Economy of two wheeler

Delhi city travelling cost per month

comparison
Ordinary Bus AC Bus
Distance
Travelled
Fuel
Efficiency
(km/ltr)
Fuel cost per
litre
Service
charge
Insurance
charge
Running
charge per
Km

Total
Operating

1000

0.88

2W
Executive
Segment

Metro
1000

1.5

1000

1.04

4W Entry
segment

1000

1000

70

15

64

64

67

250

63

500

0.87

Value Chain Analysis

Value Chain

Supplier
s

Operatio
ns

Outboun
d
logistics

Marketin
g&
sales

Service

Supplier Market

Matured Auto Component industry

Strong supply chain to major OEMs
Majority are small and Medium enterprise
Small Companies need to invest heavily in
latest machineries, manufacturing
processes, technologies and capacity
building to remain competitive

Source: Strategic Plan, Ministry of Heavy Industry and Public Enterprise

Cumulative sales %
120

100

80
Cumulative sales %
60

40

20

0
10

20

Source : INDIAN AUTO COMPONENT INDUSTRY- AN OVERVIEW, ACMA

612

Quality Award & Certifications

ISO 9000
TS 16949
QS 9000
ISO 14001
OHSAS 18001
JIPM

Number of Companies
552
438
33
204
95
3

Deming Award Winners

11

TPM Award Winners

15

Japan Quality Medal Winners

Shingo Silver Medallion Winners

1
1

Performance of auto component

sector
Paramet
ers
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Turnover
8.7
12
15
18
18.4
22
Growth
rate (%)
29%
38%
25%
20%
2%
20%
Export
1.69
2.47
2.67
3.52
3.8
3.8
Growth
rate (%)
34%
46%
8%
32%
8%
0%
Imports
1.9
2.48
3.6
5.22
6.8
8.16
Growth
rate (%)
33%
30%
45%
45%
30%
20%
Investme
nt
3.75
4.4
5.4
7.2
7.3
9
Growth
rate (%)
21%
17%
23%
33%
1%
23%

% share of the Components

Others; 7%
Electrical; 9%
Engine Part; 31%
Equipment; 10%

Suspension & Braking Part; 12%

Drive Transmission Part; 19%
Body & Chasis; 12%

Major Players

 India is a net importer of auto components of USD

4.36 Bn

 Export market

Operations

Outbound logistics- Dealers

Necessity to expand customer touch
points
Sales as well as service capability
Semi Urban & rural area are
focus(45% sales)
Satellite dealership
Challenge for smaller player and new
Entrant

 Hero Motocorp
800 dealers
4200 customer touch points
Dedicated rural vertical
Direct Sales effort-5000 & above poulation

Source: Two Wheelers Industry, Growth drivers-ICRA

 Bajaj auto
500 dealers
Expansion in rural area with commuter bike

TVS- rural & small city focused

Yamaha
Tier 2 and Tier 3
Sub dealers for rural market

HMSL
Product for mass market

Dealer Margins Comparison

Bajaj Dealer
Annual Dealer Sales
Volumes (units Nos.)
Service Load Per Year
(units Nos.)
Revenues (Sales + Service
+ Spares) (Rs. Crore)
Gross margin %
Operating Margins (%)
PAT (Rs. Crore)
Payback (years)*

Yamaha Dealer
4800

600

18,000

2,520

27.3

4.1

4.3

9.3

3.60%

3.30%

0.4

0.1

8.4

Marketing
Motorcycl
es
Entry
level

Executive

Premium

Complementors

Modification
Number plates
Helmets
Financing
Insurance
Comparison websites

External Stake holders

Ministries
Department of road
transport
Department of heavy
industries
Ministry of Petroleum
and natural gas
Ministry of
Environment and
Forests
Department of
Science & Technology

Other
associations

ACMA
SIAM
WP-29
NAB

To be modified
Fiscal Policy
The Union Budget for 2001-02 had lowered the excise duty on two-wheelers (with engine capacity in excess of 75 cc)
from 24% to 16%. The manufacturers responded to this by passing on a relatively large part of the excise cut to
customers. The Union Budget thereafter have left the excise duty on two-wheelers unchanged. But the Union Budget
2004-05 provides for a weighted deduction of 150% for investments in R&D. This may facilitate increasing R&D
allocations and allow for improvement in the technical as well as product development skills of the Indian companies.
Indian Auto Policy 2002
The Government of India approved a comprehensive automotive policy in March 2002, the main proposals of which are
as under:
Foreign direct investment : Automatic approval is proposed to be granted to foreign equity investment up to 100%
for manufacture of automobiles and components.
Import tariff : Import tariffs are proposed to be fixed at a level such that they facilitate the development of
manufacturing capabilities as opposed to mere assembly.
Incentives for R&D : The weighted average tax deduction under the Income Tax Act, 1961 for automotive companies
is proposed to be increased from current level of 125% (The weighted average deduction for R&D was increased to
150% in the Union Budget 2004-05). Further, the policy proposes to include vehicle manufacturers for a rebate on the
applicable excise duty for every 1% of the gross turnover of the company expended during the year on R&D.
Environmental aspects : Adequate fiscal incentives are proposed to promote the use of low-emission auto fuel
technology (in line with the Auto Fuel Policy). The auto policy states the Government's intent to align domestic policy
with the international practice of imposing higher road tax on old vehicles so as to discourage their use.

Vehicle Emission Norms

Emission norms for all categories of petrol and diesel vehicles at the manufacturing stage were introduced for
the first time in India in 1990 and were made stricter in 1996. When the 1996 norms were introduced, it resulted
in certain models being withdrawn from the market. With Stage I India 2000 emission norms coming into place,
the cost of developing suitable technology has remained high.
The emission norms that are currently in force for two-wheelers and three-wheelers are more stringent than the
Euro II norms. The roadmap suggested for emission norms for two/three-wheelers by the Expert Committee on
Auto Fuel Policy is as follows:
For two-/three-wheelers the emission norms are recommended to be the same in the entire country:
For new vehicles:
Bharat Stage II norms throughout the country from April 1, 2005
Bharat Stage III norms to be applicable preferably from April 1, 2008 but not later than April 1, 2010.
For reducing pollution from in-use vehicles

New pollution under control (PUC) checking system for all categories of vehicles to be put in place by April 1,
2005

Inspection & maintenance (I&M) system for all categories of vehicles to be put place by April 1, 2010

Performance checking system of catalytic converters and conversion kits installed in vehicles to be put in place
by April 1, 2007.