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Indian Automobile Industry Growth, Challenges & Opportunities Shailendra Tomar

Agenda

Automotive Clusters in India

Market Share of Passenger Vehicles

Passenger Vehicles Production

Major Developments & Investments

India will drive production growth

Strong future in B segment

India’s Demographic Dividend

Export Hub

Supplier Footprints

Auto Component

Challenges in India

Government Initiatives

Opportunities for Global Leverage

Key Automotive Trends

Expected changes and barriers

Automotive Clusters in India

India’s automotive endowment is located in four major industrial areas

spread across the country

Market Share of Passenger Vehicles

Models Dec 2013

Alto 23,823

Swift 16,788

Dzire 15,427

Wagon R 12,154

Grand i10 9,077

Bolero 8,465

Omni 5,590

Eon 5,428

Ertiga 4,924

Innova 4,918

Source: SIAM Reports Dec 2013

Passenger Vehicles Production

• The passenger vehicles production in India touched 3.23 million units in 2012–13 and is expected to reach 10 million units by 2020–21

• The industry is estimated to grow at a CAGR of 13 per cent during 2012–2021 • The industry recorded exports worth US$ 9.3 billion in 2012–13 and is projected to touch US$ 30 billion by

2020–21

Figures for Financial Year – April to

March (*Estimates)

Major Developments & Investments

Tata Motors Ltd plans to invest about £30 million in the National Automotive Innovation Campus (NAIC) for research and development (R&D).

Volvo India plans to set up truck and bus manufacturing facility in Malur, Karnataka, with an investment of US$ 158.32 million.

JBM Auto has formed a joint venture (JV) with BredaMenarinibus to manufacture luxury buses in India. They will set up a plant near Faridabad, Haryana, with at an investment of US$ 81.2

Mahindra will develop the world's first hybrid technology that can be deployed in vehicles with manual transmission and enhance fuel efficiency by ~20%.

Jaguar Land Rover (JLR) will build a manufacturing plant in Rio de Janeiro, Brazil with an investment of US$ 751.95 million.

Amtek Auto has signed an agreement to buy Kuepper Group, Germany for about €200 million in its second big European acquisition in 2013.

Honda Cars India will use the Ennore Port to export cars to South Africa. The infrastructure for car exports at Ennore Port is attractive and cost effective.

With regards to the Asian scope, China and India will drive production growth

Indian automotive market will enjoy strong growth in all segment – B segment overperform

Production evolution by segment [PC + LCV ;m vehicles]

CAGR

(10-15)

19,8%

11,5%

5,4%

11,3%

12,6%

16,6%

14,0%

33%

LCV

A

B

C

D

E+

MPV/SUV

Value [Bn€]

22,91

12%

32%

21%

10%

2% 2%

21%

Production value breakdown by segment [2010; PC + LCV; Bn EUR]

17% 19% 17%

49% 45%40%

19%24%

14%

7%

12%

LCV

A

B

C

D

E+

MPV/SUV

2015

6,18

6% 1%

11%

2010

3,21

7%

9%

2007

1,96

17,8% CAGR

Vehicle value [2010; kEUR; VAT excl.]

5

8

10 40

80

16

5

India’s Demographic Dividend

India’s Demographic Dividend Implications for Auto Industry

The Indian automotive industry is expected to be the world’s third largest market by 2030, only

behind China and the US

India is estimated to become the fifth-largest Personal Vehicle producer in the world by 2014

With the establishment of more R&D centres, likely to be more product development initiatives

from India

Much greater segmentation of the market

Entry level vehicles

Need for premium travel options, SUVs for camping, off-road vehicles

Export Hub

Polo

Auto Component Supplier Footprints

Auto Component Growth

Auto Component Tier 1 Suppliers

Challenges in India

Challenges in India

Beyond the Indian Heroes

India is at an inflexion point in terms of automotive growth

Suppliers must scale up in about 1/3 of the time vs. China

Challenges with many (in particular, Tier II, Tier III) suppliers abound

− R&D capability

− Quality understanding (despite certification)

− Process competence (project management, quality and production process systems, etc.)

− Root cause analysis and execution of necessary measures

− Systematic testing despite clear customer expectations

− Eliminate the symptom, don't solve the problem

Government Initiatives

Government to introduce fuel-efficiency ratings for automobiles to encourage sale of cars that consume less petrol or diesel

The period of concession available for specified part of electric and hybrid vehicles till April 2013 has been extended up to March 31, 2015.

An increase in excise duty from 27 to 30% has been allowed for SUVs with engine capacity exceeding 1,500 cc.

The excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14% to 13%.

Government allows 100% FDI in the automotive industry through automatic route.

Government Initiatives Road Ahead

The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during April 2000 to October 2013 was recorded at US$ 9,079 million, amounting to 4 per cent of the total FDI inflows

Opportunities for Global Leverage

Key Automotive Trends

Expected changes in market conditions and barriers

21

In India, respondents expect a decrease in all trade barriers, and in Brazil and Russia, import export/duties and governmental

interventions are forecast to ease.