Automobile industry is divided into primarily the following sectors:

1. Automotive Components
2. Commercial vehicles
3. Two wheelers
4. Cars and utility vehicles

A
utomotice components: auto-component production will grow 7-9% this fiscal owing to
increased offtake from original equipment manufacturers (OEM), especially of two-wheelers
and passenger vehicles (PV). Demand from tractor, two-wheeler, and light commercial
vehicle (LCV) manufacturers is expected to accelerate, led by the improved monsoon. We project
exports will decline 4-6% due to the sharp plunge in heavy commercial vehicle sales (-28%) in the key
export destination, the United States. A further fall will be restricted due to growth from Germany
and the United Kingdom.

auto-component production to grow at a similar 7-9% in fiscal 2018. except commercial vehicles (CV)

The replacement market will continue to grow, with anti-dumping duties on certain parts lowering
competition from imports

EBITDA: as raw material prices began to rise and there was a lag in pass through. In fiscal
2018, decline in the sales of high margin components due to a fall in medium and heavy commercial
vehicle (MHCV) sales, will restrict the expansion in margin which would have improved due to higher
utilisation. Margin will also be aided by growth in realisation from certain components from the
second half of this fiscal due to implementation of Bharat Stage IV norms. The EBITDA margin in
fiscal 2018 is expected to stabilise at 13.1-13.5%.

Long-term prospects are better than near-term numbers.

Auto-component production would record 10-12% compound annual growth rate (CAGR) from
fiscal 2016 to reach Rs 4,193 billion.

Healthy rise in automobile sales will help OEM offtake record 10-12% CAGR and touch Rs 2,772
billion. Higher realisation is expected across vehicle segments over the long term due to regulatory
norms, leading to high-value components.

Higher cost of vehicles due to BS VI implementation is expected to lower demand in 2020-21.

However, higher realisation is expected to offset decline in volume demand in fiscal 2021. (CAGR of
fiscals 2016 to 2021 represents value growth while the CAGR of fiscals 2011 to 2016 represents
volume growth).

C
ommercial vehicle: domestic commercial vehicle (CV) sales to increase 6-8% in 2016-17 as:

Medium and heavy commercial vehicle (MHCV) sales growth is expected to remain flat ,
due to dwindling replacement demand by large-fleet operators (LFOs) and slow growth in
industrial output. The high base of 2015-16 is likely to be sustained, due to faster
execution/award of infrastructure projects and mining growth.
n 2016-17, bus demand growth is expected to remain robust at 8-10%, due to higher demand from
state transport undertakings (STUs), demand for intercity travel and tourism. However, demand
should be lower in the private stage carrier and school segments, due to a high 2015-16
base. Oversupply in the school segment and slowdown in issuing new route permits would add to
the weakness in these segments.

Light commercial vehicle (LCV) sales are likely to increase 9-11% in 2016-17, because of the
improving private final consumption expenditure (PFCE) and high redistribution freight. Private
spending is expected to get at boost from: low fuel prices, interest rates and inflation; the
implementation of the Seventh Pay Commission recommendations; and better income growth, with
only a marginal increase in real returns on savings. An above-normal monsoon in 2016-17 will fuel
rural demand, aiding sales.