The%20Indian%20Automotive%20Industry%20A%20Perspective

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The Indian Automotive IndustryA Perspective
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Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

3
Organization Structure TATA MotorsSenior
Management Team
R N Tata (Chairman Tata Motors)
Ravi Kant (Managing Director)
P P Kadle (ED Finance Corporate Affairs)
P M Telang (President Light and Small
Commercial Vehicles)
A P Arya (President Heavy and Medium Commercial
Vehicles
Rajiv Dube (Sr Vice President Passenger Cars)
Engineering Research Centre
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Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

5
Asias share of the world vehicle production is
growing significantly..
Source OICA.net
Data excludes 2-wheelers where Asia is not only
the largest producer, but is also the largest
market
6
State of the Global Automotive Industry
Stagnant Sales except in Asia
Over Capacity in most Regions
Intense Product Price Competition
Industry Margins Under Pressure
Most of Industry EVA negative
Global Focus to Asia for growth
7
Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

8
INDIA An Introduction
India
USA

• Population 1080 million 296 million
• States 28 50
• ( 7 Union Territories) (14 dependent
  areas)
• Geographical Area 3.3 mn sq km 9.6 mn sq kms
• GDP - Nominal US 0.67 trillion US 11.73
  trillion
• Per Capita Income - Nominal US 622 US 39,935
• Per Capita Income US 3080 US 39,496
• (at Purchasing Power Parity)

Current Exchange Rate 1 USD INR 45 Exchange
Rate (PPP) 1 USD INR 10 (approximately)
Estimates for 2004 Sources IMF Data, The World
Factbook, CIA
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After decades of indifferent growth, Indias
economy is accelerating in the new millenium..
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Rapid increase in population in the last fifty
years have negated the impact of economic growth
in the past
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Goldman Sachs predicts India to be the third
largest economy in the world in absolute terms by
2025
Indian Economy already ranks 4th in the world in
terms of GDP adjusted for Purchasing Power Parity
GDP Growth Forecast
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Indias Demographic Dividend
India has one of the youngest population amongst
all nations
Source The World Factbook, CIA
Although it is the most populous country,
because of Beijings long-standing one-child
policy, Chinas working age population will begin
to decline in the next 10 years. Meanwhile,
Indias youthfulness - 350 million citizens are
under age 15 - ensures its workforce will expand
for decades, potentially enabling it to outstrip
Chinas economic pace through sheer weight of
numbers. Time Magazine, Issue dated Dec 05,
2005
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India has transitioned from a predominantly
agrarian to a service-based economy in line with
the growth trajectory followed by major developed
economies..
The Indian Economy is now more broad-based and
thus resilient..
Sources Statistical Outline of India 2004-05
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Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

15
Automobile production in India has doubled in 4
years, with growth seen across all four major
segments..
By numbers, two wheelers are the dominant segment
of the Indian Automotive market
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In many ways, the Indian Automotive Market is
unique

• Harsher operating conditions pose unique
  challenges for product conceptualization, design
  and development
• Road inadequacy and quality
• High Traffic density
• Poor Fuel quality variety (Gasoline, Diesel,
  CNG LPG)
• Manufacturing complexity higher despite lower
  volumes compared to global standards
• Large product portfolios
• Product obsolescence policies not articulated and
  enforced, entailing longer product life.
• Firms able to maintain profitability even at low
  volumes.

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Personal Mobility is positively correlated to per
capita GDP
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India is expected to achieve mass motorization
status in 2014
Vehicle Density vs. GDP/capita
Developing Markets
Mature Markets
India in 2002
Inhabitants/Vehicle Inhabitants/Vehicle
02
India 100
China 82
100
China in 2002
Inhabitants/Vehicle
50
India in 2014
China in 2014
Germany
10
Mexico
Belgium
Canada
South Korea
Brazil
Austria
UK
Poland
Sweden
Australia
Argentina
Spain
CzechRepublic
Japan
USA
Italy
France
0
2
20
25
30
35
15
40
1,000
Per Capita Income (US 000)
Note The above includes both Passenger Vehicles
and Commercial Vehicles Sources Wards Auto
Yearbook 2002, EIU, Goldman Sachs BRICs report,
DRI 2002, A.T. Kearney analysis
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Key Challenges facing the industry

• Increasingly Stringent Emission Safety
  Regulations
• Technological capability
• Cost
• Increase in input prices
• Ferrous Non-Ferrous Metals
• Crude oil derivatives
• Natural rubber
• Rising Customer Expectations
• Product features
• Quality reliability
• Integration with Global Markets
• Lowering product life cycles
• Reducing time-to-market for new products
• Threat of new competition

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Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

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CAGR 15
Within 2-Wheelers, Motorcycles contribute 80 of
the segment size
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Indian 2-Wheeler Market Competitive Scenario

Motorcycle 50 30 13 4 1 2 lt1 - lt1
- 15 28 - 2 46 9 lt1 -
- - 82 - - - 8 10 -
Figures denote Mkt Share (Apr-Oct 05)
India is now the second largest two-wheeler
market in the world
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The Indian 2-Wheeler Industry
Characteristics
Indian 2-wheeler Industry

• Large variety of products choice for the
  customer
• (9 manufacturers, 70 Models)

Similarity with Global Industry

• Basic transportation necessity as against fun
  fashion orientation of the Western Markets.
  (Primary transportation vehicle for entire
  families)
• Product design execution driven by economy
  rather performance and power
• Presence of strong home-grown players competing
  against Global majors.

Dis-similarity with Global Industry
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Key Market Drivers
Key Trends

• Increasing disposable incomes
• Low operating cost
• Higher fuel efficiency of New-generation
  motorcycles
• Greater reliability resulting in low maintenance
  cost
• Low interest rates translating to low financing
  and acquisition costs hence greater
  affordability.
• Inadequate urban rural public transportation
  infrastructure
• Ease of use in congested city centres

• Eclipse of scooter segment
• Emergence of new motorcycle sub-segments
• Economy
• Executive
• Performance
• Shrinking product life-cycles

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Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

26
CAGR 17
Predominantly used for commercial purposes, for
both Goods Transport (40) and Passenger
Transport (60).
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Indian 3-Wheeler Market Sub-segments and
Competitive Scenario

68 24 2 1 3 3
23 40 12 13 7 6
Sub Segments
Scooters India
60
Passenger
40
Goods
Figures denote Mkt Share (Apr-Oct 05)
India is the largest three-wheeler market in the
world
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The Indian 3-Wheeler Industry
Characteristics
Indian 3-wheeler Industry

• None.

Similarity with Global Industry

• Product unique to emerging markets in South /
  South-East Asia parts of Africa
• Product design execution focus on technological
  simplicity and ease of use.
• Lesser competitive intensity as compared to other
  segments.

Dis-similarity with Global Industry
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Key Market Drivers
Key Trends

• Last Mile Transportation needs.
• High product maneuverability driveability.
  Ideal for congested Indian roads and tropical
  conditions.
• Inadequate urban rural public transportation
  infrastructure
• Low initial ownership cost
• Self-employment opportunity for large segment of
  urban youth

• Goods segment growing at faster clip.
• Ability of product to meet increasingly stringent
  emission safety regulations is doubtful.
• Market push building up for product upgradation.

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Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

31
CAGR 17
Unlike the USA, the Indian Passenger Vehicle
market is dominated by Cars (79)
()
() MPVs were part of Passenger Car segment till
2000-01
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Indian Passenger Vehicle Market Competitive
Scenario

Passenger Cars 52 17 19 - 1 5 2 2 2 1 - lt1 lt1
Utility Vehicles 2 18 1 42 21 1 10 1 lt1 - 4 - lt1
Multi Purpose Vehicles 100 - - - - - - - - - - - lt1
Figures denote Mkt Share (Apr-Oct 05)
4th largest Passenger Vehicle Market in Asia
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The Indian Passenger vehicle Industry
Characteristics
Indian Passenger Vehicle Industry

• Multiple segmentation across within major
  segments
• Cars (A, B, C, D E segments) (Hatchbacks,
  Sedans, Notchbacks, Station Wagons Saloons)
• Utility Vehicles (Multi- Sports Utility)
• Large variety of products choice for the
  customer
• (13 manufacturers, 50 Models)

Similarity with Global Industry

• Market dominated by Mini Cars Hatchbacks (gt80)
• High incidence of taxes in Car Prices.
• (24 Excise Duty, 12.5 VAT, Local Taxes as
  applicable)
• Customer preference driven by value for money and
  cost of ownership considerations rather than
  image, performance and power.
• (80 of cars sold are priced below USD 12000)
• Large proportion of chauffer driven cars. Rear
  Passenger comfort is a critical influence in
  purchasing decisions.
• Emergence of strong domestic players (TATA,
  Mahindra).
• Strong demand pull for Utility vehicles from
  Private Taxi segment.

Dis-similarity with Global Industry
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Passenger Car Penetration is low in India
Cars per thousand population
The low penetration presents an opportunity for
industry players to offer an affordable
four-wheeled alternative to the mass of 2-wheeler
customers
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Key Market Drivers
Key Trends

• Increasing disposable incomes
• Rising aspirational levels
• Low interest rates.
• Wide variety and easy availability of Financing
  options.
• High sensitivity to Fuel prices
• Lack of urban rural public transportation
  infrastructure
• Flourishing Service Sector

• Market evolution from Mini cars to Hatchbacks to
  Compact Sedans now evident
• Increasing customer emphasis on aesthetics and
  comfort.
• Shrinking product life-cycles

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Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

37
CAGR 22
Unlike most developed markets, Indian Market has
seen dominance by Medium Commercial vehicles
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Indian Commercial Vehicle Market Competitive
Scenario

Medium Heavy CV - Trucks 64 24 - 8 - 3 - lt1 lt1
Buses L, M HCV 40 30 7 5 10 6 1 1 -
Light Small Comm Veh Trucks 59 lt1 32 4 3 3 lt1 - -
Figures denote Mkt Share (Apr-Oct 05)
TATA Motors dominates over 60 of the Indian
Commercial Vehicle Market. It is also the Worlds
fifth largest Medium Heavy commercial vehicle
manufacturer.
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The Indian CV Industry
Characteristics
Indian CV Industry

• Cyclical

Similar with Global CV Industry

• Secular long term growth trend
• Lower Power to Weight Ratios
• Early stage of road development
• Less degree of product sophistication.
• Strong price entry barriers created by domestic
  players

Dis-similar to Global CV Industry
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Key Market Drivers

• Growth in Economic Activity
• Road Network Development
• Low interest rates.
• Wide variety and easy availability of Financing
  options.
• High sensitivity to Fuel prices

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Impact of Road development
Indian CV Industry Trucks
The growth of the Commercial vehicle industry is
critically dependent on Infrastructure
development economic activity
Impact of GDP Growth.
Dramatic impact in initial stage of road
development
Gradual impact
Stage
Stage
Germany
Germany
France
France
UK
UK
Turkey
Spain
Truck penetration MHCV / m population
4
4
Truck penetration MHCV / m population
Spain
Portugal
Portugal
Australia
Russia
Argentina
Argentina
3
Brazil
Brazil
3
Hungary
China
2
Mexico
India (AL)
South Africa
Romania
China
South Africa
2
Indonesia
1
India
Indonesia
India
1
GDP per capita 1000 US / head
Road Density Paved Highway (km) / Area (km2)
Source VDA (German Automotive Association),
Worldbank, DRI Automotive report
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Road network development in India
Between 2003-04 to 2007-08 each year 2000 Kms of
4-laned highways will be added
Year-wise completion schedule of NHDP Planned
length 14,000 km
Golden Quadrilateral
N S E W Corridors
Feeder Roads
Source CrisInfac, NHAI

• Impact on Domestic CV Industry
• Faster turnaround
• Increased freight movement
• Lower operating cost of vehicles
• Replacement demand

Between 1997 - 2002, Highway length in China
increased by around 15,000 km and CV volumes
nearly doubled from 1.2 mn to 2.1mn ..
Indicative of future likely directions in Indian
market
43
Key Trends

• Migration from erstwhile Basic MCV Workhorse to
  Hub Spoke Model
• Increasing Power to weight ratio
• Increasing customer emphasis on aesthetics and
  comfort.
• Arrival of Global Players
• Divergence in Truck and Bus Technology
• Focus on Fully Built Transport Solutions

Average Power To Weight Ratios Of Selected
Countries
Europe
Japan
Truck market sophistication
Brazil
China
India
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Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

45
CAGR 22
The growth rate in Auto Components business has
kept pace with OEM growth
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Key Market Drivers
Key Trends

• Linked to growth of OEM Industry
• Highly sensitive to input cost escalation.
• Competitiveness driven by
• Manpower Large pool of qualified engineers
  skilled technicians at lower cost
• Lower investment cost Through appropriate, low
  cost automation.

• Indias emergence as low cost global sourcing
  destination.
• Indian ancillary manufacturers are shifting focus
  from global after-market to global OEM supplies.
• Firms focus on operational excellence to improve
  quality reliability of products.
• (8 Deming Award winners)
• Increasing relevance of Global Tier 1 suppliers
  (Bosch, Denso, Visteon, Delphi)

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The Indian Auto component industry is now
transitioning from being a supplier for the
global aftermarket to becoming a full-scale
global Tier 1 supplier
Rotating Auto Electricals Tyres Tubes Heavy Forgings Wheel Rims
Small Castings Forgings Plastic Components
Hand Tools Metal bonded Moulded Rubber Parts
High
Product Complexity
Medium
Transition Path
Low
Aftermarket
Tier 2-n supplier
Tier 1 supplier
Customer complexity
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Indian Component suppliers are adopting different
approaches for Global expansion growth
Exports from India

• Suppliers of
• Castings
• Forgings
• Machined Items
• Rubber Items
• Wheel Rims

Greenfield Overseas Locations
Sundaram Fasteners China Minda Group Indonesia
Overseas Acquisitions
Bharat Forge (CDP-Germany Federal Forge-
USA) Sundaram Fasteners (Cramlington Precision,
UK Peiner-Germany)
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Global Auto Industry An Analysis

• TATA Motors Organisation Structure

• Overview of Indian Economy

• Indian Auto Industry Two Wheelers Three
  Wheelers Passenger Cars Commercial
  Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

50
CAGR Overall 22 Passenger Veh
57 2-Wheelers 35
International Business growth presents a huge
opportunity, as well as a challenge for the
Indian Automotive Industry
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Opportunities for the industry are emerging both
in the areas of Automotive Manufacturing and
Engineering Services
Manufacturing
Engineering Services

• Emerging World hub
• Small Cars (Suzuki, Hyundai)
• Castings Forgings
• Regional Sourcing base
• Aggregates for Entire Vehicle Programs (e.g.
  Transmissions for Toyota IMV)
• Globalisation opportunities for Indian
  Manufacturers
• Increasing exports of Made In India vehicles
• Establishing manufacturing facilities at foreign
  locations (e.g. TVS Indonesia)
• Contract Manufacturing (e.g. Sub-150cc Bajaj
  motor cycles for Kawasaki)
• Growth through Mergers Acquisitions
• (TATA Motors acquisition of Daewoo Commercial
  Veh, Korea Hispano, Spain

• Indian IT Majors offering on-shore and off-shore
  engineering services to Global IT players.
• (e.g. TCS, TATA Technologies, Infosys, Satyam)
• Global Auto Auto component majors putting up
  Development Centres in India, either on their own
  or in partnership with local players
• (e.g. General Motors, Daimler Chyrsler, Johnson
  Controls, Delphi, Bosch)
• Independent Indian OEMs focusing on upgrading
  their design engineering capabilities.
• (e.g. TATA Motors European Development Centre
  Acquisition of INCAT plc, UK)

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Thank You