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Dilip Chenoy Director General Society of Indian Automobile Manufacturers

Dilip Chenoy Director General Society of Indian Automobile Manufacturers Plans for Expansion & Investment (Auto & Component Manufacturers). Market Update Breakfast - India September 12, 2006.

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Dilip Chenoy Director General Society of Indian Automobile Manufacturers

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  1. Dilip Chenoy Director General Society of Indian Automobile Manufacturers Plans for Expansion & Investment (Auto & Component Manufacturers) Market Update Breakfast - IndiaSeptember 12, 2006

  2. The Indian Automotive Sector: The Growth Story and OpportunitiesDilip Chenoy, Director General ,Society of Indian Automobile ManufacturersatINDIA BREAKFAST in CHICAGO, ILLINOIS 12th September 2006 SIAM

  3. Presentation Outline • SIAM • Indian Automotive Industry-Current Scenario • Growth prospects • Forecasts and Expansion Plans SIAM

  4. 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

  5. Presentation Outline • SIAM • Indian Automotive Industry-Current Scenario • Growth prospects • Forecasts and Expansion Plans SIAM

  6. Evolution of Automobile Industry 1970 - 1984 1985 - 1995 1995-2000 Post 2000 • 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 • 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 • Cars were luxury • Manufacturing licensed; expansion restricted • QR on import • High customs duty, excise duty & sales tax • Market dominated by Tata, HM, Bajaj, PAL SIAM

  7. 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 SIAM

  8. Size of the Indian Automobile Industry 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 SIAM

  9. Value of the Indian Automobile Industry All figures for Apr 2005- Mar 06 India exports another USD 2.5 billion value of vehicles 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. SIAM

  10. Indian Vehicle Parc 2005 Total Registered Vehicles ~ 87 Mn Source: Govt. of India Statistics of Registered Vehicles & SIAM estimates SIAM

  11. 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. CAGR 13.8% 1.8% 4.1% 6.5% 11.7% 3.2% 7.1% 2.0% 3.2% 5.1% (thousands of units) SIAM

  12. Total Vehicle Sales: 1970 - 2004 SIAM Source: General Motors

  13. Indian Automobile Industry –Growth 9717 8248 5175 3879 4123 2307 1875 1073 8 SIAM

  14. Vehicles Manufacturers in India SIAM

  15. 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 SIAM

  16. And Covers A Comprehensive Production Range Break-up of Turnover SIAM

  17. Size of the Auto Component Industry Source: ACMA SIAM

  18. Presentation Outline • SIAM • Indian Automotive Industry-Current Scenario • Growth prospects • Forecasts and Expansion Plans SIAM

  19. Indian Market is interesting . . . • Growth of Economy – GDP • Development of Infrastructure • Easy availability of low cost finance • Changing demographic characteristics • Increased need for mobility SIAM

  20. Growth of economy - GDP SIAM

  21. Growth of per capita GDP (1993-2003) Top Ten Growing Economies Source: World Bank, SIAM

  22. Per Capita Income in BRIC will Grow Significantly Source : Dreaming With BRICs: The Path to 2050 by Goldman Sachs SIAM Auto Industry takes off at USD 1000 per capita

  23. Projected Growth Rates of GDP BRIC’s Real GDP Growth: 5-Year Period Averages Source : Dreaming With BRICs: The Path to 2050 by Goldman Sachs SIAM

  24. Infrastructure SIAM

  25. 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 SIAM

  26. Golden Quadrilateral & North-South/ East-West Corridors 13,146 km to be 4/6 laned Estimated cost USD 12 Billion SIAM

  27. Easy Availability of low cost finance SIAM

  28. 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

  29. Markets are still under-penetrated . . penetration currently low, with growth driven by strong fundamentals… SIAM

  30. Changing demographic characteristics SIAM

  31. Demographic Profile SIAM

  32. A “Young” population . . . Per cent of population, 2003 China Germany Brazil India Age in years >60 35-59 15-34 0-14 Highest proportion of population below 35 years (70%) in India… SIAM

  33. . . .which means a bigger opportunity 2003 2009 E Age in years 0-14 15-35 35-59 >60 1,044 Total Population in million 1,221 130 mn plus people get added to working population in 6 yrs SIAM

  34. . . rapid changes in income segments taking place Significant growth in high income and middle income segments will result in higher market potential for most products SIAM

  35. Increased need for mobility SIAM

  36. Large growth Potential given low penetration levels - 2004 …. Source: WARD’s SIAM

  37. Buses per 1000 persons - 2003 VDA International statistics 2004 SIAM

  38. …Low Traffic Density - 2004 Source: WARD’s SIAM

  39. Passenger VehiclesGrowth 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

  40. Commercial Vehicles Growth Drivers • Growth in GDP and Manufacturing output • Changing demand patterns • Improved Infrastructure • Change in transportation pattern SIAM

  41. 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

  42. Presentation Outline • SIAM • Indian Automotive Industry-Current Scenario • Growth prospects • Forecasts and Expansion Plans SIAM

  43. Annual Average Growth 80s 12.2 90s 8.8 00s 10.1 Source: General Motors SIAM

  44. Future Potential Market Size of Vehicles All figures for 2009-10 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 SIAM

  45. Forecasted Two wheeler production Source: ADB SIAM

  46. Forecasted Three wheeler production Source: ADB SIAM

  47. Forecasted Commercial Vehicles production Source: ADB SIAM

  48. Forecasted Cars, MUVs Production Source: ADB SIAM

  49. Auto Component Industry – Managing High Growth (in US $ bn) PROJECTED CAGR 2005-2014 15% CAGR 1997-2004 16.5% Source : ACMA McKinsey Report SIAM

  50. 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

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