Presentation for Society of Indian Automobile Manufacturers

NYK RORO Coastal Shipping and Prospects in India

16th Jan. 2015

NYK Line Auto Logistics Group

Table of Contents

I. NYK RORO and NYK Auto Logistics at a glance

II. NYK’s Coastal RORO Shipping

1. China

2. Malaysia

3. Indonesia

4. Australia

III. Indian Coastal RORO Shipping / Prospects and challenges

NYK RORO and NYK AUTO LOGISTICS at a glance

3

NYK Fleet

4

March 31, 2014

NYK Fleet – Car Carrier

6

USEC - Middle East

USEC – WCSA

Gulf – Caribbean – ECSA shuttle

Mexico – WCSA shuttle

Far East – USWC/USEC/WCCA/WCSA/CARIB

Far East Shuttle (Japan-Korea-China)

Far East – EC AUST / WC AUST / PNG

Far East – S.E. Asia

Far East – Arabian Gulf / Red Sea / Africa

Far East － Mediterranean & Europe

Europe – North America

Europe – S.E. & Far East

Europe – Middle East

Africa - Europe

Regional head quarter

Remarks : this map is not including the services provided by subsidiaries

Intra S. E. Asia Shuttle

S. E. Asia - Bengal shuttle

S. E. Asia – AUST

S. E. Asia － Red Sea

S. E. Asia / India －Mediterranean & Europe

NYK car carrier services cover the world

7

Inland Terminal

Local RoRo Terminal

Offering value-added services from end to end with the world’s largest car carrier fleet of about

120 vessels, world-wide logistics networks and advanced transport technologies.

Production

Automobile Hub Terminal

PDI Center

(Pre-Delivery Inspection)

Inland

Transport

Ocean Transport

(Deep sea)

Automobile Hub Terminal

Dealer

Production

Ocean Transport

(Feeder Network)

Milk Run

Parts Production

PDI Center

NYK Automobile Transportation Services

8

Antwerp, Belgium

Zeebrugge, Belgium

Gioia Tauro, Italy

Southampton, UK

Bristol, UK

Almaty, Kazakhstan

Singapore

Port Kelang, Malaysia

Laem Chabang, Thailand

Tianjin, China

Dalian, China

Shanghai, China

Guangzhou, China

St. Petersburg, Russia

Novorossiysk, Russia(2013)

Zarubino, Russia

Pipavav, India (2015)

2011: 1,337,826 2012: 1,582,513 2013: 1,801,320

2011: 107,755 2012: 146,521 2013: 220,424

2011: 688,516 2012: 825,472 2013: 899,137

2011: 6,860 2012: 12,963 2013: 19,815

2011: 147,041 2012: 153,571 2013: 87,177

2011: 145,021 2012: 208,217 2013: 268,338

2011: 275,474 2012: 313,240 2013: 409,770

2011: 1,103,898 2012: 1,273,774 2013: 1,392,894

2011: 701,133 2012: 705,971 2013: 740,208

2011: 176,624 2012: 226,562 2013: 357,148

2011: - 2012: 46,065 2013: 119,709

2011: 4.7 mil Terminal TTL 2012: 5.5 mil 2013: 6.3 mil

NYK Auto Logistics RORO Terminal

Veracruz, Mexico (2014)

9

NYK Auto Logistics (Thailand)

Patrick Autocare, Australia

NYK Auto Logistics (India)

ROLF SCS (Russia) GNL, Changsha

NYK BLL (South Africa)

NYKZHENHUA, Tianjin

NYKANJI, Shanghai

Tonglit Logistics, Taiwan

NYK Automotive Logistics China

NYKULS, Shenyang

NYK Auto Logistics Philippines

GIGA SHIPPING, Malaysia

NEXUS, Malaysia

2011: - 2012: 110,830 2013: 272,182

2011: 145,305 2012: 156,382 2013: 152,973

Auto Parts

2011: 345,272 2012: 415,602 2013: 451,224

2011: 47,047 2012: 73,205 2013: 78,802

2011: - 2012: 2,233 2013: 40,669

2011: 102.204 2012: 114,725 2013: 143,417

2011: 23,023 2012: 48,603 2013: 72,756

2011: 92,241 2012: 101,719 2013: 104,793

Auto Parts

2011: 559,119 2012: 670,682 2013: 681,475

2011: 185,540 2012: 249,787 2013: 211,222

2011: 936,755 2012: 988,009 2013: 1,083,748

2011: 138,138 2012: 175,520 2013: 195,636

2011: 2.6 mil Inland Logi TTL 2012: 3.1 mil 2013: 3.5 mil

NYK Auto Logistics - Inland Logistics

PT. NYK Puninar Auto Logistics Indonesia

Almaty, Kazakhstan

CSI, Mexico

NYK Auto Logistics Group - Regional Shipping

10

United European Car Carriers,

Norway

Straits Auto Logistics,

Malaysia

NYKCOS, China

PT. NYK-SPIL INDORORO,

Indonesia

2011: 1,270,000 2012: 1,300,000 2013: 1,495,530

2011: 84,320 2012: 108,244 2013: 104,286

2011: 76,994 2012: 78,763 2013: 91,781

2011: - 2012: 13,691 2013: 35,761

2011: 1.4 mil Regional TTL 2012: 1.5 mil 2013: 1.7 mil

Patrick Auto Care,

Australia

2011: 608 2012: 1,016 2013: 2,941

Global NYK’s Coastal RORO Shipping

11

Coastal RORO Shipping in China

Regulations in China

• Operators and owners must be shared 100% by only Chinese capitals.

• Flag ship must be Chinese.

• Officers and crews must be Chinese.

Operators in China

Vessels in China

• 25 existing ships

• 4 vessels (Over 2,000units) are under construction.

• NYK provides technical support partly.

Main Service Map in China 1. North-South Service

(Nansha-Shanghai-Tianjin-Dalian)

2. Bohai Service

(Dalian-Yantai-Tianjin)

3. Shanghai Service

(Shanghai-Tianjin-Dalian)

4. Hainan Service

(Hainan-Nansha etc...)

Yantai

Shanghai

Tianjin

Nansha

Dalian

Hainan

Our Prospects for Chinese market

• Demand for coastal RORO shipping service will exceed supply there in 2015.

• The supply shortage is expected to continue and increasing.

906

1,282 1,337 89

174 181

139 139

105

0

200

400

600

800

1,000

1,200

1,400

1,600

0

50

100

150

200

2013 2015 2020

Costal Productive Capacity Demand for Short Sea Supply of Short Sea

Coastal RORO Shipping in Malaysia

Regulations in Malaysia

• Majority of the capital must be held by Malaysian.

• Flag ship must be Malaysian.

• Officers and crews must be Malaysian.

• Ships over 20 years have to be verified of the various report.

Operators in Malaysia

Major Operators are only 2 companies.

– SAL (Straits Auto Logistics Sdn Bhd)

Shared by NYK and GIGA Shipping

– KKRN (Kawasaki Kisen Regional Navigation)

Shared by K-Line and GIGA Shipping

*GIGA Shipping is a subsidiary of GIGA Maritime Group

Vessels in Malaysia

• MV Straits Challenger (SAL)

– Load over 5000 units

• MV Grand Vision (KKRN)

– Load over 5000 units

Service Map in Malaysia

• 4 fixed ordered ports of call

Port Klang, Kota Kinabalu, Labuan, Kuching

• Every 10days service

3 services / a month

Our Prospects for Malaysian market

• Malaysia coastal RORO shipping market is a niche and small market.

• Cargo volume has increased every year very slightly.

• It is expected to increase continuously gradually.

Coastal RORO Shipping in Indonesia

Regulations in Indonesia

• Domestic shares should be more than 51%.

• Flag ship must be Indonesian.

• Officers and crews must be Indonesian.

• Domestic shipping service is not allowed to be combined with foreign shipping service.

Operators and vessels

• All ports except Jakarta port cannot be called by huge vessels.

• All import cargoes are discharged at Jakarta and distributed to each islands by short sea.

• There are incalculable short sea operators in Indonesia.

• They have small vessels (less than 1,000 units).

NYK Group Company • NYK-SPIL INDORORO (“NSI”) is J/V with

NYK and SPIL. * SPIL – PT. Salaam Pacific Indonesia Lines, one of top domestics container lines based in Surabaya.

• Domestic RORO shipping service between Jakarta and 3 islands (Sumatera/Kalimantan/Sulawesi) with 2 vessels (760 units and 840 units).

• To expand own share in the limited market, NSI offers both “Port to Port Service ” and ”Door to Door Service”.

Service Map of NSI

Coastal RORO Shipping in Java

JAKARTA

SURABAYA

• Jakarta-Surabaya Coastal RORO Service is a preferable choice instead of inland transportation.

• Inland transportation in Java has some problems;

– Delay due to heavy congestion in Jakarta and Surabaya

– High damage ratio due to rough road condition

Our Prospects for Indonesian market

• Car sales growth is getting slow recently

• Java island occupies 60% of whole national demand. – All domestic car factories are located near Jakarta.

– Jakarta is sole international port to import foreign cars

• Demands for regional RORO shipping service are coming from 40% of total national market.

2011 2012 2013 2014

0.89mil 1.12 mil 1.23mil 1.25 mil

Coastal RORO Shipping in Australia

Australia Coastal RORO Service

• No domestic RORO shipping operators

• Cabotage is permitted for foreign shipping operators.

• PAC arranging short-sea booking service.

• Mainly from Melbourne & Sydney to Brisbane & Perth by NYK & etc.

Coastal RORO Service in India Prospects &Challenges

Mumbai

Mundra

Ennore

PDI at Mundra/Mumbai Port

Chennai/ Yard Management

Mumbai/Chennai VDC

Chennai Accessory Fitment

VDC/PDI

Pipavav Port Operation scheduled on 2015

RORO Terminal

Fleet expansion from 100 to 300 units

(middle term business plan)

Rail Under Study (Autowagon)

TRAILER

Chennai

Pipavav(Plan)

NYK Auto Logistics - INDIA

RORO Terminal

Trailer

VPC

T

T

P

P

P

P

P

P

Our Esteemed Customers

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Coastal Shipping Regulations in India The coastal trade of India is exclusively reserved for

– Ship owned by Indian citizen/company/co-operative society

– Ship chartered by Indian citizen/company/co-operative society as per provisions of the Merchant Shipping Act.

100% Foreign Direct Investment is permitted in Indian Shipping Company

Regulatory requirements for Coastal operations:

Note: DGS = Director General of Shipping

* Indian Citizen/Company/Co-operative Society

Chartered by Indian Entity *

Indian Flag Ships Foreign Flag Ships Foreign Flag Ships

1. Chartering permission

2. Coastal trading license

100% 50% Chartering Period:

> 30 & upto 90 days = 1/3 of crew

> 90 days = 1/2 of crew

NA NA Applicable as per DGS guidelines

Owned by Indian Entity *

Minimum Indian

Crew

DGS Approval

Right of First

Refusal To Indian

Owners

1. Trading license (General or

Coastal)

1. Coastal trading license

Finished Vehicle Logistics In India

• India produced ~ 3.77 million passenger & commercial vehicles during the year ending Mar’14 out of which ~ 17.7 % were exported.

• Finished vehicles logistics is predominantly through road carriers and very small portion through railways; none through Coastal RORO shipping.

97%

3%

0%

Road

Rail

Coastal RORO

Modal Share in Finished Vehicle Logistics in India

Pipavav

Chennai

Kolkata

Mumbai

Gujarat Cluster:

Pune Cluster:

Chennai Cluster:

Jamshedpur:

Gateway Port

Manufacturing Hub

Mundra

Prospects of Coastal Shipping in India

Mundra Port

Ennore Port

Sanand

Routes Ennore –Mundra

Port of Call Ennore Port Mundra Port

Port Rotation Ennore-Mundra-Ennore

Cargo Origin Chennai; Sanand (Return Load)

Cargo Destination North & West Gujarat; Tamil Nadu (Return load)

Business Case

Transportation Cost per Unit

By Roadways By Coastal RORO Difference

Trailer Type Freight Vessel (1550 RT)

22.5 Mtrs INR 13,920 INR 17,890 INR 3,970

18 Mtrs INR 16,800 INR 17,890 INR 1,090

By Coastal RORO By Roadways

Difference

1st Mile (incl. Consolidation Time)

Sea Leg Last Mile

(incl Distribution Time) Total In Transit

Time

3 days 6 days 3 days 12 days 7.5 days 4.5 days

Coastal RORO Challenges in India Infrastructure Bottlenecks

Lack of space for consolidation & distribution of finished vehicles at Port

Lack of dedicated berthing facility for Coastal Vessels & Berth congestion

Traffic congestion on roads in and around Port area restricting trailer / first-last mile movement of vehicles (e.g. Chennai & Mumbai port)

High Cost of Bunkering

High bunker prices due to taxes and duties for

Excise duty on bunker @ 14% VAT which varies state to state.

E.g. 24-26% VAT in Gujarat

High Crewing Cost due to Manning Scale

Manning scale for the coastal vessels are at par with the Foreign going vessels which increases the operational costs to Coastal operator.

Lack of Green Channel at Port for Customs formalities

Coastal cargo are also subjected to clearance procedures in line with EXIM cargos.

Cumbersome formalities adds documentation, cost and time to shippers and may also result in increase in overall transit time.

High Port User Charges: Wharfage

Wharfage charges for motor vehicles currently ranging from 0.18% to 0.5 % ad-valorem of Invoice value.

Wharfage charges are comparatively higher than other commodities.

Contribute ~ 16% to End-to-end cost of Coastal RORO shipping.

Coastal RORO Challenges in India (Cont…) Coastal RORO

End-to-End Cost Breakup

Commodity Rate Basis Cost Per Unit

Cars & Automobiles

(Having value of Rs 400000)

Machinery Items

(Having value of Rs 400000)

Coal & Coke 130Rs. per Tonne 130.00Rs.

Timber 15.18Rs. per CBM 15.18Rs.

Commodity Wise Comparison of Wharfage Rate in Ennore Port

0.34% Ad Valorem of Invoice value 1,360.00Rs.

0.13% Ad Valorem of Invoice value 520.00Rs.

Requisites for Viable Coastal RORO in India

• Reduction in Wharfage charges for Automobiles to the level of other commodities.

• Dedicated berth for coastal vessels, adequate space for consolidation & distribution of cargo in Port.

• Green channel implementation in Customs formalities for clearing Coastal Cargos.

• Fiscal incentives such as subsidized bunker for coastal vessels.

• Loading of domestic cargo along with export cargo to intermediate foreign port (e.g. Sri Lankan Ports)for better utilization of space in the vessel.

Thank You