Outlook on Road Logistics for Finished Vehicles 1... · 16/1/2015  · logistics infrastructure) 3....

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Dr. Wilfried Aulbur Managing Partner Roland Berger Strategy Consultants New Delhi, January 16, 2015 Outlook on Road Logistics for Finished Vehicles

Transcript of Outlook on Road Logistics for Finished Vehicles 1... · 16/1/2015  · logistics infrastructure) 3....

Page 1: Outlook on Road Logistics for Finished Vehicles 1... · 16/1/2015  · logistics infrastructure) 3. E-Commerce & Digitalization > New structures in the supply chain (e.g. bypassing

Dr. Wilfried Aulbur Managing PartnerRoland Berger Strategy Consultants

New Delhi, January 16, 2015

Outlook on Road Logistics for Finished Vehicles

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This document shall be treated as confidential. RBSC does not assume any responsibility for the completeness and accuracy of the statements made in this document.

© Roland Berger Strategy Consultants

Contents Page

A. Global trends in Automotive Road Logistics Market 4

B. Europe: A Benchmark in Logistics Competitiveness 10

C. India Landscape for Automotive Logistics 27

D. Models for Indian OEMs to Improve Outbound Logistics 40

E. Key Trends and Recommendations for India 45

F. Roland Berger Strategy Consultants India 51

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A. Global trends in Automotive Road Logistics Market

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Logistics is a dynamic market impacted by a number of key trends

Source: Roland Berger

Megatrends and impact on logisticsTrend Relevance Impact on Logistics

4 Demographic Change/Urbanization

> New logistical requirements in inner-city transportation and long-distance transportation (e.g. innovative approaches to first and last mile transportation)

> Need for better utilization of both infrastructures and fleets (e.g. pooling, use of non-logistics infrastructure)

3 E-Commerce & Digitalization

> New structures in the supply chain (e.g. bypassing of hubs, direct ordering, transparency) > Demand for value added services on B2B and B2C level (e.g. packaging, return deliveries)> Refinement of service levels (e.g. same day delivery, utmost flexibility)

7 Sustainability > Establishment of green standards across the entire supply chain (mainly driven by industry players)

> Use of more efficient vehicles, hybrids and alternative fuels

1 New Technologies

> Growth in new technology investments (e.g. RFID, inventory, automation)> Integrated logistics networks and real-time tracking of transportation value chains > New business models based on data mining/analytics

5 Globalization of Operations

> Increasing logistics process complexity of global supply chains> New approaches of supply chain risk management> Greater exposure to unusual interruptions and disruptions of business processes

2 Outsourcing/ Cost Pressure

> Continued cost pressure on supply chain operations> Forward/backward integration of players in the supply chain > Reshaping of logistics hubs, less complex than of manufacturing footprint

6 Regulatory developments

> Traffic gridlocks result in stricter regulations for urban transportation (e.g. tolls, bans)> Understanding and management of tariff and tax regulations becomes increasingly

decisive, particularly in Russia, India, Argentina (e.g. local content)

Low relevance High relevance

Example/cases

A Global trends in Automotive Road Logistics Market

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Customer requirements across industry sectors show that current pain points are driven by cost aspects or operational performance

"Pain-points"12345

12

1415

13

Impact on logisticsVery importantNot relevant Key sectors

Impact assessment across industry sectors

Source: Roland Berger; Interviews; Analysis

Complexity managementSC network optimizationSC standardization/modularization

Service level management Supply chain risk management

LEAN organization Process automationData-enabled processes

Return delivery management

10 Integrated planning/scheduling

7 Insourcing/Outsourcing8 Supplier relationship management 9 3PL/4PL management

11 Route planning

6 Inventory management

Automotive Mechanical Chemical/Pharma Food & Beverage Electronics Metal processing Transportation/LSPs

A Global trends in Automotive Road Logistics Market

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APAC dominates the key automotive logistics markets with over 50% share, total market is expected to reach ~USD 206 bn in 2018

Region wise split of global automotive logistics market (USD billion) Comments

11.1%

36.4 37.3 38.0 39.2 41.9

36.5 37.5 39.0 41.2 44.5

81.2 85.5 91.6 99.778.4

CAGR +6%

EMEA +5%

Americas +6%

APAC +7%

2018

206.6

46.5(22%)

49.2(24%)

110.9(54%)

2017

186.0

2016

172.0

2015

162.5

2014

156.0

2013

151.2

Source: EMIS, Secondary Research

> The automotive logistics market in these key regions is expected to have a steady growth of 6% and the market size is expected to reach USD 206.6 billion by 2018

> The APAC market has the highest growth rate (7%) and is expected to reach USD 110.9 billion by 2018

> APAC is expected to increase its share during the forecast period because of a rise in the number of vehicles being produced in China, Japan, India, Thailand and Korea

> It is also supported by a higher export demand from these countries

2.1% 3.2% 4.2% 5.9% 8.1%

YOY Growth rate

A Global trends in Automotive Road Logistics Market

CAGR

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90.5 94.7 101.5 110.5

65.5 67.8 70.975.5

Finished Vehicles +5%

Auto components +7%

2018

82.7(40%)

123.9(60%)

20172016201520142013

63.7(42%)

87.5(58%)

Finished vehicles logistics constitutes ~42% of the total Automotive logistics market & is expected to grow at 5% CAGR to USD 82.7 bn

Market type split of global automotive logistics market (USD billion) Comments

> The share of finished vehicles in the overall market is expected to marginally compress as the trend for smaller cars increases

> Finished vehicles logistics market was approximately USD 65.5 billion in 2014 and is expected to reach USD 82.7 billion in 2018

> Auto components logistics market was approximately USD 90.5 billion in 2014 and is expected to reach USD 123.9 billion by 2018

Source: EMIS, Secondary Research

A Global trends in Automotive Road Logistics Market

CAGR

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B. Europe: A Benchmark in Logistics Competitiveness

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10 of 20 best global economies regarding logistics capabilities are European, making Europe a benchmark in logistics

Source: 'Logistics Performance Index - The World Bank

SIX MAJOR COMPONENTS OF THE LPI's SCORE

1. The efficiency of the clearance process (speed, simplicity, and predictability of formalities) by border control agencies, including customs

2. The quality of trade- and transport-related infrastructure (ports, railroads, roads, information technology)

3. The ease of arranging competitively priced shipments

4. The competence and quality of logistics services (transport operators, customs brokers)

5. The ability to track and trace consignments

6. The frequency with which shipments reach the consignee within the scheduled or expected delivery time

ECONOMY RANK SCORE% OF HIGHEST PERFORMER

Germany 1 4.12 100.0Netherlands 2 4.05 97.6Belgium 3 4.04 97.5UK 4 4.01 96.6Singapore 5 4.00 96.2Sweden 6 3.96 94.9Norway 7 3.96 94.8Luxembourg 8 3.95 94.4US 9 3.92 93.5Japan 10 3.91 93.4Ireland 11 3.87 91.9Canada 12 3.86 91.5France 13 3.85 91.2Switzerland 15 3.84 91.1HongKong 16 3.83 90.5Australia 20 3.81 90.0

B Europe: A Benchmark in Logistics Competitiveness

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Investments in logistics in Europe are well developing – Major share of investment in the UK and Germany, 110% YoY increase overall

Source: Jones Lang LaSalle, April 2013

FY 2012 Q1 2012 Q1 2013 YoY [%] YoY [EUR m]Country180 6 15 -15 +9Belgium

17 0 0 - -Czech Republic29 23 35 +52 +12Finland

1,320 145 240 +65 +95France1,600 395 540 +37 +145Germany

40 28 24 -14 -4Italy345 53 33 -38 -20Netherlands165 10 0 - -10Norway495 104 13 -88 -91Poland335 0 0 - -Russia

85 0 0 - -Spain805 92 138 +50 +46Sweden

3,200 540 790 +46 +250UK8,800 1,400 3,000 +110 +1,600TOTAL EUROPE

Investment In Logistics Infrastructure 2012/Q 2013

B Europe: A Benchmark in Logistics Competitiveness

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Europe is a bright spot in the world for road infrastructure based on the continued focus on ensuring investments and execution

On an average, EU has 2x the road

capacity compared to other developed

nations

Country wise road density [km of road per 100 km2 of land]

50-100

0-50 0-50

0-50

0-50

100-200

Source: Eurostat; Roland Berger

B Europe: A Benchmark in Logistics Competitiveness

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Distribution within Europe/CEE the is done via European, regional or national distribution centers; a model India can deploy post GST

Source: Notteboom

TYPES OF DISTRIBUTION CENTERS

> European distribution centers (EDC) distribute to all European customers and supply regional and/or national distribution centers. An EDC is a distribution center which has outbound flows to customers or subsidiary national distribution centers located in multiple European countries

> Regional distribution centers (RDC) typically distribute to a group of adjacent countries (e.g. Spain, Portugal and southern France)

> National distribution centers cover local markets in a country

DISTRIBUTION NETWORK CONFIGURATIONS FOR CONTAINERIZED IMPORT CARGO (RETAIL) IN EUROPE

Distribution based on RDCs

Distribution based on tiered system (EDC+RDCs)

Distribution based on one EDC

Distribution based on local DCs

B Europe: A Benchmark in Logistics Competitiveness

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Logistics hotspots are well distributed all over Western Europe and CEE – excellent coverage of all markets and countries…

Source: Roland Berger

1 Birmingham, UK

2 London, UK

3 Dublin, Ireland

4 Cork, Ireland

5 Amsterdam/Schiphol, Netherland

6 Rotterdam, Netherland

7 Breda/Tilburg, Netherland

8 Venlo, Netherland

9 Antwerp, Belgium

11 Brussels, Belgium

12 Liège, Belgium

13 Paris, France

14 Lyon, France

15 Lorraine, France

16 Madrid, Spain

10 Gent, Belgium

17 Zaragoza, Spain

18 Barcelona, Spain

19 Porto, Portugal

20 Lisbon, Portugal

21 Oslo, Norway

22 Gothenburg, Sweden

23 Malmo, Sweden

24 Stockholm, Sweden

25 Helsinki, Finland

26 Copenhagen, Denmark

27 Hamburg, Germany

28 Berlin, Germany

29 Düsseldorf/Köln, Germany

31 Munich, Germany

32 Geneva, Switzerland

33 Bern, Switzerland

34 Vienna, Austria

35 Turin, Italy

36 Milan, Italy

30 Frankfurt, Germany

37 Bologna, Italy

38 Rome, Italy

39 Saint-Petersburg, Russia

40 Moscow, Russia

42 Riga, Latvia

43 Vilnius, Lithuania

44 Minsk, Belorussia

45 Gdansk, Poland

46 Warsaw, Poland

47 Poznan, Poland

48 Prague, Czech Republic

49 Brno, Czech Republic

51 Bratislava, Slovakia

52 Budapest, Hungary

53 Székesfehérvár, Hungary

54 Bucharest, Romania

55 Sofia, Romania

56 Ljubljana, Slovenia

50 Kiev, Ukraine

57 Istanbul, Turkey

58 Thessaloniki, Greece

59 Athens, Greece

41 Tallinn, Estonia

20

19

1617

18

43

1

227

28

38

37

363532 33

5614

13 15

30

291211

10 9

6 57

8

2623

22

21

31

2541

42

45

47 46

48 49

3453

5251

43

44

50

39

40

54

58

59

57

55

24

Logistics Hotspots Across Europe

B Europe: A Benchmark in Logistics Competitiveness

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20

19

1617

18

43

1

227

28

38

37

3635

32 3356

14

13 15

30

291211

10 9

6 57

8

2623

22

21

31

25

41

42

45

47 46

48 49

3453

5251

43

44

50

39

40

54

58

59

57

55

24

…the logistics hotspots are designed to cater to the centers of European populations and …

Source: Eurostat; Roland Berger

POPULATIONInhabitants / Sqkm

Below 2020-5050-100100-200200-500500-1,0001,000-2,0002,000-5,0005,000-10,00010,000-20,00020,000-40,000

POPULATION DENSITY [inhabitants/sqkm]

Logistics Hotspots Mapped to Population Density

40 Logistics Hotspot

B Europe: A Benchmark in Logistics Competitiveness

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… GDP concentrations to ensure the most economic coverage

Source: Eurostat; Roland Berger

GDPm EUR / Sqkm

Below 2020-5050-100100-200200-500500-1,0001,000-2,0002,000-5,0005,000-10,00010,000-20,00020,000-40,000No data

EUROPEAN GDP [EUR m/sqkm]

20

19

1617

18

43

1

227

28

38

37

3635

32 3356

14

13 15

30

291211

10 9

6 57

8

2623

22

21

31

25

41

42

45

47 46

48 49

3453

5251

43

44

50

39

54

58

59

55

24

Logistics Hotspots Mapped to GDP concentration

40 Logistics Hotspot

B Europe: A Benchmark in Logistics Competitiveness

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Looking at the latest GDP and retail sales forecasts per capita, the current set-up already fits to future developments

Source: DTZ Research; Roland Berger

GDP GROWTH [%]RETAIL SALES PER CAPITA ANNUAL FORECAST GROWTH 2013-2018 [%]

Albania

Belgium

Bosnia and Herzegovina Bulgaria

Denmark

Germany

Estonia

Finland

France

Greece

United KingdomIreland

Italy

SerbiaCroatia

Latvia

Lithuania

Luxembourg

Macedonia

Moldova

Netherlands

Norway

Austria

Poland

Portugal

Romania

Russia

Sweden

Switzerland

Slovakia

Slovenia

Spain

Czech Republik

Turkey

Ukraine

Hungary

Belarus

Montenegro

Malta

Cyprus

-6.1%-0.0% 0.0%-1.0% 1.0%-2.0% 2.0%-3.7% No data

Albania

Belgium

Bosnia and Herzegovina Bulgaria

Denmark

Germany

Estonia

Finland

France

Greece

United KingdomIreland

Italy

SerbiaCroatia

Latvia

Lithuania

Luxembourg

Macedonia

Moldova

Netherlands

Norway

Austria

Poland

Portugal

Romania

Russia

Sweden

Switzerland

Slovakia

Slovenia

Spain

Czech Republik

Turkey

Ukraine

Hungary

Belarus

Montenegro

Malta

Cyprus

Retail sales per capita in 2013 (kEUR)15

10

20

19

1617

18

43

1

227

28

38

37

363532 33

5614

13 1530

291211

10 9

6 57

8

2623

22

21

31

2541

42

45

47 46

48 49

3453 5251

4344

50

39

40

54

58

59

5755

24

40 Logistics Hotspot

B Europe: A Benchmark in Logistics Competitiveness

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EU is already taking the next step… The "Zero to Ten" Strategy of EU for Transportation

0% Setting a new target for CO2 emissions in major urban centres by 2030

Defining1 Defining one single European Transport Area

2+ Accelerating the Single European Sky 2+

3x Three times more funding for transport infrastructure investment

4th The Fourth Railway Package

5 Cutting red tape for shipping across five key areas

€6bn Six billion euros investment in transport research and innovation

7% Seven percent annual cut in road deaths in the last five years

8 Eight aviation agreements signed to better connect Europe to the outside world

9 Nine major transport corridors to act as the backbone for transportation

10 Ten passenger rights however you travel

The Trans- European Transport Network

Source: European Commission – Transport

B Europe: A Benchmark in Logistics Competitiveness

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Let's take a deeper look at 3 key strategies, relevant for this forum…

Defining1

0% Setting a new target for CO2 emissions in major urban centres by 2030

Defining one single European Transport Area

2+ Accelerating the Single European Sky 2+

3x Three times more funding for transport infrastructure investment

4th The Fourth Railway Package

5 Cutting red tape for shipping across 5 key areas

€6bn Six billion euros investment in transport research and innovation

7% Seven percent annual cut in road deaths in the last five years

8 Eight aviation agreements signed to better connect Europe to the outside world

9 Nine major transport corridors to act as the backbone for transportation

10 Ten passenger rights however you travel

The Trans- European Transport Network

Source: European Commission – Transport

B Europe: A Benchmark in Logistics Competitiveness

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Strategy "x3" focusses on three times the funding for transport infrastructure in EU between 2014 and 2020

Strategy "x3"

> The Connecting Europe Facility, agreed by the EU in 2013, is a dedicated infrastructure fund for transport, energy and telecommunications in the EU’s seven-year budget programme up to 2020

> EU is increasing its financing for transport infrastructure by 3x to to €26 billion as a complement to the national investments for developing the TEN-T

> This funding will focus on building the network’s nine major transport corridors, filling in missing cross-border links and removing barriers

> The national investments of EUR ~250 bn are committed by member states toward the intra country completion of the TEN-T network

EU Infrastructure Funds

Euro billion (2007-2013)

Euro billion (2014-2020)

National investments committed to Infrastructure by member states till 2020

Source: European Commission – Transport

26 8

Euro

250 billion

B Europe: A Benchmark in Logistics Competitiveness

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Strategy "€6bn" focuses on the need for investment in transport research and innovation for the next 7 years

Strategy "€6bn"

> The seven-year Horizon 2020 programme, from 2014 -2020, spending on transport research has increased by ~50% to €6.4 billion from previous budgetary period

> This will enable the EU to reach its objective of cutting carbon emissions in transport by 60% by 2050, by funding public-private partnership projects such as Clean Sky 2, SESAR 2020, Shift2Rail, and the Fuel Cell and Hydrogen Joint Undertaking 2

> It will also help transport to tackle several challenges that threaten its wider competitiveness: to lessen dependence on imported oil, cut greenhouse gas and other emissions, and reduce congestion and raise competitiveness, drive economic growth and create jobs

Source: European Commission – Transport

+50%

Investments in R&D

focused on 60% reduction

in CO2

B Europe: A Benchmark in Logistics Competitiveness

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Strategy "9" stresses on building nine major transport corridors which will act as a backbone for transportation in EU

Strategy 9

> In 2013, the EU revised the rules governing the Trans-European Transport Network (TEN-T) (designed to build by 2030), a core network of national railways, roads, airports, rivers and canals into an efficient network to connect all corners of Europe

> Nine corridors, each one spanning several thousand kilometres, will form the backbone of the planned core network

> Each corridor will include at least three different forms of transport, three EU countries and two cross-border sections

> Ports will also be fully integrated into the corridors with proper onward rail and river connections to the wider network

> 15,000 km of railway line will be upgraded to high speed ; 38 key airports with rail connections into major cities; 104 main European ports with rail and road links ; 35 cross border projects to reduce bottlenecks

Source: European Commission – Transport

B Europe: A Benchmark in Logistics Competitiveness

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C. India Landscape for Automotive Logistics

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40% of Indian logistics market is automotive related, of which 85% is based on road transportation

6,6%

17,5%

35,1%

40,9%

HealthcareSteelConsumer goods / FMCGAutomotive

Rail

AirSea

Road

1% 4%10%

85%

Comments

> Out of the total India logistics market amounting to USD 107.11 billion in 2013, the automotive sector comprises of almost 41% of the market

> In 2013, Indian automotive logistics market was USD 43.81 billion

> Out of this, automotive road logistics for India was 85% of the overall market

Industry Wise Split of Indian Logistics Market

Mode wise split of Indian Auto Logistics Market

Source: EMIS, Roland Berger

C India Landscape for Automotive Logistics

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PV sales are expected to grow at CAGR of 12% to reach ~ 4.8 m units by 2020; driven by a strong expected growth in luxury segment

FY12

2,534

FY11

2,468

FY20E

4,793

99

819

1,136

418359

6099

1,494

310

FY14

2,431

21568

788

23315518 3

2,571119

FY13

+12.0%

MicroMiniCompact

526MidsizeExecutive

Premium/Luxury

UV

Vans1)

Super-compact

PV sales forecast ['000 units]

Source: SIAM, LMC, IHS, Roland Berger Analysis

29%6%6%

10%

15%

84%

19%

17%

22%

CAGRFY14-FY20

Passenger Vehicles market – forecast

1) Vans segment includes Maruti Omni/Eeco and does not include Tata Magic/IRIS

Comments

> India is one of the biggest passenger vehicle markets in the world with annual sales of ~2.4 m units in FY14

> Mini, compact and utility vehicle segments constituted more than two-third of India's PV sales in FY14

> The PV industry shrank from FY13to FY 14 owing to the slowdown in Indian and global economy

> However, the PV industry in India is expected to grow at a CAGR of 12% till FY 2020; driven by growing middle class and increasing motorisation rate

C India Landscape for Automotive Logistics

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CV sales are expected to grow at a CAGR of 12%, driven by revival in industrial activity & strong economic growth expectations

CV sales forecast ['000 units]

910893

729

752

360

167

311

169

51

29

55

4339

FY13FY12FY11

-22%

+12%

SCV Goods2)

SCV Passenger1)

M&HCV GoodsM&HCV PassengerLCV GoodsLCV Passenger

FY20E

1,37842

FY14

712

72

Comments

> India's CV market shrank by over 22% in FY 14 owing to the slowdown in Indian economy

> However, overall CV market is expected to grow at a CAGR of 12% till FY 2020 led by the SCV and M&HCV segments.

> SCV segment is expected to grow by 13%; primarily driven by better connectivity, increasing urbanisationand rising rural incomes

> M&HCV segment is expected to grow at 10 % mainly due to the improving infrastructure and increasing adoption of higher tonnage trucks

Source: SIAM, LMC, IHS, Roland Berger Analysis

Commercial Vehicles market – forecast

13%

6%

4%

CAGRFY14-FY20

11%

1) SCV Passenger segment includes Tata Magic/IRIS and does not include Maruti Omni and Eeco 2) SCV Goods segment includes <3.5 ton cargo vehicles such as ACE, Dost, Super Ace, etc.

5%

15%

C India Landscape for Automotive Logistics

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Two-wheeler vehicle sales in India is expected to continue growing at a CAGR of 12% to reach over ~30m units by 2020

Source: SIAM, Roland Berger Analysis

+12%

Mopeds

Motorcycles

Scooters

FY20E

29.5

1.1

17.9

10.5

2017E

0.9

13.3

5.9

FY14

14.8

0.7

10.5

3.6

FY13

13.8

FY12

13.4

FY11

11.7

20.0

> The 2W industry is expected grow at a CAGR of 12%, reaching a total sales of 29.5 mn units by 2020

> Key factors driving 2W sales growth are India are – growing proporation of young

population, – moderate 2W penetration levels

and increasing per capita income – under developed public transport

system – over congested roads in Indian

cities> Scooter segment is expected to

lead the volume growth on back of shifting customer preferences

2W sales forecast [million units]

Two-wheeler market – forecast

19.5%

9.4%

7%

CAGRFY14-FY20

Comments

C India Landscape for Automotive Logistics

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The demand for road logistics for finished vehicles and the growth rate in road development are mismatched

4,27114,800

29,500

4,793

669

11.0%

2 wheeler

CVPV

FY2020

35,671

1,378

FY2014

17,943712 2,431

FY2002

5,103163

12.1%

Sales figures ('000 units) Comments

> The combined growth in volumes for automotive sales has been growing at a CAGR of 11% since FY02 and is expected to be ~12.1% by FY20

> The volumes will be primarily transported through the road networks which are already inadequate to handle the current freight tonnage

> In the past 14 years the road networks have grown at a marginal 2.8% and as a result the road freight industry has been behind global competitive levels

> Of the current road networks, a miniscule 0.02% of the roads are capable of high speed transport. This is significantly behind global benchmarks

> Going forward the expected mismatch between the growth rate of sales of vehicles and the roads needed for transporting them is going to become a major issue

Source: SIAM, IHS, Ministry of Road Transport and Highways, Roland Berger Analysis

Road network in India (length in '000 km)

2.8%

Rural & district roads

State highwaysNational Highways

2014

4,885

4,649

14393

2012

4,691

2010

4,378

2005

3,929

2000

3,326

C India Landscape for Automotive Logistics

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It is estimated that India needs to spend ~USD 1 Trillion to improve its infrastructure competitive, with strong public-private partnerships

Source: WEC -The Global Competitiveness Report 14-15

Quality of Logistics Infrastructure1)

> In India, quality of road transportation lags behind most of the countries compared

> Majority of the roads are rural roads which are unpaved

> Pot holes in city roads is another reason for bad quality of roads in India

> In Rail transportation, India has an improved performance yet it is out performed by most of its competitors

> The improvement in ranking could be attributed to the good connectivity across the length and breadth of the country

> Port infrastructure in India, critical for enabling export of vehicles, is weak and technologically inadequate especially for Automotive Industry

> India ranks below most of its competitors

> Air transport in India has recently improved, but yet is plagued by issues of last mile connectivity and high cost of operation

C India Landscape for Automotive Logistics

Japan 1

KoreaUSAChinaRussiaIndiaThailandBrazil

101517

26277495

Country Rank

Netherlands 1USA

JapanKoreaChinaThailandIndiaRussia

Brazil

12

262753547681

122

Country Rank

Road Rail Port Air

UAE 1Japan

USAKoreaChinaThailandIndiaBrazilRussia

10

1618495076

122124

Country Rank

Germany 13Germany 8

Germany 14

Singapore 1USA

JapanKoreaThailandChinaIndiaRussiaBrazil

9

273137587179

113

Country Rank

Germany 13

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India faces significant gaps in timeliness and ease of tracking; govt. should take steps to eliminate roadblocks and implement GST

Source: World Bank – Logistics Performance Index

Comparison of Logistics Capability and Performance1)

> Indian logistics service providers are significantly behind their peers in terms of performance

> India fares poorly among its peers and competitors regarding frequency of delays in delivery

> Ability to track shipment is a critical function of the supply chain and even with one of the highest cellular penetration, India is behind its peers

C India Landscape for Automotive Logistics

Service Providers On-time Performance Ability to Track

Netherlands 1

JapanUSAKoreaChinaThailandIndiaBrazilRussia

514222729314983

Country Rank

Singapore 1Japan

USAThailandKoreaChinaIndiaBrazilRussia

6

18283036477186

Country RankSingapore 1

JapanUSAKoreaChinaThailandIndiaBrazilRussia

7102531364265119

Country Rank

Germany 3Germany 8

Germany 5

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India's road transport efficiency is significantly behind the global averageRoad Transport Efficiency Indicators

Indicator

Average truck speed (in km/ph)

India Average Global Average CommentsIndia's average truck speed is ~50% lower than the global average

30 70

Source: Annual Reports, NHAI, Ministry of Transportation, EU Transport Commission

Average truck distance covered in a year (kms)

Trucks in India cover only about 16% of the average global mileage

80,000 500,000

Total length of expressways (kms)

India has a negligible %(<0.01) of roads capable of supporting high speed transportation

~1,000 74,0001)

Average truck distance per day (kms)

In India, a truck can only cover ~50% of the distance compared to US & EU daily

325 500 (BRIC) 750 (US & EU)

Share of paved roads (%)

In the remaining roads, India is also substantially behind in the % of paved road coverage also

54% 68% (BRIC) 90% (US & EU)

C India Landscape for Automotive Logistics

1) Data for China

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Current structure of toll collection, state border crossing procedures and driver harassment are key issues that lead to delays

Toll P

laza

Case Example – Delhi – Bangalore route

4.7

5.1

5.1

5.7

7.5

7.8

15.1

20.7

24.9

Chennai Kolkata

Delhi Mumbai

Delhi Bangalore

Mumbai Chennai

Pune Hyderabad

Delhi Chennai

Mumbai Kolkata

Delhi Kolkata

Indore Guwahati

Stoppage delay [as% of trip time]

Distance

Journey time

Vehicle speed

No. of stops – toll

No. of stops – others

Stoppage delay

Stoppage expenses

kms

hrs

km/hr

nos

nos

% of trip time

% of trip expenses

2,156

102

22

15

10

5

15

Toll expenses % of stoppageexpenses

47

Source: Ministry Of Road Transport & Highways, Transport Corporation of India, Roland Berger

C India Landscape for Automotive Logistics

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Delays have been witnessed in NHDP and NHAI projects in the recent past; There are high expectations from the new government Status of NHDP Projects Other NHAI projects delayed

Ph I / Dec 2000 Golden Quadrilateral(GQ), North South- East West (NSEW) Corridor, Ports & others

7616 km / Dec 2005

Not completed / 7284 km

Ph 2 / Dec 2003 NS-EW Corridor & others 7300 km / Dec 2007

Not completed / 6134 km

Ph 3 / Apr 2007 Strengthening / Up Gradation Of 2-Lane into 4-Lane

12109 km / Dec 2012

Not completed / 5296 km

Ph 4 / Feb 2012 Strengthening of 2-lane with paved shoulders

20,000 km / Dec 2017-18

Not completed / 172 km

Ph 5 / Feb 2012 Existing 4-lane into 6-lane 6500 km / Dec 2012

Not completed / 1492 km

Ph 6 / Nov 2006 Expressways 1000 km / Dec 2015

Not completed / NIL

Ph 7 / Dec 2007 Flyovers / grade separators 700 km / Dec 2014 Not completed / 21 km

Project Length (km)/ Scheduled completion

date

Status as on Mar 31, 2013

Length (km) already covered

NHDP Phase / Year of

approval

Vijayawada – Chilakaluripet May 1 2009 10/31/2011rescheduled to31/01/2014

Not completed

Hazipur–Muzaffarpur Aug 12, 2010 Feb 8 2013Chapra-Hajipur Jan 27 2011 Jul 25 2013Hazaribagh-Ranchi Aug 1 2010 Jan 27 2013Varanasi-Aurangabad Sep 12 2011 Mar 9 2014Pune-Solapur-II Sep 28 2011 Jan 14 2014Patna-Bhaktiyarpur Sep 26 2011 Mar 25 2014

Appointed Date

Scheduled completiondate

Status as on Mar 31, 2014

Section

Not completedNot completedNot completedNot completedNot completedNot completed

Barhi-Hazaribagh Feb 11 2012 Feb 10 2014 Not completed

Krishnagiri-Walajhapet Jun 7 2011 Dec 4 2013 Not completed

C India Landscape for Automotive Logistics

COMMENTS> Delays can be attributed to policy inaction, inefficient methods of environmental and other clearances, among others> However, it will be a key area of performance for the new government, with need for rapid and quantifiable progress on

these key projects> Consistent government action at the centre and state level is required to overcome such bottlenecks

Source: Ministry Of Road Transport & Highways, Transport Corporation of India, Roland Berger

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Procedural bottlenecks, land acquisition and funding issues are also attributable to the delays in the Dedicated Freight Corridor Network

Western Corridor – 1,490 km

Phase IPhase IIPhase III

Eastern Corridor – 1,805 km

Phase I Phase II Phase IIIPhase IVPhase V

920 kms430 kms140 kms

343 kms390 kms397 kms550 kms125 kms

2011-20172012-20182013-2018

2011-20172013-20182014-20192014-20192010-2016

Ahmadabad

Bangalore

Calcutta

Chennai

Delhi

Mumbai

Nagpur

Vijayawada

Ludhiana

Goa

Kharagpur

Dadri – JNPT (Western)

DFCs plannedKharagpur - Vijayawada (East coast)Kolkata - Mumbai (East - West)Delhi - Chennai (North - South)Chennai – Goa (South - West)

DFCs under execution

Ludhiana – Dankuni (Eastern)

Route map for the proposed DFCs are approximate

Project timelines

Source: DFCCI, DFC concept plan, Secondary sources, Roland Berger

Dedicated Freight Corridor Network

Kanpur

Phases Length Last year status

Expected completion

2009-20162010-20172010-2017

2010- 20162010-20162011-20162011-20162010-2016

Phases Length Last year status

DELAYS

Expected completion

C India Landscape for Automotive Logistics

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D. Models for Indian OEMs to Improve Outbound Logistics

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Strategic, Operational and Efficiency improvement are the key areas for Indian OEMs to improve performance within the current infra.

• Outbound logistics outsource strategy

• Logistics model selection

Impact area

Strategic setup

1

Operational setup

2

Key component

• Car model sales and distribution spread for each production base• Average transportation distance

1.1

2.1

2.2

• Hub-to-hub/door-to-door/hybrid model selection based on cost, complexity and agility

1.2

Source: Roland Berger analysis

• Strategic impact of production base location

• Outsource mode: General contractor vs. subcontractor• Business model of contractors (2PL, 3PL, 4PL)

• Transportation method and logistics network

• Percentage of major transportation (highway, waterway, railway) in volume and future trend and logistics network and route design

• Logistics cost management

Operational efficiency

3 3.1

3.2 • Quality control system

• Key cost factors • Pricing and settlement structures• Transportation cost management: Loading and unload ratio

• Major KPIs of passenger vehicle outbound logistics

D Models for Indian OEMs to Improve Outbound Logistics

Business model of logistics operators

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OEMs need to consider the outsourcing model and their production footprint in relation to sales footprint as a part of their strategic setup

> Logistics model selection critical > Indian OEMs mostly choose 3PL models

> Footprint must take into account anticipated sales> hotspots> Critical in dynamic markets

Source: Roland Berger

> Regular review of average transportation distance for each facility and model

> Continuously optimize footprint for the OEM

Models for Indian OEMs to Improve Outbound Logistics - StrategicD

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Operational setup of the OEMs in terms of logistics model and modes employed, drive the flexibility and costs of logistics network

> Traditional hub-to-hub model, sometimes door-to-door and hybrid models > Hybrid model to combine s rapid response and reduced inventory expenses by

making dynamic decision on model usage based on lot size, distance and demand pattern

> Critical: multimodal mix and dedicated mode for major hubs

> Regular evaluation of changes and upgrades in infrastructure

Source: Roland Berger

Models for Indian OEMs to Improve Outbound Logistics - OperationalD

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The strategic and operational setup will impact logistics efficiency and determine the market competitiveness of the OEMs

> Transportation pricing strategy, must enable flexibility to ensure optimization during volatile sales periods

> OEMs prefer a per unit vehicle price based on model, distance, destination, vehicles per trailer and unload ratio

> Quality considerations and model variety drive the number of vehicles per trailer & the trailer technology used

> Unload ratio is significantly affected by location of manufacturing bases and logistics model (hub-to-hub etc.)

Source: Roland Berger

> Quality control system necessary to drive efficient outsourcing

> With the increase in model types and fluctuating demand in the market, monitoring the performance is critical

Models for Indian OEMs to Improve Outbound Logistics - EfficiencyD

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E. Key Trends and Recommendations for India

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Trend 1 : Robust growth expected in the Indian automotive sector will increase demand for and complexity in the logistics market

E Key Trends for India

Rising automotive demand

4,792

2,431712

FY14

CV +11.6%

29,500

14,800

1,378

FY20

+12.1% PV +12.0%

2 Wheeler +12.2%

Sales figures ('000 units)

CAGRFY14-FY20

– Improve access to key logistics suppliers and enhance cooperation

– Cooperatively plan capacities for effective utilization of capacities

– Lobby with the Government to implement GST– Optimize own logistics and production

footprints– Invest in driver capability building and make the

profession more lucrative– Focus on Multimodal transportation to increase

efficiency and reduce dependence on Road

Source: SIAM, LMC, IHS, Roland Berger Analysis

Impact

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Trend 2 : Rising logistics costs as a percent of sales, increasing fuel prices and wages directly resulting in ~2% higher cost in India

Logistics costs as % of sales

Impact

> OEMs in India are heavily dependent on road transport and older transport technology

> To recover the 2% additional costs, key actions for OEMs are:– Increase efficiency and use multimodal

transport solutions to achieve the benchmark multimodal mix

– Work with specialized car-carrier manufacturers to develop India specific solutions to the enhance efficiency

– Optimize network design and focus on collaborative logistics to reduce return load factors

Korea

0.8-1.2%

Japan

1.5-2.5%

China

1.5-2.5%

India

2.5-3.5%

Fuel prices and wages

717363514546 493838403332

193177163148134122

201320122011201020092008

Petrol (Rs / l) Avg nominal wage indexDiesel (Rs / l)

Source: Secondary Research, Roland Berger Analysis

Increasing logistics costs , fuel prices and wages

E Key Trends for India

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Other trends like increasing types of car models, regulatory challenges and growing aftermarket affect auto logistics market Increasing car models, regulatory issues and growing aftermarket

Source: Secondary Research, Roland Berger analysis

E Key Trends for India

Trends Impact

– Tie-up with specialized trailer manufacturers to design efficient technologies best suited for Indian conditions

– Trailers of different flexible sizes to accommodate different types of cars are needed for effective management

– Due to increasing complexity, OEMs and suppliers need better and far more accurate forecasting than in the past

– Both the OEMs and suppliers need better technology for real-time data for production planning in a far efficient manner

> Increasing number of car models in India in the near future– Due to changing consumer preferences, rising competition, it is expected that there would be an increasing number of car models in the near future, directly affecting the Indian automotive logistics market

> Regulatory issues – Increasing regulations with respect to environmental and safety standards is increasing the cost and complexity of automotive logistics in India

– Lobby for faster implementation of GST– Focus on multiple modes of transportation instead of one to increase

efficiency– Work co-operatively with suppliers to plan capacities

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To build a competitive auto road logistics capability, India should follow the Europe example

1 Improving infrastructure –With rising demand for vehicles and bulk of the road network being poorly paved, there is a pressing demand to improve infrastructure to support intermodal services

2 Continuous investment – Continuous investments to improve the infrastructure is the need of the hour to increase capacity and service speeds significantly

3 Removing Red tape– Increasing regulations, high interest rates, complexities with respect to environmental and safety standards, complications in obtaining permits, use of inter-state permits, complex and opaque tax regime need to be done away with

4 Faster implementation of GST – Implementation of Goods and Services Tax (GST), which is meant to centralise certain taxes and help make India a common market across its state borders, will go a long way in building a competitive automotive road logistics capability

5 Completing pending projects – With sales of passenger and commercial vehicles expected to increase by over 11% in the coming years, pending projects such as the Eastern and Western corridors, NHDP and other NHAIprojects in the southern part of the country need to be completed

E Key Recommendations for India

Source: Roland Berger Analysis

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Additional focus on increasing investment in research and innovation and improving safety on roads is required

8 Newer targets for CO2 norms in Urban cities – Following the Europe example, India should aim for an ambitious plan of CO2 free urban cities for cleaner cities and for reducing dependence on scarce fossil fuels

9 More investment in research and innovation required – Investment in research and innovation for the next generation of cutting edge cleaner, cost effective technologies leading to lesser dependence on natural resources

10 Improving safety on roads – Better road safety policies need to be implemented through the use of safety devices and modern technology, tougher rules on vehicle testing and enforcing stricter penalties

E Key Recommendations for India

7 Improving rail connectivity to reduce burden on roads – While only 2-3% of automotive freight currently moves by rail, initiatives should be taken to increase this level to reduce burden on the road network. Initiatives such as rail network through the AFTO and the dedicated rail freight corridor need to be expedited

6 Integrated Logistics Plan for India – Implementation of an integrated logistics plan for India is key for building a competitive automotive road logistics capability for India. Long term plan for 2030 instead of a shorter term plan for 2020 is required incorporating future projections of population growth, migration patterns, GDP and industrial production

Source: Roland Berger Analysis

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Please contact us in person if you have any questions

Mobile India: +91 (0) 99 206 30131Mobile Germany: +49 (0) 160 744 8282e-mail: [email protected]

Dr. Wilfried Aulbur

Managing PartnerRoland Berger StrategyConsultants India

Your contact at Roland Berger Strategy Consultants

Source: Roland Berger

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F. Roland Berger Strategy Consultants India

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More than 47 years of continuous growth have made us a top-5 player in the global strategy market

Source: Roland Berger

Germany # 3Growth regions China and Russia/CEE # 2

World # 5Core markets in Western Europe # 3

2013Market positionin the strategy segment

Entrepreneurship at Roland Berger – Success

F RB Credentials

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Based on mutual trust and success, we have become the long-time advisor of leading companies and public institutions world-wide

of the global top 1,000 companies30%of the leading European enterprises40%

Our strong client base comprises:

75% repeat clients

Public institutions in 25% of all countries world-wide

Entrepreneurship at Roland Berger – Client base

Source: Roland Berger

F RB Credentials

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The Roland Berger Automotive Competence Center has a truly global footprint

> A global team of 300+ dedicated automotive consultants

> Over 300 clients in the automotive industry

> More than 2,000 successful projects since 2000

> Proven cutting-edge tools and methodologies

> Thought leadership in the form of highly regarded studies and research

More than 300 consultants worldwide

2 Partners20 consultants

Russia

3 Partners20 consultants

Korea

1 Partner40 consultants

India

3 Partners40 consultants

China/Hong Kong

4 Partners30 consultants

Japan

1 Partner5 consultants

Singapore

Eastern Europe

2 Partners20 consultants

Western Europe

17 Partners150 consultants

4 Partners25 consultants

USA

2 Partners10 consultants

South America

1 Partner10 consultants

MENA

Source: Roland Berger

F RB Credentials

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5420150116_Outlook_on_Road_Logistics_for _Finished_Vehicles_vF.pptxSource: Roland Berger

Our global automotive team advises blue chip companies right along the automotive value chainOverview of selected automotive clientsPassenger vehicle OEMs Suppliers

Financial investors

Retail/services and mobility

Commercial vehicle OEMs

F RB Credentials

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We have accumulated extensive project experience in various functional areas for many international clientsGlobal automotive projects – Sales and marketing

Selection of clients Most relevant projects

Corporate strategy, growth strategy> Long term strategy for a large automotive group> Market entry strategy for a leading luxury OEM

Sales & distribution strategy, marketing strategy> Mid to long term sales planning strategy for a luxury brand> Dealership strategy and five-year for a large Chinese automotive group

Product strategy and planning> Portfolio strategy of a Chinese company's products> New energy product strategy for a leading international company

Brand strategy> Self-owned brand strategy for a large Chinese auto group> Brand repositioning for an int'l auto group's passenger vehicle products

Aftermarket business> Conduct due diligence on aftermarket luxury car sales business> Help the biggest Chinese auto group design its aftermarket service strategy

Source: Roland Berger

F RB Credentials

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We have conducted multiple projects focusing on dealer performance improvement in the recent years

Brands and retail groups Selected projects

2 > Target dealer receive 99% positive feedback> Overall KPI improvement in all categories

Large German based OEM

3 > Showroom traffic increased by 15%> Test drive rates increased from 38% to 51%

Major European OEM

4 > Trained coaches led own dealers to be ranked in top tier among group network

Major European OEM

5 > Redefining business system to raise synergy potentials within affiliated group

Automotive mega-retailer with 8 dealer groups

1 > Sales targets of all coached dealers are 100% fulfilled> Sales volume increased significantly

Major Japanese OEM

6 > Defined strategy for profitable growth > Professionalization of internal dealer mgt. processes

Multi-brand-automotive dealer group with 7 dealerships

7 > Development and implementation of performance program> Multi-Brand expansion

Automotive-mega-dealer with 30 shops

8 > Establishment of dealer academy in 5 European markets for general and executive sales managers

Automotive OEM with 4 brands

9 Luxury car importer in China > Reorganisation of sales network and performance increase

10 Multi-Brand-Automotive dealer group > Restructuring of locations and performance improvement

11 Multi-Brand-Automotive dealer group > Turnaround Management und lead into profit zone

Global automotive projects – Dealer performance improvement

Source: Roland Berger

F RB Credentials

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We believe that our network, project experience and local team guarantee you comfort and satisfaction for this assignment

1 Global network and presence in India:We have a global network with 53 offices in 36 countries and a local team with 40+ consultants in India located in Mumbai, Delhi and Pune

3 Experienced management team: Our management team provides a good mix of relevant industry and consulting experience to guarantee project success

2 Broad project experience:We already have a broad and diversified customer base with extensive project experience in India and a proven methodology

4 Local diversified consultants: We have a local team with project experience in all relevant industries

Value proposition Roland Berger India

Source: Roland Berger

F RB Credentials

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We have successfully advised a broad client portfolio from different industries in various strategic projects in India (1/2)

Passenger cars

Selected automotive OEM references in India

Commercial vehicles Two-wheelers

> Market entry strategy for Japanese luxury OEM> Product portfolio positioning for global luxury OEM> Market entry strategy for European PV OEM> Market approach Korea for an international CV

manufacturer> Market entry strategy in Bangladesh/Myanmar for a

Japanese 2-wheeler distributor> Global KD template for a European Luxury OEM> Connectivity strategy for a global PV OEM> India strategy 2020 for European OEM> Alliance strategy for Asian CV OEM> Turn around concept for major Indian automotive player

covering all aspects of the value chain> Restructure India business for European CV OEM> LCC sourcing for international automotive & construction

OEMs> M&A Target identification for the world's largest 2-wheeler

manufacturer> JV optimization for Indian 2-wheeler OEM

Typical projects

Source: Roland Berger

F RB Credentials

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We have successfully advised a broad client portfolio from different industries in various strategic projects in India (2/2)

> Indian market studies for European automotive supplier> India growth strategy for a Japanese supplier> India growth strategy for a business unit of a leading Indian

automotive conglomerate> Product portfolio optimization & export strategy for major

Indian supplier> Logistics study for automotive industry association> M&A and due diligence support for a leading Indian

engineering services player> Commercial due diligence for an Indian engine and

transmission manufacturer> M&A search in Europe & SEA for an Indian automotive

supplier> M&A target identification in Europe & SEA for leading

Indian supplier> Location strategy for a global auto component player> Off-set strategy for globally leading aerospace and defence

players

Automotive suppliers Engineered products Government Typical projects

Selected automotive & engineered products references in India

Ministry of Commerce

Source: Roland Berger

F RB Credentials

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We have conducted numerous research studies on the Indian market – Governments too rely on our studies (1/3)

> Highlighting opportunities in India for western companies

> Case studies with success stories

> Highlighting invest-ment opportunities available in Indian Chemical Industry for potential foreign and domestic in-vestors

> Highlighting oppor-tunities for India and critical suc-cess factors for developing renew-able energy in India

> Developing a road-map for distribution and distributed ge-neration reforms in India

> Assessment of op-portunities and challenges in the Indian automotive sector

India: opportunities and challenges (2009)

India Chem(2010)

Green energy blueprint for India –report for CII (2020)

Power sector reforms task force committee (2010)

India automotive study (2012)

India automotive logistics (2013) perspectives and solutions

> Assessment of challenges and wary forward for Indian Automotive Logistics

Selected Roland Berger studies

F RB Credentials

Source: Roland Berger

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We have conducted numerous research studies on the Indian market – Governments too rely on our studies (2/3)Selected Roland Berger studiesIndia's Aerospace & Defence Sector (2013)

Driving economic growth: India's automotive industry (2013)

Thermoprocessing -Key Indian Market Trends (2013)

Security Manual for Private Companies (2013)

Rightsizing Europe (2013)

Developments in the US Chemical Industry (2013)

> Study commissioned by Government of India

> Highlighting opportunities in India for manufacturers

> Highlights impor-tance of Indian Automotive Industry for wealth generation

> Case study of Germany & France

> Highlighting invest-ment opportunities available in Indian Chemical Industry for potential foreign and domestic in-vestors

> Recommendation on the Draft Security Manual for Private Industry –Assocham – 26 June 2013

> Implications of the European Crisis for Indian suppliers

> The US shale gas revolution and its implications for India

F RB Credentials

Source: Roland Berger

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We have conducted numerous research studies on the Indian market – Governments too rely on our studies (3/3)

Achieving Manufacturing Excellence (2013)

Battery Market- Key trends and opportunities (2013)

ITC(HS) Classifications of Export and Import Items (2013)

India Homeland Security Market(2013)

Necessary steps on our way to global excellence (2014)

2025 Automotive Landscape (2014)

> Study for CII> Approach to

achieve Manufacturing Excellence

> Need for action in India

> Paper Presented for Auto Tech Review at the Battery Conclave

> Department of Electronics and IT, Ministry of Communication and IT (Govt. of India)

> Codification for Electronics Sector

> Report on Opportunities in India Homeland Security Market to Canadian Companies : Canadian Trade Commission

> Assocham Automotive Roundtable

> Background paper on necessary steps on our way to global excellence

> CII International conference on world class technologies in auto sector

> Background paper Automotive Landscape 2025

Selected Roland Berger studies

F RB Credentials

Source: Roland Berger

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AuthorsWe welcome your comments and feedback!

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Vandhna BabuSenior AnalystRoland Berger Strategy ConsultantsM : +91 88 009 07862E : [email protected]