India: Automobile Industry

Society of Indian Automobile ManufacturersSIAMJune 2005

Society of Indian Automobile ManufacturersSociety of Indian Automobile Manufacturers

• Non-profit organisation

• 37 members

• Statistical services – production, sales and exports

• Industrial & Economic Policy, Technical roadmaps and Public Policy

• Auto Expo

Promotes sustainable development of Indian automobile industry

SIAM

SIAM MembersSIAM Members• Ashok Leyland

• Atul Auto

• Bajaj Auto

• Force Motor

• Daimler Chrysler

• Eicher Motor

• Fiat

• Ford

• General Motors

• Greaves

• Hero Honda

• Hero Motors

• Hindustan Motors

• Honda Car SIAM

• Honda Motorcycle & Scooters

• Hyundai

• Kinetic

• LML

• Mahindra & Mahindra

• Maruti Suzuki

• Piaggio

• Premier Auto

• Royal Enfield

• Scooters India

• Simpson

• Skoda Auto

• Suzuki

• Swaraj Mazda

• Tata Cummins

• Tata Motors

• Tatra Trucks

• Toyota Kirloskar

• TVS Motor

• Vehicle Factory

• Volvo

• Yamaha

Range of Vehicles Made by SIAM MembersRange of Vehicles Made by SIAM Members

Indian AutomobileIndustry

Indian AutomobileIndustry

Light Pass. Vehicles

Light Pass. Vehicles

Commercial Vehicles

Commercial Vehicles Two

WheelersTwo

WheelersTractorsTractors

Three WheelersThree

Wheelers

LCV’s / M&HCVs/Buses

LCV’s / M&HCVs/Buses

PCs / MUVs / MPVsPCs / MUVs / MPVsPassenger Carriers /

Goods CarriersPassenger Carriers /

Goods CarriersMotorcycles/ Scooters/

MopedsMotorcycles/ Scooters/

MopedsFarm/ Earthmoving &

Construction EuipmentsFarm/ Earthmoving &

Construction Euipments

SIAM

Evolution of Indian automobile industryEvolution of Indian automobile industry

Cars were luxuryManufacturing licensed; expansion restrictedQR on importHigh customs duty, excise duty & sales taxMkt dominated by Tata, HM, Bajaj, PAL

Entry of MarutiEntry of Japanese 2 Wheeler and LCV mfrsDelicensing in 1993QR on importDecreasing customs & excise dutiesSeller’s mktEmergence of Hero HondaMaruti become mkt leader

Entry of international players in carsIncreased competitionAuto financeBuyers marketMarket boomEnvironmental concernsSuperior technologyFocus on pollution controlSegmentation of marketService networks

QRs removedIncreasing choice to customersEasy auto financeDiversification into financing, leasing, insurance, used car business, etcFocus on safety featuresImproving capacity utilisationIndigenously designed and developed vehiclesIncreased exports

SIAM

1970 - 1984 1985 - 1995 1995-2000 Post 2000

Indian Automobile Industry Indian Automobile Industry –– Vehicle Vehicle ParcParc

Commercial Vehicles

14%

Passenger Vehicles

13%

Two Wheelers

73%2004

Total Registered Vehicle Parc Size ~ 71.60 Mln Vehicles

Source: Govt. of India Statistics of Registered Vehicles & SIAM estimates SIAM

Recent PerformanceRecent Performance

SIAM

Size of the Indian Automobile IndustrySize of the Indian Automobile Industry

Size ~ 8.5 mn vehiclesProduction Volume ContributionProduction Volume Contribution

All figures for 2004-05

• India second largest producer of motorcycles (6.5 mn) in the world after China which has a production volume of 12 mn

Passenger Vehicles

14%

Three Wheelers5%

Two Wheelers77%

Commercial Vehicles

4%

SIAM

Current Annual Domestic Market Size of Current Annual Domestic Market Size of VehiclesVehicles

All figures for 2004-05

307,887Three Wheelers

318,438Commercial Vehicles

7,896,475All Vehicles

6,208,860Two Wheelers

1,061,290Passenger Vehicles

NumberCategory

• Currently the market is growing at a healthy rate – 16% last year• Over and above this, India had exported 6,30,000 vehicles last year

including 1,66,000 passenger vehiclesSIAM

Value of the Indian Automobile IndustryValue of the Indian Automobile Industry

Sales Value ContributionSales Value ContributionSize ~ USD 23 bn

All figures for 2004-05

Commercial Vehicles26%

Passenger Vehicles 43%

Three Wheelers2%

Two Wheelers29%

• In value terms, market for passenger cars greater than that for 2 Wheelers. Commercial vehicles contribute to significant value

• India exports another USD 2 bn value of vehicles

SIAM

Domestic Competition Domestic Competition

Type of Vehicle No of Mfrs.Passenger Cars : 11Utility Vehicles : 10Medium & Heavy Commercial Vehicles : 6Light Commercial Vehicles : 7Scooters : 7Motorcycles : 9Mopeds : 3Three Wheelers : 5

SIAM

Top Players in each segmentTop Players in each segment

Type of Vehicle Name of ManufacturersPassenger Cars Maruti Udyog

Hyundai MotorTata Motors

MUVs Mahindra & MahindraToyota MotorTata Motors

Commercial Vehicles Tata MotorsAshok LeylandMahindra & Mahindra

Two Wheelers Hero HondaBajaj AutoTVS Motor

SIAM

Market Outlook for 2005Market Outlook for 2005--0606

• Estimated Sales (incl. Exports) Growth Rate

• Passenger vehicles : 20 - 22%• Commercial vehicles : 23 - 25%• Two wheelers : 11 -13%• Three wheelers : 06 - 07%

SIAM

Automotive Forecasts in the PastAutomotive Forecasts in the Past

McKinsey (1994) : 1 million cars by the year 2000

A T Kearney : 1.5 million cars by the year 2010

NCAER : 6,25,000 cars by the year 2001-02 &

16,21,000 cars by the year 2011-12

SIAM Forecast during 10th Five Year PlanBased on GDP Growth of 6.5% : 8,40,000 PV by 2003-04

Based on GDP Growth of 8.0% : 9,52,000 PV by 2003-04

Based on GDP Growth of 6.5% : 11,00,000 PV by 2006-07Based on GDP Growth of 8.0% : 15,00,000 PV by 2006-07

SIAM

Recent Automotive Forecasts Recent Automotive Forecasts PWG-Coopers: 1.05 million LMV by the year 2004

1.19 million LMV by 2010

Booz Allen Hamilton : 1.0 million passenger vehicles by the year 2003

2.0 million passenger vehicles by the year 2010

3.5 million passenger vehicles by the year 2015

McKinsey (2004)3.0 million LPV by 2015

SIAM

Offers larger growth Potential given its Offers larger growth Potential given its existing low penetration levelsexisting low penetration levels……..

Car per thousand people

3Indonesia6China7India9Philippines

46Thailand91Brazil120Mexico186Korea202Malaysia

Source: OICA

SIAM

Future Potential Market Size of VehiclesFuture Potential Market Size of VehiclesAll figures for 2009-10

530,370Three Wheelers 12%

331,680Multi Utility Vehicles 18%

777,385Commercial Vehicles 20%

14,269,265All Vehicles

10,589,585Two Wheelers 12%

2,040,245Passenger Cars 18%

NumberCategory Growth pa

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

SIAM encouraging TransSIAM encouraging Trans--disciplinary Designdisciplinary Design- Towards Total Design

Industrial Design

CommunicationDesign

Inter-Disciplinary Design Studies

Strategic Design Management

Furniture & Interior Design

Ceramics & Glass

Toy Design & Development

Textile Design

Apparel Design& Merchandising

Graphic Design

New Media

Film & Video Communication

Animation Film Design

Ergonomics

Science & Liberal Arts

Psychology Material & Culture

Semiotics & Communication

Aesthetics

Exhibition Design

Information & Digital Design

Software & User Interface Design

Product Design

Lifestyle Accessory Design

SIAM

Rationale: Automotive Design CentreRationale: Automotive Design Centre

It is essential to strengthen indigenous design capabilities in the area of automotive and mobility products to compete on value than price.

Competition has taken new dimensions due to globalisation of the market place.

The consumer is now looking for values to meet physical and the emotional needs apart from technological advantages.

User-oriented Strategies are the key to long term competitive sustainable advantage.

SIAM

Proposed Proposed CentreCentre’’ss Focus AreasFocus Areas

Training covering skills and knowledge.Design sensitization and showcasing of new ideas and products Technology-Design fusion including humanization of technologies.User-centric ResearchDesign Services including colour, trims, styling, interaction, interior design etc.Application of Universal Design principles.

SIAM

Technology for Addressing Environmental Technology for Addressing Environmental ImperativesImperatives

Factors Influencing Emissions Management

TrafficManagement

Emissions

Air Quality

Requirements NGOPressure &

CourtInterventions

Availability ofTechnology

International StandardsFuel Quality

SIAM

Emission Standards: Existing RegulationsEmission Standards: Existing Regulations

Cars & CVs Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur, Agra

Bharat Stage III (Euro III equivalent)

All vehiclesEntire CountryEuro II equivalent/ Bharat Stage II

Type of VehiclesLocationNorms

SIAM

Emission RoadmapEmission Roadmap

-Preferably April, 2008 but not later than 01 April, 2010

-01, April, 20052 & 3 Wheelers

01 April, 201001 April, 201001 April , 200501 April, 2005Commercial Vehicles

01 April, 201001 April, 201001 April , 200501 April, 2005Passenger Cars

Bharat Stage IV

(11 Metros)

Bharat Stage III

(Entire Country)

Bharat Stage III

(11 Metros)

Bharat Stage II(Entire

Country)

Vehicle Category

11 Metros: Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur, Agra

SIAM

SIAM Working for an Integrated ApproachSIAM Working for an Integrated Approach–– For Clean Air in TransportFor Clean Air in Transport

Emission

RegulationsA

ltern

ativ

e

Fuel

sIn-use

Vehicles

Fuel

Quality

Traffic Management

GovernmentDepartments

VehicleManufacturers

OilCompanies

Judiciary

VehicleUsers

NGOs

ResearchInstitutions

SIAM24

Portfolio of Alternative FuelsPortfolio of Alternative Fuels

CNG ,LPG

Bio-fuels Bio-diesel, Ethanol

Alternative Fuels Hydrogen

Electric/Hybrid Electric Vehicles

SIAM

HarmonisationHarmonisation of Technical Regulationsof Technical Regulations

To develop harmonised, global technical regulations, covering Safety/ Emissions/ Vehicle Aggregates

India has joined WP 29 as observer. Evaluating options to join:1958 Agreement1998 Agreement-World Forum for Harmonisation of Vehicle Regulations.

UNECE – WP 29

SIAM

Stages for Implementation of Safety Stages for Implementation of Safety Regulations Regulations

STAGE I2005

STAGE II2007

STAGE IIIBeyond 2007

- e.g. Lighting, Brakes, Survival Space, NoiseBumpers, Anti-Theft Devices etc.

- e.g. EMC, ChildRestraint system etc.

- e.g. front, lateral & back collision etc.

SIAM

Testing and R & D Facilities in IndiaTesting and R & D Facilities in India

• World Class Automotive Testing & Developmental Facilities needed for– Meeting testing requirements as per stringent emerging

Safety and Emission Norms in line with ECE– Promoting development of world class automobile and

components– Deepening India’s capability in R & D and auto

designing– Catalysing development of India as a hub for product

development & related engineering services for both local & global firms

India would be investing about USD 350 Million in upgradation and creation of new test facilities

SIAM

International Market : Trade PolicyInternational Market : Trade Policy

• Removal of Quantitative Restrictions

• Tariff Levels are being progressively reduced every year

• Conditions of import – to comply with emission and safety norms as applicable to domestic companies

SIAM View: Level Playing Field Required for Manufacturers SIAM View: Level Playing Field Required for Manufacturers Operating in IndiaOperating in India

SIAM

FTAs / PTAs & Automotive IndustryFTAs / PTAs & Automotive Industry

Negotiations are on for different types of Preferential / Free Trade Agreements with:

India’s Trade Agreements

• Thailand • Singapore• ASEAN• Malaysia• Korea / Japan / China Joint Study Groups• MERCOSUR• South Africa - SACU• SAFTA• BIMSTEC• Bangkok Agreement• Chile• Egypt• Gulf Coop Council

SIAM

SIAMSIAM’’s Views : Preferential Rules of Origins Views : Preferential Rules of Origin

• Change of Custom tariff classification at the 4 digit level (from import to export)

• Value Addition (TVBD) at 50%, (including value of sub-component import of parent assemblies).This can be applied on component imports too.

• Minimum operation at country of origin (weld + paint + assembly)

• Non qualifying processes: Packaging, Re-packaging Polishing, finishing, mere assembly or disassembly, Inspection, Internal Transport, freight, anti-rust applications, oiling, etc

• Rules of origin to be certified by Government Authorities of partner countries only

SIAM

Tariff Structure Indicating Progressive Tariff Structure Indicating Progressive ReductionReduction

60%

60%

15%

15%

15%

2005-06

60%

60%

20%

20%

20%

2004-05

25%30%35%Commercial Vehicles

25%30%35%Components / Parts/CKD all vehicles

60%

60%

25%

2003-04

60%

60%

30%

2002-03

35%Multi Utility Vehicles

60%Passenger Cars

60%Two Wheelers

2001-02Category

SIAM

Recent Trends: Automobile Exports and Recent Trends: Automobile Exports and Top five export destinations Top five export destinations

29,949 *166,413 *66,801 *366,724 *AfghanistanIndonesiaSudanMexicoArab Emirates AlgeriaPeruNepal

ItalyGermanyEgyptPhilippinesBangladeshItalyBangladeshSri Lanka

Sri LankaNetherlandsSri LankaBangladesh

Commercial Vehicles

Passenger Vehicles

3-Wheelers2-Wheelers

* Total exports in Nos. during Apr 04-Mar 05

SIAM

Thank you!Thank you!

SIAM