EMIS Insights - India Automotive Sector Report - Segmentation

INDIA AUTOMOTIVE SECTOR 2016/2017
An EMIS Insights Industry Report CONTENTS
06
PASSENGER
VEHICLES
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06 PASSENGER VEHICLES CONTENTS
Highlights
Overview
As of FY2016, India was the world’s sixth-largest motor vehicle producer. It also ranked as the world’s
sixth-largest passenger vehicle (PV) manufacturer in 2015, claiming a 4.9% share in global car
production. The share of passenger car sales in the PV segment declined from 81% in FY2012 to 74% in
FY2016 as a result of consumer preferences shifting towards micro SUVs, which are perceived as more
comfortable on India’s pot-holed roads. The share of micro-SUV sales in total PV sales averaged 17.6%
between FY2012 and FY2016, rising from 12% in FY2012 to 20% in FY2016. The market share of the van
segment has remained almost unchanged over the period.
Drivers and Constraints

India’s urbanising, youth-dominated population’s climb up the income ladder is the subsector’s main
driver, along with a robust domestic steel manufacturing industry and the availability of skilled and
semi-skilled labour, attracting OEM manufacturers to the country. Passenger vehicle manufacturing
faces challenges such as high taxation, increasing competition, fluctuating input prices, inadequate
road infrastructure and procedural delays of investments. Sales performance is tied to the overall
state of the economy and to consumer sentiment, which is in turn affected by interest rates, inflation,
fluctuating FX rates, and agricultural output, among other factors. The quality of the monsoon is a
vital variable for India agricultural output, which is the main determinant of rural incomes.
Outlook
The PV subsector enjoys good mid- to long-term prospects in India because of the low penetration of
passenger vehicles, the country’s favourable demographic profile, and the strengthening of the
middle class based on double-earner nuclear families. According to government estimates, India has
potential to be the world’s top production destination and market for small cars, to rank third globally
in PV sales, and to have a PV subsector that makes a total contribution of 12% to national GDP by
2026. The government has adopted various initiatives targeting greater ease of doing business and
facilitation of R&D to help the sector achieve the targeted growth.
Source: D&B, AMP 2026
INDIA AUTOMOTIVE SECTOR 2016/2017 66

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06 PASSENGER VEHICLES CONTENTS
Statistics
Domestic Passenger Vehicle Sales, units PV Sales by Type, FY2016

2,789,678
2,629,839 2,665,015 2,601,236
2,503,509 177,535
234,761 237,298 171,395
190,844 586,664
363,772 553,662 552,135 MUVs
525,839
20.50%
2,031,306 1,874,055 1,877,706 2,025,479

1,786,826
Passenger
Cars 74.30%
Vans 5.20%
FY2012 FY2013 FY2014 FY2015 FY2016
Vans
Utility Vehicles
Passenger Cars
Total Passenger Vehicle Sales
New Sales Petrol-Diesel Mix, % PV Foreign Trade, INR bn
368
345
58
56 319
52 53 52
48 47 48
44
42 237
182
36 30
12 14 13
FY2012 FY2013 FY2014 FY2015 FY2016 FY2012 FY2013 FY2014 FY2015 FY2016
Petrol Diesel Exports Imports
Source: D&B, CMIE Industry Outlook, DGFT, Maruti, SIAM

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07
COMMERCIAL
VEHICLES

Investor Company.
07 COMMERCIAL VEHICLES CONTENTS
Highlights
Overview
India is the world’s seventh-largest CV manufacturer and the subsector accounted for 3% of domestic
motor vehicle sales volume in FY2016. The domestic CV industry is split between LCVs and M&HCVs in
a ratio of 56:41, according to a 2016 report by D&B. CV production and domestic sales reported CAGRs
of 4.2% and 4.1% respectively between FY2012 and FY2016. Overall CV sales, i.e. including exports,
dropped by 3% over the same period. CV exports grew at a CAGR of 2.5% between FY2012 and FY2016,
with LCV exports claiming a 65% share in total CV exports in FY2016. Sri Lanka, Bangladesh, the UAE,
Nepal and South Africa were India’s top 5 CV export markets, claiming a combined share of 50% by
value, in FY2016. Sweden, Thailand and Finland were the top three import markets for the same year.

Rising freight movement by road against a backdrop of growing mining, construction, and
manufacturing sector output benefitted the CV subsector in FY2016. Freight movement by road is
popular in India because it provides accessibility to areas with no rail infrastructure or where laying
rails is unfeasible. Other drivers include replacement demand and pre-buying of BS-IV compliant
vehicles. Poor road infrastructure is a significant challenge for the subsector. According to the World
Bank’s Logistics Performance Index 2016, India ranked 35th out of some 160 countries in terms of
logistics quality. The government has been working to improve India’s road infrastructure, which is
expected to boost the performance of its commercial vehicle subsector.
Outlook
The introduction of GST in India is expected to spur the domestic economy on both the supply and the
demand side, which is projected to result in strong commercial vehicle sales in the medium term at
least. On the other hand, lower incentives for exports to nearby markets such as Sri Lanka and
Bangladesh are likely to decrease export volumes, while efforts to curb steel imports from China are
expected to increase raw material prices. CV prices are also likely to increase, by about 10%, as a
result of BS-VI norm compliance. Government programmes aimed at boosting the length and quality
of India’s railway infrastructure are likely to snatch business from road carriers. Commercial vehicle
sales are expected to post a CAGR of 14% between FY2016 and FY2019, according to D&B estimates.
The HCV segment will grow at 16%, as against 12% for LCVs over the same period.
Source: D&B, SIAM

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07 COMMERCIAL VEHICLES CONTENTS
Statistics
Commercial Vehicle Sales, thou units Commercial Vehicle Sales Break-Down,

FY2016
1,000
M&HCV Goods
900 901 Carriers 38%
873
800 788
700 710 702
600
500 809 793
686 M&HCV
400 633 615 Passenger
300 Carriers 6%
200
LCV
100 Passenger
92 80 77 87 102 Carriers 7%
0 LCV Goods
FY2012 FY2013 FY2014 FY2015 FY2016 Carriers 49%
Exports Domestic Sales Total Sales
Commercial Vehicle Exports, INR bn Commercial Vehicle Imports, INR bn
80 5
74 4
70 70 4
62 61 4
60 3
3 3
53
50 3
63 55 3
40 41
49 2 4 2
30 43 3 3
2
2
20 2
1
10 20 1
12 16
11 9 1 0
0 0 0
0 0
FY2012 FY2013 FY2014 FY2015 FY2016 FY2012 FY2013 FY2014 FY2015 FY2016
Passenger Carriers Goods Carriers Total Exports Passenger Carriers Goods Carriers Total Exports
Source: SIAM, CMIE Industry Outlook, D&B, DGFT

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08
TWO AND THREE
WHEELERS

Investor Company.
08 TWO AND THREE WHEELERS CONTENTS
Highlights
Overview
India boasts the second-largest two-wheeler market in the world in terms of volume of production,
and is the third-largest two-wheeler exporter, behind China and Japan. The country’s annual two-
wheeler production, at 18.8mn units in FY2016, is mostly consumed by the domestic market, with
exports totaling 2.48mn for the same year. India’s two-wheeler industry, broadly segmented into
entry-level, deluxe and premium, accounts for about 80% of the Indian motor vehicle industry in
terms of both volume and value. Motorcycles are typically the best-selling category, followed by
scooters and mopeds. Two-wheeler manufacturer Bajaj Auto, which exports about 40% of its annual
production, held a commanding 60% share in two-wheeler exports in FY2016.

Inefficiencies in the public transportation system across India’s rural, suburban and urban areas mean
that two wheelers are among the most cost-effective solutions for daily commuting. Other factors
driving two-wheeler sales include India’s favourable demographic profile, the lower prices of two
wheelers compared with those of other personal vehicles, and two wheelers’ lower operating costs.
Given India’s leading position as a global two-wheeler exporter, rupee volatility is an important factor
too, with a depreciating rupee being beneficial to exports. An increase in import duties to Sri Lanka
had a negative impact on two-wheeler exports during FY2016, similarly to political and economic
developments in key export markets such as Nigeria and Colombia.
Outlook
D&B expects annual two-wheeler sales to climb to more than 21mn units by FY2019, from some 19mn
units in FY2016. This forecast is corroborated by BMI Research, which also expects two-wheeler sales
to reach some 21mn units by 2019, and nearly 24mn by 2021, against projected outputs of some 30mn
units and 37mn units for 2019 and 2021, respectively. The outlook across motorcycle segments is
bright, with the lower-priced entry and executive segments more dependent for their growth on the
general macroeconomic situation and consumer sentiment, while the premium segment is more
affected by consumer income levels and changes in consumer preferences, according to D&B.
Improving infrastructure and changing lifestyles in urban India have resulted in a surge in the sales
of premium motorbikes, in a trend that is likely to deepen in the foreseeable future.
Source: D&B

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08 TWO AND THREE WHEELERS CONTENTS
Statistics
Vehicle Production, FY2016 Vehicle Sales, FY2016
Two Wheeler
Two Wheeler
Production
Sales 79%
79%
Three
Wheeler Three
Production 4% Wheeler
Sales 4%
Passenger Vehicle Passenger
Commercial Vehicle Commercial Vehicle Vehicle Sales
Production 14%
Production 3% Sales 3% 14%
Two-Wheeler Sales Major Export Destinations, FY2016
18,462 18,937 Mexico 5% Iran 4%

16,891 Philippines
15,754 5%
15,384
Nepal 6% Others 36%
16,005 16,456
14,807 Bangladesh
13,409 13,797 7%
Sri Lanka
12%
1,975 1,956 2,084 2,458 2,481
Colombia
FY2012 FY2013 FY2014 FY2015 FY2016 Nigeria 12% 13%
Exports Domestic Sales Total Sales
Source: SIAM

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09
AUTOMOTIVE
ANCILLARY
INDUSTRIES
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09 AUTOMOTIVE ANCILLARY INDUSTRIES CONTENTS
Highlights
Overview
India’s auto component sector is estimated to have had sales of INR 2,556bn in FY2016, having grown
at a CAGR of 5.7% between FY2012 and FY2016. The government’s Make in India initiative has been
helping consolidate the country as an auto component manufacturing hub. As a result, India’s auto
component imports rose only by 1.8% y/y in USD terms in FY2016, as against 6.1% in the previous year.
Nevertheless, India is still a net importer of auto components. Against this backdrop, up to 80% of the
auto components exported by India are supplied to OEM/Tier1 manufacturers, while the remaining
20% is exported to the after-market auto industry. Low or zero customs duties on imports from ASEAN
and the EU, in line with the FTAs India has signed, undermine domestic auto component
manufacturing by increasing the threat of advantageously-priced substitutes.

The auto components industry is raw material- and capital-intensive and also relies on sophisticated
technology and employee skills. Thus, the industry is prone to risks related to raw material supply
constraints, input price and currency fluctuation risks, and labour attrition. Its performance is strongly
tied to that of the automotive industry and the general state of the economy and manufacturing.
Intense global competition has forced domestic auto component manufacturers to upgrade the
quality of their products, so as to be up to par with international offerings. India’s robust steel
industry enables domestic auto component manufacturers to source steel cheaply, in an additional
advantage over manufacturers exposed to raw-material import risks.
Outlook
The government-sponsored Make in India initiative is expected to make auto component
manufacturers stay or establish operations in India in spite of increasing labour costs. This, alongside
rising disposable incomes, and a bullish outlook on manufacturing and private consumption, will
result in the auto component industry growing at an average rate of 11.5% between FY2016 and
FY2019, to total turnover of some INR 3,560bn, according to an August 2016 report by D&B. India’s AMP
2026 projects that the turnover of the Indian automotive industry will grow to between INR 16,000bn
and INR 19,000bn by 2026. The auto component industry, in turn, is expected to grow from INR 2,556bn
in FY2016 to between INR 6,000bn and INR 7,320bn by 2026.
Source: D&B, AMP 2026, ACMA

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Statistics
Turnover of Auto Component Industry Auto Component Exports and Imports,

USD bn
3,000 2,348.0 2,556.0 45
42.2 2,117.0 13.80 13.70 13.58 13.82
39.7 39.0 40
2,500 38.5 12.80
2,160.0 35.1 35
2,046.0 11.20 10.80
2,000 30 10.20
9.70
25 8.80
1,500
20
1,000 15
10
500
5
0 0
FY2012 FY2013 FY2014 FY2015 FY2016
FY2012 FY2013 FY2014 FY2015 FY2016
Auto Component Industry Turnover, INRbn
Auto Component Industry Turnover, USDbn Auto Component Exports Auto Component Imports
Major Export Destinations, FY2016 Major Import Destinations, FY2016
Others 39.40% Thailand

8.10% USA 7.60%
Japan
10.70% Italy 3.40%
UK 2.60%
Mexico 2.60%
France 1.60%
South Korea
Brazil 2.60% 11.20% Sweden 1.40%
France 3.00%
UAE 3.20% Others
Thailand 3.20% 16.00%
USA 23.60% Germany
Italy 3.90%
14.30%
UK 5.40%
Turkey China
Germany 7%
6.20% 23.20%
Source: ACMA, D&B

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Tyres
Overview
India boasts one of the largest tyre markets in the world, with some 150mn tyres produced and some
124mn sold domestically in FY2016. The country was a net tyre exporter between FY2012 and FY2016.
Truck and bus tyres accounted for some 72% of exports by value in FY2016, followed by passenger car
tyres with 16%. Passenger car tyres and truck and bus tyres claimed almost equal shares of 46.1% and
47.6% of tyre imports by value in the same year. By volume, cycle tyres claimed 78% of total tyre
exports in FY 2016, while imports were mainly of passenger and two-wheeler tyres, with shares of 54%
and 28% respectively. China is India’s main source of tyre imports. The country’s biggest export
markets are the US, Germany and the Philippines, which claim shares of about 10%, 6%, and 5%,
respectively.

The performance of the tyre segment hinges on the dynamics of the automotive sector in general.
Both enjoy good prospects for the foreseeable future, driven by economic growth, urbanisation, and a
strengthening middle class. Poor road infrastructure is generally considered a constraint for the
sector, but potholed roads result in higher demand for spare parts and replacement tyres. Some 60%
of tyre demand in India comes from the replacement segment, D&B said in a 2016 report. Capacity
creation in the automotive sector has spilled over into investment projects in tyre manufacturing as
well, with some INR 360bn of outstanding investment as of October 2015, mainly in the passenger car
radial (PCR) and light truck (LT) segments.
Outlook
India’s healthy recent rate of economic growth is expected to drive business sentiment which –
alongside government efforts to upgrade infrastructure, streamline agriculture and ensure steady raw
material supply to the steel, metal processing and construction industries, among others – is
projected to keep tyre demand robust in the medium-to-long term. Growing disposable incomes,
favourable consumer lending conditions and moderate inflation will help stimulate demand, including
demand for tyres and vehicles. The government’s Make in India initiative is expected to help
consolidate India as a tyre and vehicle spare part manufacturing hub, thus attracting fresh
investment in the tyre and auto component sectors.
Source: D&B

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Tyre Statistics
Tyre Production and Turnover Tyre Production by Type, FY2016

Passenger
146.1 150.7 Cars 26%
160 600
140 125.4 128.9 530
122.8 500 500
120 465
430 443
400 Trucks and
100 Busses 11%
80 300
60
200 Light Trucks
40 6%
100
20
0 0 Tractor Tyres
FY2012 FY2013 FY2014 FY2015 FY2016 4%
Two & Three
Wheelers Others 1%
Tyre Production, million units 52%
Turnover of the Indian Tyre Industry, INR bn
Tyre Sales by Segment Foreign Trade in Tyres
133
OEMs 22%
108 106
100
96
Export 18%
36 34
27 27 27
Replacement
Tyres 60%
FY2012 FY2013 FY2014 FY2015 FY2016
Imports Exports
Source: D&B, DGFT, ATMA, CMIE

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EMIS Insights - India Automotive Sector Report - Segmentation

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INDIA AUTOMOTIVE SECTOR 2016/2017

An EMIS Insights Industry Report CONTENTS

Any redistribution of this information is strictly prohibited.

Drivers and Constraints

Source: D&B, AMP 2026

INDIA AUTOMOTIVE SECTOR 2016/2017 66

Domestic Passenger Vehicle Sales, units PV Sales by Type, FY2016

2,031,306 1,874,055 1,877,706 2,025,479

New Sales Petrol-Diesel Mix, % PV Foreign Trade, INR bn

Petrol Diesel Exports Imports

Source: D&B, CMIE Industry Outlook, DGFT, Maruti, SIAM

INDIA AUTOMOTIVE SECTOR 2016/2017 67

Any redistribution of this information is strictly prohibited.

Drivers and Constraints

Source: D&B, SIAM

INDIA AUTOMOTIVE SECTOR 2016/2017 69

Commercial Vehicle Sales, thou units Commercial Vehicle Sales Break-Down,

Exports Domestic Sales Total Sales

Commercial Vehicle Exports, INR bn Commercial Vehicle Imports, INR bn

Source: SIAM, CMIE Industry Outlook, D&B, DGFT

INDIA AUTOMOTIVE SECTOR 2016/2017 70

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Drivers and Constraints

INDIA AUTOMOTIVE SECTOR 2016/2017 72

Vehicle Production, FY2016 Vehicle Sales, FY2016

Two-Wheeler Sales Major Export Destinations, FY2016

18,462 18,937 Mexico 5% Iran 4%

Nepal 6% Others 36%

INDIA AUTOMOTIVE SECTOR 2016/2017 73

Drivers and Constraints

Source: D&B, AMP 2026, ACMA

INDIA AUTOMOTIVE SECTOR 2016/2017 75

Turnover of Auto Component Industry Auto Component Exports and Imports,

Major Export Destinations, FY2016 Major Import Destinations, FY2016

Others 39.40% Thailand

Source: ACMA, D&B

INDIA AUTOMOTIVE SECTOR 2016/2017 76

Drivers and Constraints

INDIA AUTOMOTIVE SECTOR 2016/2017 77

Tyre Production and Turnover Tyre Production by Type, FY2016

Turnover of the Indian Tyre Industry, INR bn

Tyre Sales by Segment Foreign Trade in Tyres

Source: D&B, DGFT, ATMA, CMIE

INDIA AUTOMOTIVE SECTOR 2016/2017 78

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