Dilip Chenoy
Director General
Society of Indian Automobile Manufacturers
Plans for Expansion & Investment
(Auto & Component Manufacturers)
Market Update Breakfast - India
September 12, 2006
The Indian Automotive Sector: The
Growth Story and Opportunities
Dilip Chenoy, Director General ,
Society of Indian Automobile Manufacturers
at
INDIA BREAKFAST
in CHICAGO, ILLINOIS
12th September 2006
SIAM
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
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Evolution of Automobile Industry
1970 - 1984
1985 - 1995
1995-2000
 Cars were
luxury
 Manufacturing
licensed;
expansion
restricted
 QR on import
 High 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 import
 Decreasing
customs &
excise duties
 Seller’s mkt
 Emergence of
Hero Honda
 Maruti became
mkt leader
 Entry of
international
players in cars
 Increased
competition
 Auto finance
 Buyers market
 Market boom
 Environmental
concerns
 Superior
technology
 Focus on
pollution
control
 Segmentation
 Service
networks
Post 2000
 QRs removed
 Increasing 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
Government intention to make India an automotive
manufacturing hub
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Size of the Indian Automobile Industry
Commercial
Vehicles
Passenger
4%
Vehicles
13%
Three Wheelers
4%
Two Wheelers
79%
Production Volume Contribution
Size ~ 9.7 mn vehicles
All figures for Apr 2005- Mar 06
• India second largest producer of
motorcycles (7.6 mn) in the world
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Value of the Indian Automobile Industry
Three Wheelers
2%
Two Wheelers
29%
India exports another
USD 2.5 billion value
of vehicles
All figures for Apr 2005- Mar 06
Passenger
Vehicles
43%
Commercial
Vehicles
26%
Estimated Sales Value Contribution
Size ~ USD 25.5 billion
Market for passenger cars greater than that for 2 wheelers.
Commercial vehicles contribute to significant value.
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Indian Vehicle Parc
2005
Passenger
Vehicles
13%
Commercial
Vehicles
14%
Two
Wheelers
73%
Total Registered Vehicles ~ 87 Mn
Source: Govt. of India Statistics of Registered Vehicles & SIAM estimates
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Global vehicle sales grew more than 1m
units a year
80% of growth (1993-2003) was in Top 10 mkts
Nearly 50% in China and the U.S.
CHINA
3268
2769
USA
U.K.
970
SPAIN
803
INDIA
666
RUSSIA
655
FRANCE
434
CANADA
434
MEXICO
393
0
1000
13.8%
1.8
%
4.1
%
6.5
%
11.7%
715
ITALY
CAG
R
3.2
%
7.1
%
2.0
%
3.2
%
5.1
%
2000
3000
4000
(thousands of units)
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Millions
Total Vehicle Sales: 1970 - 2004
10
9
8
7
6
Japan
5
4
Germany
3
China
2
India
1
0
70
72
74
76
78
Source: General Motors
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
SIAM
8
9717
8248
12,000
2006
2005
2004
5175
10,000
2003
2002
4123
3879
8,000
2001
2000
1999
1998
1997
1875
6,000
1996
1995
1994
1993
1992
1991
2307
4,000
1990
1989
1988
1987
1986
1985
1073
2,000
1984
Total Sales ( Incl. Exports) In
'000s
Indian Automobile Industry –Growth
0
Year
Sales
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Vehicles Manufacturers in India
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Indian Auto-components Industry
• 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
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And Covers A Comprehensive
Production Range
Electrical
Parts
9%
Others
7%
Engine Parts
31%
Equipments
10%
Suspension &
Braking Parts
12%
Body &
Chassis
12%
Drive
Transmission
& Steering
Parts
19%
Break-up of Turnover
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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
Source: ACMA
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
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Growth of economy - GDP
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Growth of per capita GDP (1993-2003)
Top Ten Growing Economies
7.9%
China
Ireland
6.6%
India
4.7%
South Korea
4.5%
4.3%
Poland
Slovenia
4.0%
Hungary
3.8%
3.6%
Taiw an
3.5%
Tunisia
Finland
3.4%
Chile
3.2%
0%
Source: World Bank,
2%
4%
6%
8%
10%
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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
48952
Source : Dreaming With BRICs: The Path to 2050 by Goldman Sachs
Auto Industry takes off at USD 1000 per capita
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Projected Growth Rates of GDP
BRIC’s Real GDP Growth: 5-Year Period Averages
%
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
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
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Golden Quadrilateral & North-South/ EastWest Corridors
13,146 km to be
4/6 laned
Estimated cost
USD 12 Billion
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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 (%)
60
55
52
50
40
33
30
20
18
10
5
0
K orea
Taiwan
M alaysia
Thailand
India
. . penetration currently low, with growth driven by strong
fundamentals…
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Changing demographic
characteristics
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Demographic Profile
India: Urban Population as % of Total Population
35.00
32.00
29.00
26.00
23.00
20.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: Euro Monitor
SIAM
A “Young” population . . .
Per cent of population, 2003
India
China
Germany
10
23
Brazil
Age in years
>60
35-59
7
23
30
15-34
35
0-14
35
36
35
25
8
26
37
26
16
29
Highest proportion of population below 35 years (70%) in
India…
SIAM
. . .which means a bigger opportunity
Age in years 2003
2009 E
0-14
365
15-35
365
35-59
>60
391
449
240
73
1,044
295
87
Total Population in million
1,221
130 mn plus people get added to working population in 6
yrs
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. . rapid changes in income segments
taking place
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
>$1,5002,300
10.4
11.9
13.9
16
20
Low income
$1,500
83.6
79.6
74.2
69
58
Significant growth in high income and
middle income segments will result in
higher market potential for most products
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Increased need for mobility
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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
Mexico
Brazil
Thailand
Indonesia
Philippines
India
China
219
135
96
51
16
9
7
6
89
69
24
75
12
21
4
15
Source:
WARD’s
SIAM
Buses per 1000 persons - 2003
South Korea
26.0
China
6.7
Indonesia
Japan
Taiwan
Germany
India
UK
3.5
1.8
1.1
1.0
0.7
0.2
VDA International statistics 2004
SIAM
…Low Traffic Density - 2004
Countries
Germany
Vehicles (Four Wheelers)
per mile
212
Korea
171.7
Thailand
140.2
Malaysia
108.8
Mexico
65.1
France
Indonesia
China
Brazil
Philippines
India
36.2
19.1
16.3
12.8
12.8
3.5
Source:
WARD’s
SIAM
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
X1,000
3,500
Annual Average Growth
80s
12.2
3,000
90s
8.8
2,500
00s
10.1
2,000
1,500
1,000
500
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
0
Source: General Motors
SIAM
Future Potential Market Size of Vehicles
All 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
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Forecasted Two wheeler production
Forecasted Two Wheeler Production
figures in million
250
200
150
India
100
China
50
0
2008
2015
2025
Year
Source: ADB
SIAM
Forecasted Three wheeler production
Forecasted Three wheeler Production
figures in million
10
8
6
India
4
China
2
0
2008
2015
2025
Year
Source: ADB
SIAM
Forecasted Commercial Vehicles
production
Forecasted Commercial Vehicles Production
figures in million
80
70
60
50
India
40
30
China
20
10
0
2008
2015
2025
Year
Source: ADB
SIAM
Forecasted Cars, MUVs Production
Forecasted CAr, MUVs Production
figures in million
140
120
100
80
India
60
China
40
20
0
2008
2015
2025
Year
Source: ADB
SIAM
Auto Component Industry –
Managing High Growth
25.00
40.0
(in US $ bn)
PROJECTED CAGR
2005-2014
15%
20.00
CAGR
1997-2004
16.5%
15.00
18.65
18.65
10+
8.7
10.00
5.43
5.00
3.10
3.25
3.9
3.97
6.73
4.47
0.00
1997
1998
1999
2000
Source : ACMA McKinsey Report
2001
2002
2003
2004
2005
2009
2014
SIAM
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
Design & Research Centers in India
Cummins
SIAM
India: Entry Plans
•
•
•
•
•
•
BMW
Citroen
ITL
Man
Nissan
Renault
•
•
•
•
•
•
Volksawgen AG
Alfa Romeo
Maserati
Land Rover
Aston Martin
Scania
SIAM
India: Expansion Plans
•
•
•
•
•
•
•
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
SIAM
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: dchenoy@siam.in
Website: www.siamindia.com
SIAM