The Indian Automotive Industry
A Perspective
1

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Indian Auto Industry
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
2

A P Arya
(President – Heavy and
Medium Commercial Vehicles
Organization Structure – TATA Motors
Senior 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) Rajiv Dube
(Sr Vice President – Passenger
Cars)
Engineering
Research Centre
3

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Indian Auto Industry
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
4

70000
60000
50000
40000
30000
20000
10000
World Vehicle Production Trends (in '000s)
Asia’s share of the world vehicle production is growing significantly..
0
1997 1998 1999 2000
Year
2001 2002 2003 2004
North America South America European Union Other Europe Japan Asia-other than Japan
Source : OICA.net
Data excludes 2-wheelers where Asia is not only the largest producer, but is also the largest market
5

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
6

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Indian Auto Industry
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
7

INDIA : An Introduction




Population
States
Geographical Area
GDP - Nominal
:
:
:
:
India
1080 million
28
(+ 7 Union Territories)
3.3 mn sq km
US $ 0.67 trillion
USA
296 million
50
(+14 dependent areas)
9.6 mn sq kms
US $ 11.73 trillion

Per Capita Income - Nominal:
Per Capita Income :
(at Purchasing Power Parity)
Estimates for 2004
Sources:
– IMF Data, The World Factbook, CIA
US $622
US $ 3080
US $39,935
US $ 39,496
Current Exchange Rate: 1 USD = INR 45
Exchange Rate (PPP) : 1 USD = INR 10 (approximately)
8

Real GDP (USD Billion)
600
500
400
After decades of indifferent growth,
India’s economy is accelerating in the new millenium..
5.8%
5.4%
6.9%
548
586
473
300
200
100
0
3.0%
279
4.2%
60
1950
86
1960
3.2%
118
159
1970 1980 1990 2000
Year
1950 1960 1970 1980 1990 2000 2003 2004
2003 2004
9

Per capita GDP (USD)
600
500
400
300
200
100
0
Rapid increase in population in the last fifty years have negated the impact of economic growth in the past
2.2%
164
199
0.8%
216
0.7%
231
1950 1960
3.6%
328
3.6%
466
6.9%
511
1970 1980 1990 2000
Year
1950 1960 1970 1980 1990 2000 2003 2004
2003
546
2004
10

Indian Economy already ranks 4 th in the world in terms of GDP adjusted for
Purchasing Power
Parity
RANK COUNTRY
7
8
5
6
3
4
1
2
9
10
United States
China
Japan
India
Germany
United Kingdom
France
Italy
Brazil
Russia
(*) Estimates for 2004
Source : The World Factbook - CIA
GDP
(Purchasing Power Parity)
11,750,000,000,000
7,262,000,000,000
3,745,000,000,000
3,319,000,000,000
2,362,000,000,000
1,782,000,000,000
1,737,000,000,000
1,609,000,000,000
1,492,000,000,000
1,408,000,000,000
7.5
5
2.5
10
%
0
Goldman Sachs predicts India to be the third largest economy in the world in absolute terms by
2025
GDP Growth Forecast
India
Brazil
China
Russia
11

Average Median Age (Years)
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
42.64
42.16
38.99
Japan Germany UK
Source: The World Factbook, CIA
38.85
France
36.27
USA
32.26
China
27.81
Brazil
Year
Average Median Age (Years)
27.60
India has one of the youngest population amongst all nations
24.93
24.66
World Mexico India
23.98
South
Africa
“Although it is the most populous country, because of Beijing’s long-standing one-child policy,
China’s working age population will begin to decline in the next 10 years. Meanwhile, India’s youthfulness 350 million citizens are under age 15 - ensures its workforce will expand for decades, potentially enabling it to outstrip China’s economic pace through sheer weight of numbers.”
Time Magazine, Issue dated Dec 05, 2005
12

India has transitioned from a predominantly agrarian to a service-based economy in line with the growth trajectory followed by major developed economies..
Sectoral Share of GDP
The Indian Economy is now more broad-based and thus resilient..
100%
29.0%
33.5% 32.9%
36.0%
41.1%
48.5% 75%
51.4%
15.2%
20.7% 21.9%
25.9% 50%
24.9%
24.2%
24.5%
55.8%
25%
45.8% 45.2%
38.1%
34.0%
27.3%
24.0%
0%
1950
Sources:
Statistical Outline of India 2004-05
1960 1970 1980
Year
1990
Agriculture Industry Services
2000 2004
13

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
14

Automobile production in India has doubled in 4 years, with growth seen across all four major segments..
Automobile Production in India (Nos.)
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
By numbers, two wheelers are the dominant segment of the Indian Automotive market
156,706
640,934
203,234
3,758,518
162,508
669,719
212,748
4,271,327
203,697
723,330
276,719
5,076,221
275,040
989,560
356,223
5,622,741
350,033
1,209,654
374,414
6,526,547
2000-01 2001-02 2002-03
Year
2003-04
Two Wheelers Three Wheelers Passenger Vehicles Commercial Vehicles
2004-05
15

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.
16

17

India is expected to achieve mass motorization status in 2014
India in
2002
Developing Markets Mature Markets
Inhabitants/Vehicle
100
50
10
0
China in 2002
India in 2014
India
China
China in 2014
Brazil
Argentina
Mexico
South Korea
Poland
Czech
Republic
Spain
Canada
Australia
Italy
France
Germany
Belgium
Austria
UK
Sweden
Japan
2 15 20 25 30
$1,000
Per Capita Income (US$ 000)
Note: The above includes both Passenger Vehicles and Commercial Vehicles
Sources: Ward’s Auto Yearbook 2002, EIU, Goldman Sachs BRICs report, DRI 2002, A.T. Kearney analysis
35
‘02
100
82
USA
40
18

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
YEAR
2000
2005
2009
Transition of Emission & Safety Regulations for Vehicles
India
Emission Regulation
Metro Cities Rest of Country
BS 2 (Euro II) BS 1 (Euro I)
Safety Regulation
Underbody Protection Devices
Advance Warning Triangles
BS 3 (Euro III)
BS 4 (Euro IV)
BS 2 (Euro II)
BS 3 (Euro III)
Spray Suppression, Noise
Norms, Headlamp levellers
ABS, Pedestrian Protection
(Expected)
19

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Indian Auto Industry
Three Wheelers
Passenger Cars
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
20

2-Wheeler Production & Market Sub-Segments (Nos.)
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
640,934
879,759
2,183,785
2000-01
Within 2-Wheelers, Motorcycles contribute 80% of the segment size
669,719
937,506
2,906,323
723,330
848,434
3,876,175
989,560
935,279
4,355,168
2001-02 2002-03
Year
Motorcycles Scooters Moped
2003-04 2004-05
CAGR
1,209,654
986,208
5,193,752
– 15%
21

Motorcycle
50% 30% 13% 4%
15% 28% -
82% -
Figures denote Mkt Share (Apr-Oct 05)
1% 2% <1% <1%
2% 46% 9% <1% -
8% 10% -
India is now the second largest two-wheeler market in the world
22

The Indian 2-Wheeler Industry
Indian 2-wheeler Industry Characteristics
Similarity with Global Industry • Large variety of products & choice for the customer
(9 manufacturers, 70+ Models)
Dis-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.
23

Key Market Drivers
 Increasing disposable incomes

Low operating cost
 Higher fuel efficiency of Newgeneration 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
Key Trends

Eclipse of scooter segment
 Emergence of new motorcycle subsegments
 Economy
 Executive
 Performance
 Shrinking product life-cycles
24

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Indian Auto Industry
Two Wheelers
Passenger Cars
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
25

3-Wheeler Production (Nos.)
200,000
150,000
100,000
50,000
0
400,000
350,000
300,000
250,000
203,234
2000-01
Predominantly used for commercial purposes, for both Goods Transport
(40%) and Passenger Transport (60%).
212,748
2001-02
276,719
2002-03
Year
Three Wheeler
356,223
2003-04
CAGR
374,414
2004-05
– 17%
26

Sub
Segments
Scooters
India
60% 68% 24% 2% 1% 3% 3%
Passenger
40%
23% 40% 12% 13% 7% 6%
Goods
Figures denote Mkt Share (Apr-Oct 05)
India is the largest threewheeler market in the world
27

The Indian 3-Wheeler Industry
Indian 3-wheeler Industry
Similarity with Global Industry • None.
Characteristics
Dis-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.
28

Key Market Drivers
 “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
Key Trends

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.
29

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Indian Auto Industry
Two Wheelers
Three Wheelers
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
30

Passenger Vehicle Production & Market Sub-Segments (Nos.)
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
127,519
513,415
(*)
Unlike the USA, the Indian Passenger
Vehicle market is dominated by Cars
63,751
105,667
500,301
(79%)
51,441
114,479
557,410
60,673
146,325
782,562
67,371
181,778
960,505
0
2000-01 2001-02
(*) MPVs were part of Passenger Car segment till 2000-01
2002-03
Year
2003-04
Passenger Cars Utility Vehicles Multi-Purpose Vehicles
2004-05
CAGR
– 17%
31

Indian Passenger Vehicle Market
– Competitive Scenario
Passenger
Cars
Utility
Vehicles
Multi
Purpose
Vehicles
52%
2%
100%
17%
18%
-
19%
1%
-
-
42%
-
1%
21%
-
5%
1%
-
2%
10%
-
2%
1%
-
2%
<1%
-
1%
-
-
-
4%
<1% <1%
<1%
<1%
Figures denote Mkt Share (Apr-Oct 05)
4 th largest Passenger Vehicle Market in Asia
32

The Indian Passenger vehicle Industry
Indian Passenger Vehicle
Industry
Similarity with Global Industry
Dis-similarity with Global
Industry
Characteristics
• 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)
• Market dominated by Mini Cars & Hatchbacks (>80%)
• 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.
33

The low penetration presents an opportunity for industry players to offer an affordable fourwheeled alternative to the mass of 2-wheeler customers
34

Key Market Drivers
 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
Key Trends
 Market evolution from Mini cars to Hatchbacks to
Compact Sedans now evident
 Increasing customer emphasis on aesthetics and comfort.
 Shrinking product life-cycles
35

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Indian Auto Industry
Two Wheelers
Three Wheelers
Passenger Cars
Indian Auto Component Industry
Emerging Opportunities
36

Commercial Vehicle Production & Market Sub-Segments (Nos.)
200,000
150,000
100,000
50,000
0
400,000
350,000
300,000
250,000
68,922
87,784
Unlike most developed markets,
Indian Market has seen dominance by Medium Commercial vehicles
65,756
96,752
83,195
120,502
108,917
166,123
138,890
211,143
2000-01 2001-02 2002-03
Year
2003-04
Medium & Heavy Commercial Vehicles Light Commercial Vehicles
2004-05
CAGR
– 22%
37

Indian Commercial Vehicle Market
– Competitive Scenario
Medium &
Heavy CV -
Trucks
Buses – L, M
& HCV
Light & Small
Comm Veh –
Trucks
64%
40%
59%
24%
30%
<1%
-
7%
32%
8%
5%
4%
3% -
10% 6% 1%
3% 3% <1%
<1%
1%
-
<1%
-
-
Figures denote Mkt Share (Apr-Oct 05)
TATA Motors dominates over 60% of the Indian Commercial Vehicle
Market. It is also the World’s fifth largest Medium & Heavy commercial vehicle manufacturer.
38

The Indian CV Industry
Indian CV
Industry
Characteristics
Similar with Global
CV Industry
• Cyclical
Dis-similar to
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
Indian CV Industry
250
200
150
CAGR: 5%
100
50
0
7
0
-7
1
7
2
-7
3
7
4
-7
5
7
6
-7
7
7
8
-7
9
8
0
-8
1
8
2
-8
3
8
4
-8
5
8
6
-8
7
8
8
-8
9
9
0
-9
1
9
2
-9
3
9
4
-9
5
9
6
-9
7
1
9
9
8
-9
9
0
0
-0
1
0
2
-0
3
39

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
40

Indian CV Industry: Trucks
The growth of the Commercial vehicle industry is critically dependent on Infrastructure development & economic activity
Impact of Road development Impact of GDP Growth.
1000
900
800
700
Dramatic impact in initial stage of road development
600
Turkey
500
400
300
200
Australia
Russia
Argentina
Brazil
China
100
0
0
Indonesia
India
0.5
Spain
Portugal
1
UK
France
1.5
Stage
Germany
4
3
2
1
2
1000
900
800
700
Road Density
Paved Highway (km) / Area (km 2 )
Source: VDA (German Automotive Association), Worldbank, DRI Automotive report
Gradual impact
600
500
Spain
Portugal
400
300
Brazil
Argentina
Hungary
200
100
Mexico
Romania China
South Africa
Indonesia
India
0
0 5 10 15
GDP per capita
1000 US$ / head
Stage
Germany
UK
France
20
4
3
2
1
25
41

Road network development in India
Between 2003-04 to 2007-08 each year ~2000 Kms of 4-laned highways will be added
Golden
Quadrilateral
Year-wise completion schedule of NHDP
Planned length
– 14,000 km
2004
21%
N S E W
Corridors
2003
12%
Feeder
Roads
Completed
15%
2005-07
52%
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
42

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
14
12
10
18
16
Europe
Japan
Brazil
China
8
6
4
2
15
India
25
GVW (Tonnes)
35 45
43

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Indian Auto Industry
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
44

Automobile Component Business - India
(In USD Million)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
625
3,340
2000-01
The growth rate in Auto Components business has kept pace with OEM growth
578
3,892
760
4,670
1,020
5,710
2001-02 2002-03
Year
Domestic Export
2003-04
1,400
7,300
2004-05
CAGR
– 22%
45

Key Market Drivers
 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.
Key Trends
 India’s emergence as low cost global sourcing destination.

Indian ancillary manufacturers are shifting focus from global aftermarket 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)
46

Rotating Auto
Electricals
Tyres & Tubes
The Indian Auto component industry is now transitioning from being a supplier for the global aftermarket to becoming a fullscale global Tier 1 supplier
Heavy Forgings
Wheel Rims
Small Castings &
Forgings
Plastic Components
Hand Tools
Metal bonded &
Moulded Rubber Parts
Aftermarket Tier 2-n supplier Tier 1 supplier
Customer complexity
47

Exports from India
Suppliers of:
•
Castings
• Forgings
• Machined Items
• Rubber Items
• Wheel Rims
Indian Component suppliers are adopting different approaches for Global expansion & growth
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)
48

•
•
•
•
•
•
TATA Motors – Organisation Structure
Global Auto Industry – An Analysis
Overview of Indian Economy
Indian Auto Industry
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
49

700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Automobile Exports from India (Nos.)
International Business growth presents a huge opportunity, as well as a challenge for the
Indian Automotive
Industry
CAGR
Overall – 22%
Passenger Veh – 57%
2-Wheelers
– 35%
29,949
166,413
17,432
129,291
68,144
66,801
13,770
27,112
16,263
111,138
12,255
72,005
43,366
11,870
53,165
15,462
104,183
179,682
265,052
366,724
2000-01 2001-02 2002-03
Year
2003-04 2004-05
Two Wheelers Three Wheelers Passenger Vehicles Commercial Vehicles
50

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

Indian IT Majors offering on-shore and off-shore engineering services to Global
IT players.
(e.g. TCS, TATA Technologies, Infosys,
Satyam)

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
 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)
51

52