1 The Indian Automotive Industry A Perspective. 2 Global Auto Industry – An Analysis Indian Auto...

1

The Indian Automotive Industry

A Perspective

2

• Global Auto Industry – An Analysis

• Indian Auto Industry

Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles

• Indian Auto Component Industry

• Emerging Opportunities

• Overview of Indian Economy

• TATA Motors – Organisation Structure

3

Organization Structure – TATA MotorsSenior Management Team

R N Tata(Chairman – Tata Motors)

R N Tata(Chairman – Tata Motors)

Ravi Kant(Managing Director)

Ravi Kant(Managing Director)

Rajiv Dube(Sr Vice President – Passenger

Cars)

Rajiv Dube(Sr Vice President – Passenger

Cars)

P P Kadle(ED – Finance &

Corporate Affairs)

P P Kadle(ED – Finance &

Corporate Affairs)P M Telang(President – Light and

Small Commercial Vehicles)

P M Telang(President – Light and

Small Commercial Vehicles)

A P Arya(President – Heavy and Medium

Commercial Vehicles

A P Arya(President – Heavy and Medium

Commercial Vehicles

Engineering Research Centre

Engineering Research Centre

4



Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles





5

0

10000

20000

30000

40000

50000

60000

70000

1997 1998 1999 2000 2001 2002 2003 2004Year

World Vehicle Production Trends (in '000s)

North America South America European Union Other Europe Japan Asia-other than JapanSource : OICA.net

Asia’s share of the world vehicle

production is growing significantly..

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

Intense Product & Price Competition

Stagnant Sales except in Asia

Industry Margins Under Pressure

Over Capacity in most Regions

Most of Industry EVA negative

Global Focus to Asia for growth

7



Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles





8

INDIA : An Introduction

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)

India USA

Estimates for 2004

Sources:– IMF Data, The World Factbook, CIA

Current Exchange Rate: 1 USD = INR 45

Exchange Rate (PPP) : 1 USD = INR 10 (approximately)

9

Real GDP (USD Billion)

6086

118159

279

473

548586

0

100

200

300

400

500

600

1950 1960 1970 1980 1990 2000 2003 2004Year

1950 1960 1970 1980 1990 2000 2003 2004

4.2%

3.2%

3.0%

5.8%

5.4%6.9%

After decades of indifferent

growth, India’s economy is

accelerating in the new

millenium..

10

Per capita GDP (USD)

164199 216 231

328

466

511546

0

100

200

300

400

500

600

1950 1960 1970 1980 1990 2000 2003 2004Year

1950 1960 1970 1980 1990 2000 2003 2004

2.2%0.8%

0.7%

3.6%

3.6%6.9%

Rapid increase in population in the

last fifty years have negated the

impact of economic growth

in the past

11

RANK COUNTRYGDP

(Purchasing Power Parity)

1 United States 11,750,000,000,0002 China 7,262,000,000,0003 Japan 3,745,000,000,0004 India 3,319,000,000,0005 Germany 2,362,000,000,0006 United Kingdom 1,782,000,000,0007 France 1,737,000,000,0008 Italy 1,609,000,000,0009 Brazil 1,492,000,000,000

10 Russia 1,408,000,000,000

(*) Estimates for 2004Source : The World Factbook - CIA

Indian Economy already ranks 4th in the world in terms of GDP adjusted for

Purchasing Power Parity

Goldman Sachs predicts India to

be the third largest economy

in the world in absolute terms

by 2025

GDP Growth Forecast%

0

2.5

5

7.5

10

2000

-05

2005

-10

2010

-15

2015

-20

2020

-25

2025

-30

2030

-35

2035

-40

2040

-45

2045

-50

India

Brazil

China

Russia

12

Average Median Age (Years)

42.64 42.1638.99 38.85

36.27

32.26

27.81 27.6024.93 24.66 23.98

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

Japan Germany UK France USA China Brazil World Mexico India SouthAfrica

Year

Average Median Age (Years)

Source: The World Factbook, CIA

“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

India’s “Demographic Dividend”

India has one of the youngest population amongst all nations

13

Sectoral Share of GDP

55.8%

45.8% 45.2%38.1% 34.0%

27.3% 24.0%

15.2%

20.7% 21.9%

25.9%24.9%

24.2%24.5%

29.0%33.5% 32.9% 36.0%

41.1%48.5% 51.4%

0%

25%

50%

75%

100%

1950 1960 1970 1980 1990 2000 2004Year

%

Agriculture Industry Services

Sources:

Statistical Outline of India 2004-05

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..

14



Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles





15

3,758,518

203,234640,934

156,706

4,271,327

212,748

669,719

162,508

5,076,221

276,719

723,330

203,697

5,622,741

356,223

989,560

275,040

6,526,547

374,414

1,209,654

350,033

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2000-01 2001-02 2002-03 2003-04 2004-05

Year

Automobile Production in India (Nos.)

Two Wheelers Three Wheelers Passenger Vehicles Commercial Vehicles

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

16

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.

17

Personal Mobility is positively correlated to per capita GDP

18

India is expected to achieve mass motorization status in 2014

Vehicle Density vs. GDP/capitaVehicle Density vs. GDP/capitaVehicle Density vs. GDP/capitaVehicle Density vs. GDP/capita

Note: The above includes both Passenger Vehicles and Commercial VehiclesSources: Ward’s Auto Yearbook 2002, EIU, Goldman Sachs BRICs report, DRI 2002, A.T. Kearney analysis

Inh

abit

ants

/Veh

icle

10

Per Capita Income (US$ 000)

50

100

Mature MarketsMature MarketsDeveloping MarketsDeveloping Markets

USAItaly

Brazil

MexicoSouth Korea

CzechRepublic

Spain

China in 2002

India in 2014

UKAustralia Sweden

Germany

Japan

Belgium

France

AustriaCanada

Poland

India in 2002

Argentina

2 20 25 30 3515

$1,000

0 40

China in 2014

Inhabitants/Vehicle

‘02

India 100

China 82

19

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 Safety RegulationMetro Cities Rest of Country

2000 BS 2 (Euro II) BS 1 (Euro I)Underbody Protection Devices

Advance Warning Triangles

2005 BS 3 (Euro III) BS 2 (Euro II)Spray Suppression, Noise Norms, Headlamp levellers

2009 BS 4 (Euro IV) BS 3 (Euro III)ABS, Pedestrian Protection

(Expected)

Transition of Emission & Safety Regulations for VehiclesIndia

Emission Regulation

20



Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles





21

2,183,785

879,759

640,934

2,906,323

937,506

669,719

3,876,175

848,434

723,330

4,355,168

935,279

989,560

5,193,752

986,208

1,209,654

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2000-01 2001-02 2002-03 2003-04 2004-05Year

2-Wheeler Production & Market Sub-Segments (Nos.)

Motorcycles Scooters Moped

Within 2-Wheelers, Motorcycles contribute 80% of the segment size

CAGR – 15%

22

Indian 2-Wheeler Market Competitive Scenario

Motorcycle 50% 30% 13% 4% 1% 2% <1% - <1%

- 15% 28% - 2% 46% 9% <1% -

- - 82% - - - 8% 10% -

India is now the second largest two-wheeler market

in the world

Figures denote Mkt Share (Apr-Oct 05)

23

The Indian 2-Wheeler 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

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

Similarity with Global Industry

CharacteristicsIndian 2-wheeler Industry

24

Key Market Drivers

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

Key Trends

Eclipse of scooter segment

Emergence of new motorcycle sub-

segments

Economy

Executive

Performance

Shrinking product life-cycles

25



Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles





26

203,234 212,748

276,719

356,223374,414

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2000-01 2001-02 2002-03 2003-04 2004-05Year

3-Wheeler Production (Nos.)

Three Wheeler

Predominantly used for commercial purposes, for both Goods Transport

(40%) and Passenger Transport (60%).

CAGR – 17%

27

Indian 3-Wheeler Market Sub-segments and Competitive Scenario

68% 24% 2% 1% 3% 3%

23% 40% 12% 13% 7% 6%

India is the largest three-wheeler market in the world

Passenger

Goods

Scooters India

60%

40%

Sub Segments


28

The Indian 3-Wheeler 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.


• None. Similarity with Global Industry

CharacteristicsIndian 3-wheeler Industry

29

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.

30



Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles





31

513,415

127,519

0

500,301

105,667

63,751

557,410

114,479

51,441

782,562

146,325

60,673

960,505

181,778

67,371

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2000-01 2001-02 2002-03 2003-04 2004-05Year

Passenger Vehicle Production & Market Sub-Segments (Nos.)

Passenger Cars Utility Vehicles Multi-Purpose Vehicles

Unlike the USA, the Indian Passenger Vehicle market is dominated by Cars

(79%)

CAGR – 17%

(*)

(*) MPVs were part of Passenger Car segment till 2000-01

32

Indian Passenger Vehicle Market – Competitive Scenario

Passenger Cars 52% 17% 19% - 1% 5% 2% 2% 2% 1% - <1% <1%

Utility Vehicles 2% 18% 1% 42% 21% 1% 10% 1% <1% - 4% - <1%

Multi Purpose Vehicles

100% - - - - - - - - - - - <1%

4th largest Passenger Vehicle Market in Asia


33

The Indian Passenger vehicle Industry

• 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.


• 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

CharacteristicsIndian Passenger Vehicle Industry

34

Passenger Car Penetration is low in India

The low penetration presents an opportunity for industry players to

offer an affordable four-wheeled alternative to the mass of 2-wheeler

customers

Ca

rs p

er

tho

us

an

d p

op

ula

tio

n

35

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

36



Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles





37

87,784

68,922

96,752

65,756

120,502

83,195

166,123

108,917

211,143

138,890

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2000-01 2001-02 2002-03 2003-04 2004-05Year

Commercial Vehicle Production & Market Sub-Segments (Nos.)

Medium & Heavy Commercial Vehicles Light Commercial Vehicles

Unlike most developed markets, Indian Market has seen dominance

by Medium Commercial vehicles

CAGR – 22%

38

Indian Commercial Vehicle Market – Competitive Scenario

Medium & Heavy CV - Trucks

64% 24% - 8% - 3% - <1% <1%

Buses – L, M & HCV 40% 30% 7% 5% 10% 6% 1% 1% -

Light & Small Comm Veh – Trucks

59% <1% 32% 4% 3% 3% <1% - -

TATA Motors dominates over 60% of the Indian Commercial Vehicle Market. It is also the World’s fifth largest Medium & Heavy commercial

vehicle manufacturer.


39

The Indian 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

• CyclicalSimilar with Global CV Industry

CharacteristicsIndian CV Industry

0

50

100

150

200

250

Nos i

n '00

0

Indian CV Industry

CAGR: 5%

40

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

41

Impact of Road development

Source: VDA (German Automotive Association), Worldbank, DRI Automotive report

0

100

200

300

400

500

600

700

800

900

1000

0 5 10 15 20 25

Tru

ck

p

en

etr

ati

on

MH

CV

/ m

po

pu

lati

on

Germany

France

UK

SpainPortugal

IndiaIndonesia

South Africa

Argentina

Brazil

ChinaRomania

Hungary

Mexico

1

2

3

4

Stage

GDP per capita1000 US$ / head

0

100

200

300

400

500

600

700

800

900

1000

0 0.5 1 1.5 2

Tru

ck

p

en

etr

ati

on

MH

CV

/ m

po

pu

lati

on

Germany

France

UK

Spain

Portugal

Turkey

Australia

IndiaIndonesia

South AfricaChina

Brazil

ArgentinaRussia

1

2

3

4

Stage

Road DensityPaved Highway (km) / Area (km2)

Dramatic impact in initial stage of

road development

Gradual impact

Indian CV Industry: Trucks

Impact of GDP Growth.

The growth of the Commercial vehicle industry is critically dependent on Infrastructure development & economic activity

India (AL)

42

Road network development in India

Golden Quadrilateral

N S E W Corridors

Feeder Roads

Source: CrisInfac, NHAI

Year-wise completion schedule of NHDP

Planned length – 14,000 km

2005-0752%

Completed15%

200421%2003

12%

Between 2003-04 to 2007-08 each year ~2000 Kms of 4-laned highways will be added Between 2003-04 to 2007-08 each year ~2000 Kms of 4-laned highways will be added

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

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

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

2

4

6

8

10

12

14

16

18

15 25 35 45GVW (Tonnes)

Aver

age

Powe

r to

Wei

ght r

atio

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

Europe

Japan

Brazil

India

Average Power To Weight Ratios Of Selected Countries

Average Power To Weight Ratios Of Selected Countries

China Truck

mar

ket

sophis

ticat

ion

Truck

mar

ket

sophis

ticat

ion

44



Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles





45

3,340

625

3,892

578

4,670

760

5,710

1,020

7,300

1,400

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2000-01 2001-02 2002-03 2003-04 2004-05

Year

Automobile Component Business - India(In USD Million)

Domestic Export

The growth rate in Auto Components business has kept pace with OEM

growth

CAGR – 22%

46

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 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)

47

Rotating Auto Electricals

Tyres & Tubes

Heavy Forgings

Wheel Rims

Small Castings & Forgings

Plastic Components

Hand Tools

Metal bonded & Moulded Rubber Parts

Aftermarket

Customer complexityTier 2-n supplier Tier 1 supplier

Lo

wM

ed

ium

Hig

h

Pro

du

ct C

om

ple

xit

y

Transition Path

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

48

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)

49



Two Wheelers

Three Wheelers

Passenger Cars

Commercial Vehicles





50

111,138

16,26327,112

13,770

104,183

15,462

53,165

11,870

179,682

43,366

72,005

12,255

265,052

68,144

129,291

17,432

366,724

66,801

166,413

29,949

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2000-01 2001-02 2002-03 2003-04 2004-05

Year

Automobile Exports from India (Nos.)

Two Wheelers Three Wheelers Passenger Vehicles Commercial Vehicles

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

51

Opportunities for the industry are emerging both in the areas of Automotive Manufacturing and Engineering Services

Manufacturing:

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

Engineering Services:

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)

52

Thank You

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