Market overview & trends of Asian Auto-sales market － Japan, China and ASEAN markets

Market overview & trends of Asian Auto-sales market－Japan, China and ASEAN markets 22nd August 2012 Delhi, India Ryohei SAKAMOTO Nomura Research Institute India office Automotive Industry Consulting Division Nomura Research Institute Tokyo office Automotive I& Electronics Industry Consulting Dept. 7th Floor/Unit 2A, Tower A, Building No.5, DLF Cyber CityPhase III Gurgaon, Haryana, India 122 002

Agenda • Attractiveness of Asian auto-After Market • Market outlook of major markets • Japan • China • ASEAN • Entry Approaches for Indian Auto Companies

I. Attractiveness of Asian auto-After Market －Automobile market projectionWorldwide, annual car sales will reach 100 mil. At 2017.Then Asian market is estimated to account for nearly half of it. Projection of Annual Automobile sales (flow market) by region [%] Comments ASIA (%) 40% 44% 47% (tho. units) CAGR[09-17] Region • Total Car Sales at 2017 will reach approximately 100 mil. units • Expected continuous growth mainly in emerging markets • India market will reach 5 mil. around 2017 • Growth expected to slow down in developed markets W Europe 1% US 6% Brazil 7% Russia 11% China 11% India 15% Japan 0% Other Asia 5% RoW 7% *above projection contains only main countries in each region (Source) NRI estimate, only containing PV and pickup trucks

I. Attractiveness of Asian auto-After Market －Automobile market projectionStable and brisk growth of car sales in Asia will result in expansion of stock market (total # of cars owned)… Projection of Automobile Stock Market by region [%] Comments ASIA (%) 24% 26% 28% • Since growth of stock market will come after continuous growth of car sales, portion of Asian market is less than that in new car sales. • However, the importance of Asian stock market will be increased by; • Market shrink started in developed market such as Japan • China, India starting to enjoy the bonus of market expansion also in stock market (mil. units) CAGR[09-17] Region W Europe 1% US 0% Brazil 7% Russia 4% China 12% India 8% Japan -2% Other Asia 3% RoW 3% *above projection contains only main countries in each region (Source) NRI estimate, only containing PV and pickup trucks

I. Attractiveness of Asian auto-After Market －Automobile market projectionMajor OEMs have been rapidly increasing their exposure at Asian market.Penetration of foreign majors’ cars will drive people to care more about after parts. Automobile sales of TOP 6 worldwide OEMs [07-11] and its ratio of Asian market(%): VW GM TOYOTA Renault/Nissan Hyundai Ford in million units Asianmarket (%): 2007 2011 2007 2011 2007 2011 2007 2011 2007 2011 2007 2011 Increased by 10%+ (Source) NRI

I. Attractiveness of Asian auto-After Market －Automobile market projectionAsia is expected to continue balanced growth both in flow/stock markets.Especially, long-term high growth in stock market of emerging countries expected. Growth of both Flow / Stock market by region [CAGR 09-17] Comments CAGR [09-17] of Stock market by region [%] China • In addition to the market size, Asia will enjoy well-balanced growth in flow and stock market. • Especially, in China, there will be remarkably rapid growth in terms of stock market. • As a result of fast motorization since 2004 • Increased demands for used cars, after parts are expected India Brazil Asia Total Other Asia W Europe Russia Others Japan US CAGR [09-17] of Annual Automobile sales (flow market) by region [%] (Source) NRI Estimate

I. Attractiveness of Asian auto-After Market －Business stability as stock businessAfter market business is “Stock Business”, which is relatively stable unlike “Flow Business” such as new car sales. [Reference]Historical change of Auto-sales and GDP per capita of Thailand Comments Annual Auto-sales [tho. Units] Car sales in emerging markets usually takes place according to the increase in GDP per capita There are, however, various risk factors such as financial crisis and political issues in short term. After market has a merit to stabilize automotive business unlike flow businesses such as new car sales, which sometimes causes short term sharp decline of sales GDP per capita [tho. BAH] Financial Crisis Asia Financial Crisis Military Coup (Source) UNSTATS, JAMA

I. Attractiveness of Asian auto-After Market －Free Trade Agreements with Asian CountriesFTAs which India have agreed / discussing with countries in Asian region will accelerate trading related to auto-aftermarket business. Existing Planning (under discussion) Bi-lateral Multi-lateral Bi-lateral Multi-lateral Thailand India ASEAN Bi-lateral FTA (signed in 2010)  Singapore Bi-lateral CECA (effect in 2005)  Multi-lateral FTA (signed in 2010) Malaysia Bi-lateral CECA (effect in 2011)  Regional Comprehensive Economic Partnership (RCEP *ASEAN+6) Other ASEAN India- Indonesia CECA  Non-ASEAN China India- China FTA  Korea Bi-lateral CEPA (effect in 2010)  Japan Bi-lateral CEPA (effect in 2011)  (Source) JETROmaterial

II. Market outlook of major markets －World wide aftermarket overview (market size projection)Total market size of worldwide aftermarket is 249 billion USD at 2009 and expected to reach 314 billion USD at 2015. Auto Aftermarket Market Size Projection Worldwide by Region Comments ASIA (%) 23% 25% 32% • Asia will account for more than 30 % of world wide market at 2015. • Especially, Asian region and Latin America will see rapid growth. • Remarkable growth of CAGR 30% in Latin America, 21% in China, 9% in India. • Unlike, developed markets will see slow-downed growth / market shrink (bil. USD) CAGR[09-17] Region Europe 2% US 1% Latin America 30% China 21% India 9% Japan -1% Other Asia 5% Middle East 6% (Source)“AUTOMOTIVE AFTERMARKET (2008.03)”

II. Market outlook of major markets －World wide aftermarket overview (Consumer tendencies) Consumers in China and India have tendencies to go to auto-dealers if their insurance covers, otherwise go to general repair shops if only simple repair required. Consumer tendencies on afterparts/services purchase by region Utilization of Aftermarket channels Prefer auto-dealers to take care of below parts, even after insurance period has expired Auto- dealers regardless of insurance period Auto- dealers if insurance covers Garage regardless of insurance period Quotes Engine Radiator AC Meter Wipers Others Japan • After parts/services in auto dealers are considered to be “high quality but expensive and frequently delayed” • Opinions from FGI in China; • “Dealers don’t give services unless I make reservations. Repair shops can do right on the spot when I visit” • “Repair shops provide guarantee of 1.5 year on original parts. Dealers don’t.” • “When radiators have broken down, dealers changes all of it, while repair shops can fix only part of it..” China Indonesia India (Source)Questionnaire research conducted by NRI

Japan II. Market outlook of major markets －Japan (Market size)Auto-after market is a mature market like new car sales market. China ASEAN Auto After-sales Market Size in Japan Comments (bil. USD) OES route General sales route CAGR: -1% • Japanese Auto-aftermarket is a mature market. • According to decrease in flow/stock market, after market is on the decrease. • OES rout used to be the majority but currently starting to decrease gradually. • On the other hand, general sales is stable 2006 2008 2010 2012 2014 (Source)“AUTOMOTIVE AFTERMARKET (2008.03)”

Japan II. Market outlook of major markets －Japan (product mix)Unique feature of Japanese market is that the audio/car navigation systemaccounts for considerable portion. China ASEAN Sales by product category in both sales routes Comments After sales through OEM route After sales through general outlets Tyre, audio & car navigation system and oil / Chemical products are the biggest product categories in terms of sales. Consumables and functional parts have been more sold through general sales route. 2010; Value basis 2010; Value basis Interior Accessories Others Audio, Car Navigation System Dress up parts Others Tune up parts Aluminumwheels Oil, Chemicals Tyres Functional Parts Oil, Chemicals Consumable goods Audio, Car Navigation System General After parts

Japan II. Market outlook of major markets －Japan For auto-dealers, aftermarket can generate more profit than that of new car sales and its profit contribution highly appreciated. China ASEAN Management condition of typical Japanese auto dealers (2010, average of 10 dealers) Comments Million JPY New carsales It is becoming important to gain profit from after market, since new car sales has peaked out. Not only for auto-dealers, auto-makers after parts sales is one of important profit sources. [38%] [65%] Used car Sales [11%] • More than 60%of the total profit coming fromAfter Sales Services/ Parts [13%] [49%] [21%] Others [2%] [1%] Sales Operating Profit (Source)JADA

Japan II. Market outlook of major markets －Japan For Indian companies, producing Private Brand products and re-manufacturedproducts are considered to be potential entry approaches. China ASEAN Possible Entry Approach to Japanese Market for Indian Companies • DIY and Auto Center Chains have been important sales channel, in addition to auto-dealers. • These sales channels have entered “Private Brand” business leveraging their strong / broad sales network. • Especially, oils , cleaning liquids, filters and consumables such as wiper blades and batteries are compatible with this “private brand” business. • Moreover, portable navigation device (PND) is also promising in that it is possible to replace existing expensive genuine navigation system. 1. Providing Products for Private Brands of Car Parts Shop Chains 2. Providing Re-manufactured Products for Expensive Auto-Parts • Used parts such as re-manufactured products for expensive parts such as parts for engine/transmission are receiving attention recently. • Target parts include starter, alternator, turbo charger, injection pump, transmission parts and others. • Currently these re-man parts have been provided dominantly by Japanese makers. If possible to recycle or provide core parts of these, potentially possible to capture after parts demands of Japanese vehicles

Japan II. Market outlook of major markets －Japan (Ref.) Import of auto-parts from overseas markets has been increasing briskly.Also for Indian companies, auto-parts export to Japan is expected to grow. China ASEAN Recent trends of import of auto-parts Comments Recent Import of auto-parts Auto-parts import by country (2011) • Import of Auto parts have been recently increasing due to; • Intensified cost competition among car makers • Enhanced quality of Chinese auto-parts makers • Import from India have been increased by45 % yoy from 2010. • Value of more than 400 bil.JPY is already imported from China. • There considered to be a lot room for expansion of import from India Thousand ton Billion JPY; 2011 YoY 2001 2003 2005 2007 2009 2011 * The above includes all the auto parts, not limited to after parts (Source）Trade Statistics (Source) JAPIA

Japan II. Market outlook of major markets －China (Market size)China is one of the markets where huge growth takes place continuously for upcoming years. China ASEAN Auto After-sales Market Size in China Comments (bil. USD) CAGR: 21% • Rapid market growth of after-market has been expected in China for following reasons; • Rapid growth of stock market with CAGR of 12% • Increased consumer consciousness regarding after care for their cars 2005 2007 2009 2011 2013 2015 (Source)“AUTOMOTIVE AFTERMARKET (2008.03)”

Japan II. Market outlook of major markets －China60-70% of all the after parts (value basis) is generated throughAuto Parts City route. However, to capture this opportunity is extremely difficult. China ASEAN * # of outlets (estimated) Distribution network of after market in China Comments Parts maker Auto parts makers • Most parts shops are located in Auto Parts City. • Parts shops in Auto Parts City purchasing parts from exclusive agency inside of each Auto Parts city. • Distribution flow in Auto Parts City is not well-organized. Therefore, parts makers need to do sales activities for primary shops respectively. Auto Parts City Wholesale Bosch/ Denso Maker AMdiv. Distributor [Primary shop] 2,800 250 k Distribution Auto Dealers (4S) Parts shop [Secondary Shop] 2,800店 • Secondary shops not only purchase genuine parts from AM division of parts makers but also purchase original parts via distributors. Outlet BCS/ Denso Shop Auto Dealer Repair Garage Secondary Shop Primary shop Auto centre • Since Japanese dealers have repair garage aside, there is no business flow of purchasing parts from independent repair garages. • Generally, however, Chinese auto-dealers rarely have repair garages and they contract with independent repair shops. 200-300 k End-user End users OES route Auto Parts City Route60～70% Chains route (Source) Various material, interviews

II. Market outlook of major markets －China There are more than 240 thousand repair shops in China,most of which are small businesses. Japan China ASEAN Break down of repair shops in China by license type Comments Repair shop Categories • Repair shops in China reached 220 thousands in 2003 and 240 thousands in 2005. • Only 58 thousands have 1st/2nd license which correspond those in Japan. • While Japan has 80 thousands repair shops for 75 million car owned, China has 58 thousands repair shops for 33 million car owned. • Density of repair shops in China (569 cars covered by one repair shop) is higher than in Japan (938 cars covered by one repair shop) LicenseType # of Companies Service Lineup • Capable of overhaul of E/G and transmission • Capable of repair of high complexity 8,000 1st Tier • Mid-sized repair shops Capable of repair related to E/G, transmission, Chassis and other driving related parts 50,000 2nd Tier • Small-sized repair shops only capable of minor repair related to interior/exterior which doesn’t influence driving function 182,000 3rd tier (Source) Chinese Auto Yearbook 18

Japan II. Market outlook of major markets －ChinaMajority of repair shop/auto parts shops are accumulated in auto parts cities, althoughsome of all independent shops do not sell genuine parts and many “copy parts” are in market. China ASEAN Auto Parts City has broad coverage nation wide On the contrary, its actual situation is… ＿ Copy parts of MAZDA detected by Guangdong Administration for Industry & Commerce By notification by related party, Guangdong Administration for Industry & Commerce inspected parts companies and charged approximately 2,800 copy parts of MAZDA parts.Administration officers inspected 6 sales companies in a Auto Parts City in Guangzhou city. As a result of the inspection, approximately 2,000 parts have been charged as copy parts of MAZDA, such as oil filter, fuel filter, air filter, piston and valves. In Shenzhen, 10 legal officers inspected 4 sales companies in Luohu area and detected 800 copy parts in total as a result of legal execution / inspection. (Source) China Intellectual Property News 11th Dec. 2009

Japan II. Market outlook of major markets －China (Auto Parts City in Beijing)Built in1994. Total area of 100 tho. m2 and 50 of building floor space.Has 1,000 shop tenants with annual 1 billion RMB. China ASEAN Image of typical APC buildings (both found in the Beijing West APC) Assumed low efficiency in sales activity • New building whose rent is more expensive • In a primary parts shop in the APC, there were business cards of parts makers found. • Some of primary shops (exclusive agency in the area) still placing orders based on the contact info such as these. • Old building whose rent is cheaper, only has two floors (Source) pictures taken by NRI

II. Market outlook of major markets －China Major wholesaler doesn’t exist between parts makers & APC.Therefore, parts shops in APC directly deals with auto parts makers. Japan China ASEAN Distribution network of after market in Auto Parts City (Image) Parts Maker A Parts Maker B Parts Maker C • Primary shops are placing orders directly parts makers or their wholesale division. • (Each agent has a PC in their outlet for ordering, if not, they are placing orders by phone call, utilizing contact points of business cards of parts makers) ・・・ • Major wholesaler doesn’t existbetween parts makers & APC • For example, parts shops usually purchase parts via regional exclusive agency in APC but can also directly purchase parts from parts makers • Sold prices are assumed to be adjusted so that they can be homogeneous regardless of distribution channel APC Primary Shop In Auto Parts City (Regional Exclusive Agency ) • For example, Bosch has a regional exclusive agency in APC, apart from BCS shop. • They also sell other brand products Secondary Shop In Auto Parts City Secondary Shop In Auto Parts City Secondary Shop In Auto Parts City Repair shop • Inside of APC is not well-organized • Real-estate companies are in charge of operating APCs and they attract parts hops and charge tenant fee • Repair shops in town or individual users come to APC to buy auto parts. • APC functions both as a retailer and as a wholesaler. Repair shop End users (source) hearings by NRI 21

Japan II. Market outlook of major markets －China Key points on China Auto-Aftermarket China ASEAN Key Points on China Auto-Aftermarket In China, new car sales has rapidly increased recently. Stock market and after market are also considered to greatly expand continuously. In terms of sales channel, general sales route, most through “Auto Parts City (APC)” , accounts for approximately 70% of total turnover. Distribution flow of general sales route has not been well-organized. • Its most unique feature is that a lot of business takes place in APC, where many repair shop/parts shops are accumulated. • For enlarging business in China aftermarket, time consuming visiting primary shops in each APC will be required. 1 2 3

Japan II. Market outlook of major markets －ASEAN (Market size)Although not as high as China, ASEAN market is expected to seestable growth in Auto-Aftermarket. China ASEAN Auto After-sales Market Size in South-East Asia and Australia Comments (bil. USD) CAGR: 5% Stable annual growth of 5% is expected to continue in ASEAN & Australia region. Its market size will be around half of Chinese market (3.) 2005 2007 2009 2011 2013 2015 (Source)“AUTOMOTIVE AFTERMARKET (2008.03)”

Japan II. Market outlook of major markets －Indonesia While general sales route is not yet organized, OES route is established mainly byAuthorized Distributors of conglomerate groups, which are into both manufacturingand sales and a major player in auto-parts business. China ASEAN * # of outlets (estimated) Distribution network of after market in Indonesia Comments Parts maker Overseas Parts Makers Recycle Factory Repair garage Genuine Parts Makers Domestic Parts Makers (2nd Tier) • OES：Auto-parts makers of local conglomerate group manufactures after parts and sell them to auto-dealers Wholesale APTM Trading house (e.g. Chinese Partsmakers) Importers • OES：Genuine auto-parts makers sell some of those parts to general sales route. Distribution Main Dealer • OES：Main dealers such as Auto2000 centrically purchase after parts from same conglomerate group and distribute to sub-dealers under the same group Mid~HighQuality Outlets Low Quality Outlets(pasarmobil) Outlet Sub Dealer Specialized Service SS Used Car Dealer Auto-parts Retailer Repair shop 4,400 1,300 1,700 6,600 900+ End-user • OES：Procures after parts from main dealers directly. No direct business is going on between parts makers. • General sales route: Retailers of mid-high quality procures some genuine parts as well. End users High Quality Original Parts Foreign Parts Inc. Copy parts Re-man Parts OES route General Sales route (Source) Interview, NRI

Japan II. Market outlook of major markets －Indonesia Authorized Distributors are sole players which have both broad product line-up and broad coverage in terms of distribution flow. China ASEAN Main Authorized Distributors in Indonesia Network of Authorized Distributors Astra Otoparts Main Players Domestic Parts Makers (2nd Tier) Overseas Parts Makers Astra Otoparts (Wholesale division) AOP Australia Pty. Ltd Auto2000 (Astra Group) Modern retailers Repair Shops Domestic/ Overseas Parts Makers Car dealer Product Lineup • Having broad whole sale network not only with OES route but also general sales route.

Japan II. Market outlook of major markets －Indonesia Supply of original after-parts have been limited to simple parts such as consumables. As to electric parts, only genuine parts are available choice. China ASEAN Actual situation of original after-parts distribution in Indonesia Quotes Korean Dealer Japanese Dealer A Japanese Dealer B Local Main Dealer • “As far as I am aware of, original parts of these parts (left cited) are impossible to purchase from general sales route, other than from auto-dealers.” O2 Censor/ A/F Censor   Injector  IgnitionCoil  • “Although I haven’t checked, original parts of these parts cannot be purchased from general sales route.” * Imported Parts from Korea Electric Throttle  Alternator  Starter  • “Although some imported parts from Korea are available in the market, these are hard to consider as original parts. Therefore, there are little original parts supplied, if limited to electric parts.” OCV for VCT AC compressor HID Lamp   (Source) Various Interviews, NRI

II. Market outlook of major markets －Indonesia Recently, many after parts, most of which are low-price and quality, havebeen imported to Indonesia and mainly sold in low-end channel such as pasarmobil. Japan China ASEAN Recent Imports of Auto-parts in Indonesia Typical Example of Original Partssold in Indonesia • Foreign auto parts maker such as Japanese used to dominate the market, by selling high-quality parts. • After 1998 financial crisis, other foreign makers such as Chinese, Taiwanese, Thai and Vietnamese introduced original, low-price and low-quality parts (million USD) • Local suppliers are limited to producing consumables such as filters (Source)AUTOMOTIVE COMPONENT VALUE CHAIN OVERVIEW, NRI 27

Japan II. Market outlook of major markets －Indonesia (Entry approach)Despite strong demands for mid-end parts, the market is lack of major suppliers. Enriching mid-range product can be successful entry approach. China ASEAN Business environment and opportunities for Indian companies Consumer needs ratio Suppliers Opportunities Looking for highquality parts/services 1 High quality High price range Genuine parts makers already have broad product lineup • Strong demand for mid-range after parts • 43%, Secondary to the consumer group “looking for high quality parts/ services” • Indian companies should enter the market through enriching mid-end product lineup • Local manufactures also trying to develop their aftermarket business in the same segment. • Partner ship with local players should be also taken into account 51% Utilizing differentchannels based on needs *cost performance conscious 2 Mid quality Mid price range • Lack of major players • Currently, local makers are planning to develop 43% OK withlow quality Parts/services 3 Low quality Low price range • Increasing imports from Chinese makers • Including considerable amounts of copy parts 6% 28

Japan II. Market outlook of major markets －IndonesiaKey points on Indonesia Auto-Aftermarket China ASEAN Key Points on Indonesia Auto-Aftermarket In Indonesia, cars are luxury products and people have tendency to use car dealers frequently than other areas (a study shows 51% uses car dealers regardless of insurance period) Especially, parts makers of authorized dealer group are a major player in Indonesian auto-after market business, who produces genuine after parts and procures original parts from domestic and overseas markers. The national network of their dealers is estimated to be 4,000+. On the contrary, original parts supply is limited. Local makers only produces simple products such as filters and their quality is not high enough to satisfy local demands. Supply of afterparts have been polarized to high quality parts sold through auto dealers and low quality parts provided by local / import makers and is lack of affordable mid-range products. Enriching mid-range product also through partnering local suppliers can be successful entry approach for Indian auto-parts makers. 1 2 3 4 5

Japan II. Market outlook of major markets －ASEAN (Thailand)Japanese OEMs are much involved in various levels of value chain with commitmentfrom production to aftermarket, which is making their market position firm.To seize larger potential of ASEAN aftermarket, alliance with Japanese OEMs will be a key. China ASEAN Market share of PV, SUV, LCV by maker CV OEM’s involvement in each value chain level (representative OEMs) 2011; # of units basis Development Production Sales Promotion Finance Afterservice Proton TATA(1%) • Complete Knock Down • Sales / Networking activities to local leaders • Has an affiliate • Taking risk aggressively • OEM leads providing genuine parts to dealers Japanese OEM “A” Others(2%) GM Ford Mazda • Complete Knock Down • Presents for clients, party invitation • Has an affiliate • Trying to enhance variety of genuine parts Japanese OEM “B” Toyota Mitsubishi Renault Nissan • Has an affiliate Risk takingnot aggressive • Complete Knock Down+Import • Focusing on enlarging clients in rural areas • Trying to enhance variety of genuine parts European OEM Honda Isuzu Foreign OEM • Import only • Not a specific activity • Relying on local partners • OEM not committing • Relying on dealers about after service 88% Japanese OEMs:

III. Entry Approaches for Indian Auto CompaniesBelow 3 approaches will be possible entry approaches to Asian Aftermarket,leveraging the positioning of Indian companies. Contract Manufacturing Service For Japanese Makers Contract Manufacturing Service For Taiwanese Makers Possible entry approaches to Asian Auto-after market business Re-manufacturing business model Product Quality + • Price competition only leads to a war of attrition with Chinese / other companies with price competitiveness. • Value add other than low price should be added as a differentiation factor to compete in Asian market 1 2 3 • Imported low-cost / copy products are dominating . • Better to enter this segment because it only leads to a war of attrition. - 2W / 3W PassengerVehicles Commercial Vehicles Targeted Segment

III. Entry Approaches for Indian Auto Companies Contract Manufacturing Service For Japanese MakersThrough partnering with Japanese parts-makers, supply after parts for Japanese cars, which are well penetrated in ASEAN region. 1 Biz opportunities for Indian Companies Implementation Scheme Image Japanese makers have high MS in ASEAN market and has broad sales channels, which makes sense to ally with them in ASEAN aftermarket. Possible to increase competitiveness by building a cooperative partnership between Indian and Japanese companies. Competition Environment • Production • Delivery • Design • Productionoutsourcing • Sales in ASEAN • Japanese makers is not being competitive against Chinese companies in terms of cost competitiveness, making it difficult to enlarge its market share in ASEAN market • They tend to incur much cost /time for product design, due to their tendency to design from scratch for external clients, apart from OES products ASEAN Market • MS of Japanese maker is high and they have secured their own sales network Biz opportunities • By merging cost-competitiveness in production of Indian companies and brand and sales channel of Japanese makers, possible to develop effective supply scheme for ASEAN aftermarket. Comments

III. Entry Approaches for Indian Auto Companies Re-manufacturing business modelCollecting used durable parts and position India as a centric production site ofre-manufactured parts to supply mainly to Asian market. 2 Biz opportunities for Indian Companies Implementation Scheme Image Re-manufactured products (only replacing consumable parts and washing to recycle for further use) for expensive durable parts are frequently used world widely. • e.g.) engine parts, turbo charger, starter, alternator, compressor, transmission parts, etc… Develop parts collection scheme from Europe and North America, and include Europe and North America as target markets in addition to ASEAN Competition Environment • For commercial vehicles and high displacement cars, remanufactured parts are often used. • However, re-manufacturing is a labour intensive process and cannot be profitable in a country where labour cost is expensive, because it decreases the gap between re-man parts and new parts. • Used parts collection • Used parts collection • Re-manufacturing Biz opportunities • Leveraging cost competitiveness in India, provide re-manufactured parts to world market. • By building optimal supply chain from used parts collection and product supply, possible to dominate world re-manufactured parts market. Comments

III. Entry Approaches for Indian Auto Companies Contract Manufacturing Service For Taiwanese MakersPartnering with Taiwanese companies which operate throughout the world can expand possibilities to enlarge after market business world-widely 3 Biz opportunities for Indian Companies Implementation Scheme Image Taiwanese companies have built strong position, with supply chain of low cost production in MoC and supply to RoW Since Taiwanese companies are strong esp. in developed markets such as NA and EU, partnering with them can expand possibilities to operate business more broadly. • Developed markets like EU have severe cost requirement and weak preference for genuine parts, 3rd party can have high MS. • In some countries such as Indonesia where Indian makers have high MS, ,Indian parts makers can leverage its experience of application development Competition Environment • Taiwanese companies are well positioned in low-end after parts market, with optimal cost in production and product design Europe Market North America Market ASEAN Market *Especially where Indian auto-bike makers have high MS Biz opportunities • Utilizing low production cost and application development capabilities developed through businesses with Indian 4w/2w • develop and supply low-end after parts to world-wide market. Comments

Contacts Michael CHANDY Noriyuki KOBAYASHI Nomura Research Institute. Delhi Office Division Head – Automotive Industry Consulting Division E-mail: Michael.Chandy@nri.com Telephone: +91-8130-791678 Nomura Research Institute, Tokyo office Group Manager – Automotive & Electronics Industry Consulting Department E-mail: n1-kobayashi@nri.co.jp Ryohei SAKAMOTO Masayuki AOKI Nomura Research Institute. Delhi Office Senior Consultant – Automotive Industry Consulting Division E-mail: Ryohei.Sakamoto@nri.com Telephone: +91-8130-791681 Nomura Research Institute, Tokyo office Senior Consultant – Automotive & Electronics Industry Consulting Department E-mail: m4-aoki@nri.co.jp Keiichi ISHIGAKI Nomura Research Institute, Tokyo office Chief, Consultant – Automotive & Electronics Industry Consulting Department E-mail: k-ishigaki@nri.co.jp

Market overview & trends of Asian Auto-sales market － Japan, China and ASEAN markets