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Growth Drivers

GDP growth
Robust Economic Growth Projections : 8% to 9% - Short to Medium Term

2010 GDP ($m) 984,668.7

2011 1066396

2012(e) 1154796

2013(e) 1250338

2014(e) 1353632

2015(e) 1465288

Growth rate (%)


GDP, per capita ($)

10.3
775.5

7.9
825.7

8.3
882.7

8.3
943.8

8.3
1079.4

8.2
1154.5

Component of GDP 2006-11

Healthy mix with rapid growth - both in Industry and Service Sectors - helping Commercial Vehicles Business Expansion Substantially

Growth in Urban Population

As per 2010 Datamonitor estimates, nearly 70.2% of the Indian population live in rural areas and 29.8% live in urban areas.

Increase in urban population to sustain market expansion and drive growth

Major Thrust on Indian Road Infrastructure Development


As of December 2011, India had completed and placed in use over 16,500 kilometers of recently built 4 or 6-lane highways connecting many of its major manufacturing centers, commercial and cultural centers US $ 27Bn Project in progressCompletion by Dec12
SCV carry almost 90 percent of the countrys passenger traffic and 65 percent of its freight

Hub and spoke model

Increasing share of Road Transportation due to road infrastructure development and evolving hub and spoke model

Credit availability indicators and lending rates (vehicle financing)

PEST Analysis
Increased Infrastructure spending Stringent emission norms & safety regulations Increased income will increase freight movements Costlier finance High material cost, high production cost

Political Technolo
gical

Economic Social

Constant upgradation required to keep up with competitors Emission control tech. to meet norms

Growth in number of SMEs Status consciousness in rural India

Key Challenges
Increasing Customization & Application Proliferation

Accelerated Infrastructure development

Stiff Emission & Other Regulatory changes

Operating Cost Pressures Increased Customer awareness Accelerated Technology upgradation requirements & other Change needs

Cyclicality of businesses

Increasing Competition & WTO Regime

Key Challenges
Increased Customer awareness

Indian SCV Industry conscious of the challenges to achieve a fast transformation

The Global CV markets has developed in 4 Market distinct stages High level of regulation
Market Poor infrastructure (Roads) Rampant Overloading Customers Fragmented & Uninformed Purchase decision by price Products Dominance by MCVs (65%) Tonnage range - Few models Rugged, low tech, standardized vehicles Emission norms: Euro I & II Manufacturers Few strong local manufacturers Market Road infrastructure dev. Reduced overloading Customers Increased awareness Purchase decision more by life cycle cost Products MCVs (35%) to HCVs Shift Explosive increase in LCVs Emergence of special applications vehicles Premium CVs grow (20%) Emission norms: Euro I & II Manufacturers Entry of foreign OEMs manufacturers Market Customized vehicles Requirement Growth in product plus offerings Customers Increasing sophistication Emergence of consolidation Products MCVs diminishes (10%) Technology convergence of low end & premium products Largest share of haulage (60%) by HCVs, mainly TTs Proliferation in LCVs Emission norms: Euro III Manufacturers Dominance of foreign OEMs Domination by 3PL provider Transport solution package Customers Highly sophisticated Purchase decision purely by life cycle cost and profit High level of consolidation Products Sophisticated technology Shrinking product life cycle High Utilization High level of electronics Car derived LCVs Emission norms: Euro IV Manufacturers Consolidation of players

Level of Market Development

Stage 1 e.g. India

Stage 2 e.g. China

Stage 3 e.g. Brazil

Stage 4 e.g. USA Time

We clearly see Indian market moving towards Stage 2 and 3 simultaneously and going forward, it is likely to follow the evolutionary path, albeit at an accelerated pace

Engineering Challenges to Address Current & Introduce advance products and Future Business needs

Business
Focused products for varied customer application and performance needs Robust/ Rugged vehicles to address target markets & terrains Application proliferation with modularity, commonization and rationalization Flexible Capacity ramp up for faster response

Strategy
Customer / Market Segments

features @ no or minimal cost impact Improve fuel efficiency & driveline performance Develop Alternative Fuel Vehicles Meet Stiffer Regulations emission, safety and noise Use of alternative material Improve Reliability & Durability

Product & Process Technology

Rapid development & cost effective introduction of new products Flexibility Design/ Development/ Manufacturing/ Distribution Optimized Outsourcing

Indian Commercial Vehicle Industry Transformation to World Class Products


Before Power to weight ratio Fuel Efficiency Operating Economics Reliability Safety Moderate (4) X KmpL X Rs. (fuel cost ) / Ton / KM 4.5L KM/ 18 months warranty on Driveline Now High ( >6.5) 1.2 X KmpL 0.7 X Rs. (fuel cost ) / Ton / KM 0.7 X Rs. (fuel cost ) / Ton / KM

Low safety requirements

Safety requirements to match ECE 2S


Vastly Upgraded Technology & Process Performance Expectations

Future Growth Potential


India surpassed more mature marketssuch as France, the United Kingdom, and Italyin terms of overall size, and became the sixth-largest light-vehicle market in the world. - Report of India Automotive 2020: The Next Giant from Asia

Future Growth Potential (contd.)


Besides the liberalized policies and economic growth taking place in India, the sheer size of the population and the low penetration rate in its automotive market make the country an attractive destination for global automakers

Trends so far
The proliferation of the hub-nspoke model, improving last mile connectivity and last but not the least the strong demand originating from rural segment is likely to drive demand in the LCV segment over the medium term.

It has in fact been one of the strongest growing segments in the entire automobile space during the current year, registering a growth of 29.3% YTD Nov 2011. The SCV segment within LCVs which accounts for over 3/4th of the LCV market is driving growth on back of strong demand for transportation of consumer goods within cities, replacement demand from upper-end three wheelers and healthy viability offered to FTUs.

Future forecast

We maintain our long-term growth outlook for M&HCV with a CAGR (%) of 9.5-11.5% and for LCV with CAGR of 11-13% over the next five years We expect the LCV segment to grow by 17-18% in FY12 on YoY basis despite rising interest rates for CV financing In the sub 1t segment, passenger variants have also been successful, replacing the clumsy upper-end three wheelers, which traditionally cater to traffic in outskirts of cities.

Competitors market share