electric car in March 2013 after acquiring carmaker Reva Technology In 2013, inked a partnership with online shopping portal Snapdeal.com to sell its two-wheelers

33 India is fast emerging as a global R&D hub Opportunities for creating sizeable market segments through innovations Small-car manufacturing hub 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 twowheelers 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) Note: M&M Mahindra & Mahindra

34 Society of Indian Automobile Manufacturers (SIAM) Core 4-B, 5 th Floor, India Habitat Centre Lodhi Road, New Delhi India Phone: Fax: siam@siam.in

35 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

36 ULCC: Ultra Low Cost Car USD: US Dollar Wherever applicable, numbers have been rounded off to the nearest whole number

37 Exchange rates (Fiscal year) Exchange rates (Calendar year) Year INR equivalent of one USD Year INR equivalent of one USD Average for the year

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