Dilip ChenoyDirector General
Society of Indian Automobile Manufacturers
Plans for Expansion & Investment(Auto & Component Manufacturers)
Market Update Breakfast - IndiaSeptember 12, 2006
The Indian Automotive Sector: The Growth Story and Opportunities
Dilip Chenoy, Director General , Society of Indian Automobile Manufacturers
atINDIA BREAKFAST
in CHICAGO, ILLINOIS
SIAM12th September 2006
Presentation Outline
• SIAM
• Indian Automotive Industry-Current Scenario
• Growth prospects
• Forecasts and Expansion Plans
SIAM
Society of Indian Automobile Manufacturers
• Apex National Body representing 38 Vehicle Manufacturers in India
• Non-profit organisation
• Industrial & Economic Policy, Technical roadmaps and Public Policy
• Statistical services – production, sales and exports
• Auto Expo
Promotes sustainable development of Indian automobile industry
SIAM
Presentation Outline
• SIAM
• Indian Automotive Industry-Current Scenario
• Growth prospects
• Forecasts and Expansion Plans
SIAM
Evolution of Automobile Industry
1970 - 1984 1985 - 1995 1995-2000
Cars were luxury
Manufacturing licensed; expansion restricted
QR on importHigh
customs duty, excise duty & sales tax
Market dominated by Tata, HM, Bajaj, PAL
Entry of Maruti
Entry of Japanese 2 Wheeler and LCV mfrs
Delicensing in 1993
QR on importDecreasing
customs & excise duties
Seller’s mktEmergence of
Hero HondaMaruti
became mkt leader
Entry of international players in cars
Increased competition
Auto financeBuyers
marketMarket boomEnvironment
al concernsSuperior
technologyFocus on
pollution control
Segmentation
Service networks
Post 2000
QRs removedIncreasing
choice to customers
Easy auto finance
Diversification - financing, insurance, etc
Focus on safety Improving
capacity utilisation
Indigenously designed and developed
Increased exports
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Auto Policy Today . . .
No
• Restriction on FDI• Requirement of local content• Export obligation• Foreign Exchange neutralization• Minimum R&D spend
SIAM
Government intention to make India an automotive manufacturing hub
Size of the Indian Automobile Industry
Size ~ 9.7 mn vehicles
Production Volume Contribution
All figures for Apr 2005- Mar 06
• India second largest producer of motorcycles (7.6 mn) in the world
Passenger Vehicles
13%
Three Wheelers4%
Two Wheelers79%
Commercial Vehicles
4%
SIAM
Value of the Indian Automobile Industry
Estimated Sales Value Contribution
Size ~ USD 25.5 billion
All figures for Apr 2005- Mar 06
Market for passenger cars greater than that for 2 wheelers.
Commercial vehicles contribute to significant value.
Commercial Vehicles
26%
Passenger Vehicles
43%
Three Wheelers2%
Two Wheelers29%
India exports another USD 2.5 billion value of vehicles
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Total Registered Vehicles ~ 87 Mn
Commercial Vehicles
14%
Passenger Vehicles
13%
Two Wheelers
73%
Indian Vehicle Parc
Source: Govt. of India Statistics of Registered Vehicles & SIAM estimates
2005
SIAM
Global vehicle sales grew more than 1m units a year
80% of growth (1993-2003) was in Top 10 mktsNearly 50% in China and the U.S.
393
434
434
655
666
715
803
970
2769
3268
0 1000 2000 3000 4000
MEXICO
CANADA
FRANCE
RUSSIA
ITALY
INDIA
SPAIN
U.K.
USA
CHINA
CAGR
13.8%1.8%
4.1%
6.5%
11.7%
3.2%
7.1%
2.0%
3.2%5.1%
(thousands of units)
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Total Vehicle Sales: 1970 - 2004
0
1
2
3
4
5
6
7
8
9
10
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Millions
Germany
Japan
China
India
SIAMSource: General Motors
Indian Automobile Industry –Growth
0
2,000
4,000
6,000
8,000
10,000
12,000
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
Year
To
tal
Sale
s (
In
cl.
Exp
ort
s)
In
'000s
Sales
1073 23
07
1875
3879
8248
5175
4123
SIAM8
9717
Vehicles Manufacturers in India
SIAM
Indian Auto-components Industry
SIAM
• US$ 10 billion revenue growing at about 18 - 20% per annum
• About 500 organised sector players and 5000 unorganised sector players
• Investment of US $ 3.8 billion
• Exports account for about 18% at about US$ 1.8 billion
• OEM demand about 54% ; 28% is replacement market
• The Indian component industry is characterised by: ۰Strong backward and forward linkages ۰Many technically capable companies ۰Increasing success in tapping export markets
Electrical Parts9%
Equipments10%
Suspension & Braking Parts
12%
Engine Parts31%
Drive Transmission
& Steering Parts19%
Body & Chassis
12%
Others7%
And Covers A Comprehensive Production Range
Break-up of Turnover
SIAM
Source: ACMA
Size of the Auto Component Industry
Year Size ( USD millions) Exports ( USD millions)
’99 – 00 3,849 456
’00 – 01 3,965 625
’01 – 02 4,470 578
’02 - 03 5,430 760
’03 – 04 6,730 1,020
’04 - 05 8,700 1,400
’05-06 10,000 1,800
SIAM
Presentation Outline
• SIAM
• Indian Automotive Industry-Current Scenario
• Growth prospects
• Forecasts and Expansion Plans
SIAM
Indian Market is interesting . . .
• Growth of Economy – GDP
• Development of Infrastructure
• Easy availability of low cost finance
• Changing demographic characteristics
• Increased need for mobility
SIAM
Growth of economy - GDP
SIAM
Growth of per capita GDP (1993-2003)
3.2%
3.4%
3.5%
3.6%
3.8%
4.0%
4.3%
4.5%
4.7%
6.6%
7.9%
0% 2% 4% 6% 8% 10%
Chile
Finland
Tunisia
Taiw an
Hungary
Slovenia
Poland
South Korea
India
Ireland
China
Top Ten Growing Economies
Source: World Bank, SIAM
Per Capita Income in BRIC will Grow Significantly
Projected US$ GDP Per Capita
2003 US$ Brazil China India Russia Germany
2000 4338 854 468 2875 22814
2005 2512 1324 559 3718 24402
2010 3417 2233 804 5948 26577
2015 6664 3428 1149 8796 29111
2020 6302 4965 1622 12527 31000
2025 7781 7051 2331 18862 32299
2030 9823 9809 3473 22427 33898
2035 12682 13434 5327 28749 37087
2040 16370 18209 8124 36314 40988
2045 20926 24192 12048 42081 44949
2050 26592 31367 17966 49848 48952Source : Dreaming With BRICs: The Path to 2050 by Goldman Sachs
Auto Industry takes off at USD 1000 per capita SIAM
Projected Growth Rates of GDP
% Brazil Russia India China
2000-2005 2.7 5.9 5.3 8.0
2005-2010 4.2 4.8 6.1 7.2
2010-2015 4.1 3.8 5.9 5.9
2015-2020 3.8 3.4 5.7 5.0
2020-2025 3.7 3.4 5.7 4.6
2025-2030 3.8 3.5 5.9 4.1
2030-2035 3.9 3.1 6.1 3.9
2035-2040 3.8 2.6 6.0 3.9
2040-2045 3.6 2.2 5.6 3.5
2045-2050 3.4 1.9 5.2 2.9
BRIC’s Real GDP Growth: 5-Year Period Averages
Source : Dreaming With BRICs: The Path to 2050 by Goldman Sachs
SIAM
Infrastructure
SIAM
Three main areas in roads:
• Golden Quadrilateral Project & North-South/ East-West Corridors
• National Connectivity Project
• Ports
• Key cities
• Grameen Sarak Yojana for development of rural roads
SIAM
Golden Quadrilateral & North-South/ East-West Corridors
13,146 km to be 4/6 laned
Estimated cost USD 12 Billion
SIAM
Easy Availability of low cost finance
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Easy finance
• Almost 95% of vehicles are financed• Lower financing rates• Large variety of financing options are available• Longer financing terms• Lower up front payment
Markets are still under-penetrated
Consumer loans / GDP (%)
18
33
52
5
55
0
10
20
30
40
50
60
Korea Taiwan Malaysia Thailand India
. . penetration currently low, with growth driven by strong fundamentals…
SIAM
Changing demographic characteristics
SIAM
India: Urban Population as % of Total Population
20.00
23.00
26.00
29.00
32.00
35.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: Euro Monitor SIAM
Demographic Profile
Per cent of population, 2003
7
23
35
35
>60
35-59
15-34
0-14
10
30
35
25
23
36
26
16
8
26
37
29
A “Young” population . . .
Highest proportion of population below 35 years (70%) in India……
Age in years
India China Germany Brazil
SIAM
. . .which means a bigger opportunity
365
240
73
3650-14
15-35
35-59
>60
2003
391
295
87
449
2009 E
Total Population in million1,04
41,22
1
130 mn plus people get added to working population in 6 yrs
Age in years
SIAM
Annual Income (at 1998-99 prices)
1992-93 1995-96 1998-99 2001-02 2006-07 (expected)
High income >$2,300
6.0 8.5 11.9 15 22
Middle income >$1,500-2,300
10.4 11.9 13.9 16 20
Low income $1,500
83.6 79.6 74.2 69 58
. . rapid changes in income segments taking place
Significant growth in high income and middle income segments will result in
higher market potential for most products SIAM
Increased need for mobility
SIAM
Large growth Potential given low penetration levels - 2004 ….
Countries Cars per thousand people
Commercial Vehicles per
thousand people
Germany 550 43
France 495 102
Malaysia 253 51
South Korea 219 89Mexico 135 69Brazil 96 24Thailand 51 75Indonesia 16 12Philippines 9 21India 7 4China 6 15
SIAM
Source: WARD’s
Buses per 1000 persons - 2003
VDA International statistics 2004SIAM
South Korea 26.0
China 6.7
Indonesia 3.5
Japan 1.8
Taiwan 1.1
Germany 1.0
India 0.7
UK 0.2
SIAM
…Low Traffic Density - 2004Countries Vehicles (Four Wheelers)
per mile
Germany 212
Korea 171.7
Thailand 140.2
Malaysia 108.8
Mexico 65.1
France 36.2
Indonesia 19.1
China 16.3
Brazil 12.8
Philippines 12.8
India 3.5
Source: WARD’s
Passenger Vehicles Growth Drivers
• Increasing affordability– Higher growth in personal disposable incomes
relative to car prices– Cheaper and easier financing options
• Growing aspirations– Faster replacement and upgrades– Income and demographic distribution
• Increased demand for mobility
SIAM
Commercial Vehicles Growth Drivers
• Growth in GDP and Manufacturing output
• Changing demand patterns
• Improved Infrastructure
• Change in transportation pattern
SIAM
Two Wheelers Growth Drivers
• Increased disposable income – more families graduating to the threshold level required for potential two wheeler customers
• Rapid urbanization with cities becoming larger-Increasing need fro mobility
• Increased demand from Semi-Urban & Rural Areas.• Wider product range/ choice available to customer • Real Price of products going down• Greater Finance Opportunities
SIAM
Presentation Outline
• SIAM
• Indian Automotive Industry-Current Scenario
• Growth prospects
• Forecasts and Expansion Plans
SIAM
India Long-Term Sales Forecast
0
500
1,000
1,500
2,000
2,500
3,000
3,500
X1,0
00
Annual Average Growth
80s 12.2
90s 8.8
00s 10.1
Source: General Motors SIAM
Future Potential Market Size of VehiclesAll figures for 2009-10
Category Growth pa
Number
Passenger Cars 18% 2,040,245
Multi Utility Vehicles 18% 331,680
Commercial Vehicles 20% 777,385
Two Wheelers 12% 10,589,585
Three Wheelers 12% 530,370
All Vehicles 14,269,265
However, potential is more if exports market is taken into consideration
The vehicle industry turnover in 2004-05 is estimated to be USD 25 billion. Even if the market grows at 8% pa, the turnover would be more than USD 65 billion in 10 years SIAM
Forecasted Two wheeler production
Source: ADB
SIAM
Forecasted Two Wheeler Production
0
50
100
150
200
250
2008 2015 2025
Year
fig
ure
s in
mill
ion
India
China
Forecasted Three wheeler production
Forecasted Three wheeler Production
0
2
4
6
8
10
2008 2015 2025
Year
fig
ure
s in
mil
lio
n
India
China
Source: ADB
SIAM
Forecasted Commercial Vehicles production
Source: ADB
SIAM
Forecasted Commercial Vehicles Production
0
10
20
30
40
50
60
70
80
2008 2015 2025
Year
fig
ure
s in
mil
lio
n
India
China
Forecasted Cars, MUVs Production
Source: ADB
SIAM
Forecasted CAr, MUVs Production
0
20
40
60
80
100
120
140
2008 2015 2025
Year
fig
ure
s in
mil
lio
n
India
China
Auto Component Industry – Managing High Growth
10+8.7
6.735.43
4.473.973.93.253.10
0.00
5.00
10.00
15.00
20.00
25.00
1997 1998 1999 2000 2001 2002 2003 2004 2005
Source : ACMA McKinsey Report
PROJECTED CAGR 2005-201415%
CAGR1997-200416.5%
(in US $ bn)
2009
18.65
40.0
20142009
18.65
40.0
2014
18.65
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Companies in India are …
Setting up Greenfield manufacturing facilities
Establishing new Joint Ventures in India
Substantially increasing their production capacities
Investing in or acquiring companies Overseas
Establishing manufacturing footprints overseas.
SIAM
India: Entry Plans
• BMW
• Citroen
• ITL
• Man
• Nissan
• Renault
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• Volksawgen AG
• Alfa Romeo
• Maserati
• Land Rover
• Aston Martin
• Scania
India: Expansion Plans
SIAM
• Ashok Leyland• Bajaj Auto• Eicher• Force Motors• General Motors• Hero Honda• Honda
• Hyundai Motors• Mahindra & Mahindra• Maruti Udyog• SkodaAuto• Tata Motors• Toyota• TVS Motors
. . . . And more
Thank You!
Society of Indian Automobile Manufacturers
Core 4B, 5th Floor
India Habitat Centre
Lodi Road
New Delhi
Phone: 011 2464 7810 - 12
Fax: 011 2464 8222
E-mail: [email protected]
Website: www.siamindia.com
SIAM