A

BRIEF REPORT

ON

AUTO AND AUTO ANCILARIES IN INDIA

May, 2014














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Page 2 of 13
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A brief report on Auto & Auto Ancillaries in India

Private & Confidential Page 3 of 13

growth, the demand for SCVs have also reached a point of saturation across metros and tier II/III
cities. Among segments, the M&HCV segment reported a decline of 24.0% during February 2014,
while sales volumes in the LCV segment contracted by 32.5% during the same period. The demand
contraction continues to be across the board with M&HCV (trucks) being affected the most,
registering a drop 22.1% in volume sales during the same period. Overall, M&HCV sales have been
declining for over 22 consecutive months, reflecting the impact of weak economic activity, subdued
industrial activity and as a result low freight/cargo availability. In terms of market share, Tata
Motors has gained some its lost market share in the M&HCV (Goods) segment in 11m 2013-14,
while its market position has weakened in the LCVs (Goods) segment as slowdown has caught up
with the sub 2t category where it commands a strong market share. In contrast, the 2-3.5t segment
has witnessed strong growth where M&M has relatively strong market position with its wide
portfolio of pick-up trucks.

1.2.2 Passenger Vehicles

The domestic passenger vehicle (PV) industry volumes at 217,749 units in Feb 2014 declined by
3.9% YoY as both the Utility Vehicles (UV) segment as well as the Vans segment shrunk by 9.1%
YoY and 32.8% YoY, respectively. However, breaking the streak of volume decline that was being
witnessed during the prior four months, the Passenger Car (PC) segment recorded a mild growth of
1.4% YoY on the back of healthy volumes of several new models. The reduction in excise duty on
PVs in Feb 2014 is expected to result in an uptick in demand over the next few months given that
(a) the excise duty sop is applicable only till June 30, 2014 which could lead to sales advancement to
some degree; (b) around 40% of the industrys sales are attributable to replacement demand, a
segment of buyers that may choose to avoid postponement of their purchase decision further to
capitalize on the currently available window of reduced PV prices.

1.2.3 Two Wheelers

Two Wheelers accounted for the largest share in the export market at 67 per cent in 2013. The
month of Feb 2014 marked seven consecutive months of positive volume growth for the domestic
two-wheeler (2W) industry, unlike various other automobile segments. With volumes at 1.2 million
units, domestic 2W volumes grew by 9.7% YoY in Feb 2014 riding mainly on continued robust
demand for scooters. Accounting for 24.1% of 2W industry volumes (in 11m 2013-14), scooter
volumes expanded by a robust 28.2% YoY in Feb 2014, with demand for motorcycles also growing
by a steady 5.4% YoY during the month. Within the motorcycles segment, growth dynamics have
undergone a change in 11m 2013-14 compared to 2012-13. While volumes in the 100cc segment had
shrunk by 1.9% in 2012-13 (over the previous year), growth has been moderately positive in this
largest motorcycle sub-segment in 11m 2013-14 at 4.2% YoY. In contrast, the fastest growing sub-
segment of 2012-13 i.e. 125cc bikes has seen its growth taper-off from 26.0% in 2012-13 to minus (-
) 3.8% YoY in 11m 2012-13. In terms of market share, Honda continues to expand its share having
increased it from 18.9% in 2012-13 to 23.6% in 11m 2013-14 at the expense of Hero MotoCorp,
Bajaj Auto and TVS Motor.

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Page 4 of 13
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1.3.2 Exports

Automobile Exports Trends
Category 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Passenger
Vehicles
218,401 335,729 446,145 444,326 507,318 554,686
Commercial
Vehicles
58,994 42,625 45,009 74,043 92,663 79,994
Three Wheelers 141,225 148,066 173,214 269,968 362,876 303,088
Two Wheelers 819,713 1,004,174 1,140,058 1,531,619 1,947,198 1,960,941
Grand Total 1,238,333 1,530,594 1,804,426 2,319,956 2,910,055 2,898,659
Source: SIAM

1.4 Major Automotive Players in India

Companies Segments
Ashok Leyland LCVs, M&HCVs, buses
Asian Motor Works M & HCVs
Bajaj Auto Two and three wheelers
BMW India Cars and MUVs
Daimler Chrysler India Cars
Eicher Motors LCVs, M & HCVs
Fiat India Cars
Force Motors MUVs and LCVs
Ford India Cars and MUVs
General Motors India Cars & MUVs
Hero Honda Motors Two wheelers
Hindustan Motors Cars, MUVs and LCVs
Honda Two wheelers, cars and MUVs
Hyundai Motors Cars and MUVs
Kinetic Motor Two wheelers
Mahindra & Mahindra Three wheelers, cars, MUVs, LCVs
Maruti Suzuki Cars, MUVs, MPVs
Piaggio Three wheelers, LCVs
Royal Enfield Motors Two wheelers
Skoda Auto India Cars
Suzuki Motorcycles Two wheelers
Swaraj Mazda Ltd LCVs, M & HCVSs, buses
Tata Motors Cars MUVs, LCVs, M&HCVs, buses
Toyota Kirloskar Cars, MUVs
TVS Motor Co Two wheelers
Volvo India M & HCVs, buses
Volkswagen India Cars
Yamaha Motor India Two wheelers



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1.5 Profile Of Major Players In India

1.5.1 Tata Motors

Instigated in the year 1945, Tata Motors has a wide network of retailers and suppliers across India. It
was in 1954 that the company launched its first vehicle. Today more than 3 million Tata cars and
heavy vehicles glide through Indian roads. The company gained the prestige of being the first from
engineering industry of India to be listed under the New York Stock Exchange in September 2004.

Besides being second biggest in the passenger car division, Tata Motors is also ranked as fifth
highest in the category of medium and heavy commercial vehicles at international level.

With the help of its associates, Tata Motors offer high end manufacturing and automotive solutions
to its customers. It's foremost indigenously made car was Tata Indica, followed by a mini-truck Tata
Ace in 2005. In the year 2009, the firm marked its name in the pages of automotive history by
introducing the world's fuel efficient and cheapest car - Tata Nano.

1.5.2 Mahindra and Mahindra

Mahindra and Mahindra is the flagship company of Mahindra Group. It was set up in 1945 to make
general purpose utility vehicles for the Indian market and soon it started manufacturing agricultural
tractors and light commercial vehicles (LCV).

The company has recently started a separate sector, Mahindra systems, and automotive
Technologies (MSAT) in order to focus on developing components as well as offering engineering
services. Mahindra and Mahindra have two main operating divisions. One is the Automotive
Division for the manufacturing of utility vehicles, LCV and three wheelers.

1.5.3 General Motors

In 1928 General Motors began with assemblage of Chevrolets, trucks, buses, and batteries. Although
it closed operations in 1954, it has been in Indian market as a part of tie-ups with Hindustan Motors
to produce Bedford trucks, Vauxhall cars, Allison transmission, and off-highway equipment. In
1994, General Motors India was incorporated as a 50-50 joint venture with C.K. Birla Group of
Companies. In 1999 it became a fully owned subsidiary of General Motors when General Motors
Overseas Corporation bought the remaining shares.

The existing General Motors plant was originally built by Hindustan Motors. In 1994 General
Motors modernized it. The plant is located at Halol, near Vadodara, Gujarat.

1.5.4 Ford India

Ford has been in India since 1907 when it launched Model A here. In 1926, Ford India was
established, but the operations were discontinued in 1954. Again in 1995, Ford Motor Company
received government approval to establish Mahindra Ford India, Limited (MIFL).

It was 50:50 joint ventures with Mahindra and Mahindra Limited (M & M). In November 1998 Ford
A brief report on Auto & Auto Ancillaries in India

Private & Confidential Page 7 of 13

received approval to increase its stake in the joint venture to 92.18%. The Company was re-
christened as Ford India Limited.

It has set up a modern, integrated manufacturing facility in Maraimalai Nagar near Chennai.

1.5.5 Bajaj Auto Ltd

Bajaj Auto Ltd. is the largest exporter of two and three wheelers. With Kawasaki Heavy Industries
of Japan, Bajaj manufactures state-of-the-art range of two-wheelers. The brand, Pulsar is continually
dominating the Indian motorcycle market in the premium segment. Its Discover DTSi is also a
successful bike on Indian roads.

Since 1986, there is a technical tie-up of Bajaj Auto Ltd. with Kawasaki Heavy Industries of Japan to
manufacture state-of-art range of latest two-wheelers in India. The JV has already given the Indian
market the KB series, 4S and 4S Champion, Boxer, the Caliber series, and Wind125.

1.5.6 Maruti Udyog

In February 1981 Maruti Udyog Limited (MUL) was incorporated under the provisions of the
Indian Companies Act, 1956. It was established to meet the growing demand of a personal mode of
transport caused by the lack of an efficient public transport system. A license and Joint Venture
Agreement was signed between Government of India and Suzuki Motor Company (now Suzuki
Motor Corporation of Japan) in October 1982. It manufactured India's first affordable cars. In the
past twenty years it has diversified into various types of passenger cars catering to the need of
different section of the population.

The manufacturing Unit of is located at Palam Gurgoan Road, Gurgoan, Haryana.

1.5.7 Hero Honda Motors

Hero Honda Motors, an India based Two-wheeler Company. It is regarded as the Worlds Largest
Manufacturer of Two-wheelers.

It manufactures geared and gear-less two-wheelers. It caters low powered bikes to high power bikes
to its wide pool of 15 million customers world-wide. Products like Hero Honda Splendor, Hero
Honda Passion, CD Dawn, Hero Honda CBZ and Hero Honda Karizmaare extremely popular
among masses. Their products are well known for fuel efficiency and as well as power delivery
coupled with affordability. Its gearless or step-thru models like Hero Honda Street and Hero Honda
Pleasure are also gaining huge popularity amongst young Indian ladies.

1.6 Government Initiatives

Government has taken several policy initiatives and pro-active measures to enhance the
effectiveness and drive growth in Automotive Sector. Major steps have been taken to make India a
global automotive hub under the Automotive Mission Plan' for the period of 2006-2016. The
Mission Plan aims to make India emerge as the destination of choice in the world for design and
A brief report on Auto & Auto Ancillaries in India

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manufacture of automobiles and auto components, without put reaching a level of US$ 145 billion.
Some of the other key initiatives include:

Formation of National Automotive Board (NAB) to look into the issue of recall of vehicles;
hence improving manufacturing standards
Reduction of excise duty on small cars
Launch of the National Mission for Hybrid & Electric Vehicles under Budget FY12, to make
hybrid vehicle kits cheaper by reducing the excise duty rebate to 5% from 10%
State Government promoting industrial space especially in the automobile sector
Open to Public Private Partnerships (PPP)
Establishing special auto parks and virtual SEZ's for auto components industry by providing
an interest subsidy on loans and investment in new plants and equipment
Export benefits to intermediate suppliers of auto components against the Duty Free
Replenishment Certificate (DFRC)
Automatic approval for 100% Foreign Equity Investment in auto components
manufacturing
Manufacturing and importing in this sector exempt from licensing and approvals

1.7 Future Perspective

The rapid improvement in infrastructure, huge domestic market, increasing purchasing power,
established financial market and stable corporate governance framework have made the country a
favorable destination for investment by global majors in the auto industry, as per Automotive
Mission Plan (AMP) (2006-16).

Additionally, the introduction of alternative fuels like hydrogen and bio fuels needs to be promoted
to ensure sustainability of the industry over the long term. The vision of AMP 2006-2016 aims India
to emerge as the destination of choice in the world for design and manufacture of automobiles and
auto components with output reaching a level of US$ 145 billion accounting for more than 10 per
cent of the GDP and providing additional employment to 25 million people by 2016.

In addition, the US-based car major, Ford aims to make India its export hub and plans to sell its
products in more than 50 countries over a period of time. The company has committed a total
investment of US$ 2 billion in India so far (November 2012).

The luxury car market of India is set for growth over the medium and long term. The market is
about 30,000 cars a year and is rising steadily.

1.7.1 Strategic Insight

Some of the key strategies that vehicle manufacturers are likely to adopt in 2013 are listed below:

a) Commercial vehicles
Launch new models
Increased customer focus by expanding sales and service network
Focus on product innovation to create new market segments
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Develop new products for the international markets

Expand footprint to newer export markets
Continue thrust on cost control & productivity improvement measures
Greater thrust on and expansion of less cyclical businesses.

b) Passenger vehicles
Launch new vehicle models, especially more diesel models
Increase focus on tier II and tier III markets, even for high-end models
Expand sales and service network for enhanced customer satisfaction
Increase focus on expanding pre-owned vehicle business
Continue thrust on cost control & productivity improvement measures
Leverage social media to establish closer bonds with customers.

c) Two wheelers
Increase focus on small towns and rural markets (e.g. expansion of distribution/service
network)
Increase focus on emerging markets such as Brazil, Africa, Argentina, Indonesia, etc to
push exports.



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Page 10 of 13
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A brief report on Auto & Auto Ancillaries in India

Private & Confidential Page 11 of 13

Figures for financial year April to March (* Estimates)

2.2 Auto Component Industry - Production Turnover


Financial Year
Ending
2005 2006 2007 2008 2009 2010 2011 2012
Percentage Change
(%)
25.6 38.7 20.8 6.5 -0.7 28.4 34.2 13.3
* latest data as available


2.3 Major players

Sona Koyo Steering Systems, Rane Madras and Rane TRW Systems are the key players
in steering systems.
Bharat Gears, Gajra Bevel Gears and Eicher are some of the major players in the gears
sub-segment. Two international companies, Graziano Transmission and SlAP Gears
India, have set up their base in India.
Clutch Auto, Ceekay Daikin, Amalgamations Repco and Luk Clutches are the major
players in the clutch sub-segment. RaneBrake Lining and Rico Auto are the key players
manufacturing clutch-facings.
GKN Drive shafts (India) and Delphi cater to the drive shaft requirements of passenger
cars and SonaKoyo Steering Systems services to the commercial vehicle segment.
Brakes India, KalyaniBrakes and Automotive Axles are the three major brake system
suppliers in the country.
Rane Brake Lining, Sundaram Brake Lining, Hindustan Composites and Allied Nippon
dominate the brake linings sub-segment.
Jamna Auto and Jai Parabolic are the major manufacturers of leaf springs.
Gabriel India, Delphi and Munjal Showa are the key manufacturers of shock absorbers.
Lumax, Autolite and Phoenix Lamps are the key players in the headlights sub-segment.\
Premiere Instruments and Controls is the leading player in the dashboard sub-segment
Jay Bharat Maruti, Omax Auto and JBM Tools are the major players in the sheet metal
parts sub segment.
26.5
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Lucas TVS, Denso, Delco Remy Electricals, and Nippon Electricals are the key players
in this segment.
Phoenix Lamps, Autolite, Hella-India, and Lumax are prominent players manufacturing
sheet metal parts.

2.4 Government Initiatives

The Government of India (GoI) plans to introduce fuel-efficiency ratings for automobiles to
encourage sale of cars that consume less petrol or diesel.

The GoI plans to push the supply of vehicles powered by electricity over the next eight years. It is
expected that there will be a demand of 5-7 million electricity-operated vehicles by 2020.

The GoI allows 100 per cent foreign direct investment (FDI) in the automotive industry through
automatic route.

The Automotive Mission Plan (AMP) 2006-2016 aims at doubling the contribution of automotive
sector in gross domestic product (GDP) by taking the turnover to US$ 145 billion in 2016 with
special emphasis on export of small cars, multi-utility vehicles (MUVs), two & three wheelers and
auto components.

2.5 India: The Global Auto Hub

Nissan India is currently exporting a number of child parts, engine and body parts to
overseas markets. We export to about 101 countries worldwide and there are many
parts that we export from India regularly to 14 countries, including big markets like the
UK, Brazil, Mexico and USA.
South Africa is pitching its auto component industry to Indian automakers for
partnerships. Accompanied by a delegation of 27 companies.
RSB Transmissions has entered into a partnership with DHB Automotives, Brazil to
launch auto components in India. The new range of products was unveiled at the Auto
Expo 2014 Components Show at Pragati Maidan, New Delhi.
Volkswagen is looking at investing US$ 248.55 million over the next five years to set up
a diesel engine manufacturing facility.
Infosys has signed a multi-year contract with Volvo Cars to provide application
development services to the latter's global operations. The application development
work includes maintaining applications to support multiple domains, including marketing
and sales, customer service, manufacturing, product development and corporate business
functions.

Furthermore, India is fast becoming a major procurement centre for Yamaha Motor for its global
operations. We are supplying around 125-130 parts from around 37 companies in India to
Yamahas global facilities including Indonesia, Vietnam and Thailand. In the next 3-4 years, we plan
to supply around 300-400 parts and double the number of vendors from India, as per Mr Sanjiv
Paul, Group Head Purchase Operations, India Yamaha Motor (IYM).


A brief report on Auto & Auto Ancillaries in India

Private & Confidential Page 13 of 13

2.6 Future Perspective

It is estimated that by 2016-17, the total production of the auto component industry would be $75
billion with exports accounting for $15 billion, 20% of the total domestic production. The demand
for auto components in the same year is expected to cross $80 billion.

Domestic Indian companies have developed strong manufacturing capabilities that have helped
them till now in keeping costs low and quality under control. As volumes increase, Indian
component manufacturers will have to scale up their operations and further improve quality, cost
and delivery performance to global standards demanded by customers, it added.

Over 70% of the auto component companies in India are SMEs. Government support for
R&D/new product development is critical.

It also asked for elimination of customs duty on alloy steel, aluminum alloy and secondary aluminum
alloy.