Booz & Company

Delhi, 2011

India Automotive Market 2020

This document is confidential and is intended solely for the use and information of the client to whom it is addressed.

The key 5s
1. Going forward, India is a key pillar of global automotive market - policy, actions and strategies of players in India will have a fundamental impact on the global auto landscape 2. By 2015, India will exceed every major European market inc. Germany, France and UK in automotive sales - making India the 4th largest automotive market by volume in the world 3. Over the next 20 years, India will be part of global automotive triumvirate - the global BIG 3 4. In fact, we expect the India automotive sales to exceed the US market by mid 2030s 5. The global automotive game will be pretty much decided by twin forces for China and India

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India is booming and projected to maintain the trajectory

Regional: Percentage of World GDP
2004
India 2% Other 20% Japan 12% China 4%

Real GDP Growth

2005-2020

4.0

China Growth Rate (Base=2005)

3.5

India
3.0

US 28%

EU 34%

2.5

2050 Estimate
Other 10%
India 17%

2.0

Thailand

US 26%

China 28%

1.5

United Kingdom Germany

EU 15% Japan 4%

1.0
20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20
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Source: Global Insights Database, Business Week, Booz & Company analysis
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Emerging markets are transforming the economic landscape could the future repeat the past ?
Percent Contribution of India & China, US, Western Europe and UK to World Economy
Percentage Contribution to World Economy

80% 80%

(15002050 AD)

60% 60%
India & China India & China

40% 40%
Western Europe (excluding UK)

US

20% 20%

UK

Western Europe (excluding UK) UK

0% 1500 1800

1850 1850

1900 1900 Year

1950 1950

2000 2000

2050

Note: UK, US and W. European countries do not include GDP from former British colonies Source: The World Economy-Historical Statistics; Goldman Sachs BRIC Report; Booz & Company research and analysis
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An assessment of parallels with markets such as China strengthen our belief in tomorrow
GDP Growth
$3,000 $3,000

GDP Per Capita Growth

$90,000 $80,000

FDI Trends India and China

$2,500

$2,500 $70,000

$2,000

$2,000

$60,000

In $ Bn

In $ Mn
1 3 5 7 9 11 13 15 17 19 21 23 25 27

$1,500

In $

$50,000 $40,000 $30,000 $20,000

$1,500

$1,000

$1,000

$500

$500 $10,000

$0 1 3 5 7 9 11 13 15 17 19 21 22 25 27

$0

$0 1 3 5 7 9 11 13 15 17 19 21 23 25 27

Years Since Liberalization

Years Since Liberalization

China 1979 India 1991

Years Since Liberalization

Source: Economic Intelligence Unit, Booz & Company analysis

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The twin pillars of the global economy, India & China, will define the economic landscape for generations to come
GDP Trends
2005 Constant Prices ($Trillion) $ Trillion 25 China Growth relative to 2005
11 10 9

Real GDP Growth

(Base = 2005)

China India

20 15

8 7 6

10 India Japan 5 Germany Russia Pakistan 0 2000

2010 2020 2030 2040

5 4 3 2 1 0 2000 2010 2020 2030

Pakistan Russia Germany Japan

2040

Source: Global Insight Database, Booz & Company analysis

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Wealth is being generated via a positive structural shift in the economy

Shift in GDP composition by sector (1950 to 2020E)
100% 90% 30% 80% 35% 39% 48% 49% 50%

% contribution to GDP

70% 60% 50% 40% 30% 20% 29% 10% 0% 1950 1990 2000 2007 2012 2020 22% 15% 56% 14%

36% 38% 37% 40% 42%

11%

8%

Agriculture
Source: Global Insights Database, Economic Intelligence Unit, Booz & Company analysis
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Industry

Services

Industry is likely to benefit from the change in consumption pattern of an increasingly prosperous society
Private Consumer Spending
1994-2015
Index 100%
15 14

Private Consumption Growth

Base - 1994

Transport / Comm.

29% 40%

Food & Beverages

13 12 11

% consumption of total

55%
8% 7% 16% 5% 13% 4%

Recreation

Clothing & Footwear Housing Health

10 9 8 7 6

Total Consumption

6% 15% 3% 11%

23%

Transport / Comm.

5 4

20%

Food & Beverages

5% 19%

Recreation / Education Miscellaneous

3 2 1 0 1990 1995 2000 2005 2010 2015

3% 6% 1994

3% 9% 2005

2015

Note: Miscellaneous includes personal care goods and other services Source: Central Statistics Organization (GOI), Booz & Company analysis
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This rise in per capita GDP will lead to higher vehicle ownership
Cars / 1000 People Versus GDP / Capita
Cars / 1000 People
600 550 500 450 400 350 300 250 200 150 100 50 0 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 $55,000
Rising per capita income leading to increased penetration; trend expected to continue given low current levels Saturated penetration levels in developed economies

1990 - 2013 Germany

USA

Russia

India China

GDP / Capita
Source: Economist Intelligence Unit; Booz & Company analysis
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The result: India is an anchor of future growth in the auto industry

GDP Growth by Country
2010 2020

> 5% projected GDP growth 3.5 % - 5% projected GDP growth < 3.5% projected GDP growth
Source: Global Insight Database, Booz & Company analysis
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Automotive sales are destined to resonate with global economic shift - India is the place to be for the global OEMs
Automotive Sales by Geography
(Passenger Vehicles, Commercial Vehicles and Two Wheelers)

1980 Market size: 60 M units Asia & Japan: 7% Europe: 42% NA: 41%

2009
Market size: 102 M units Asia & Japan: 45% Europe: 32% NA: 18%

2020

Market size: 205 M units Asia & Japan: 65% Europe: 20% NA: 15%

Shift in center of gravity

1) Source:

Includes passenger vehicles, commercial vehicles and two-wheelers Global Insight Database, March 2009; Wards Auto; Booz & Company analysis
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Indias car market has the potential to grow up to 6+ millions units annually by 2020
Passenger vehicle sales in India (2001 2020)
Million Units 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Italy Car Sales 2008 - 1.9 M Units Spain Car Sales 2008 - 1.6 M Units Germany Car Sales 2008 - 3.1 M Units

Aggressive

Base Case Consensus Conservative

Figures for passenger vehicles includes numbers for light commercial vehicles like TATA Ace, TATA Magik, Suzuki Omnivan, Toyota Dyna, Mitsubishi Canter, etc Aggressive scenario 14% CAGR upto 2015, after which market stabilizes (based on similar growth seen in the Chinese markets under similar macroeconomic conditions) Base Scenario 8% CAGR over 2009-2020; based on historical growth trends of the Indian car market Conservative Scenario 6% CAGR; car sales negatively impacted by economic downturn or unfavorable government policies (high interest rates, financing not easily accessible, etc) Source: Global Insight database, Booz & Company Analysis
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India will soon be bigger than most other markets

Western Europe (1998) and India (1998)
4,500 4,000 3,500
3920

Sales Volume (in thousands of units)

3,000 2,500 2,000 1,500 1,000 500 0

SP NE AI N TH ER LA N DS BE LG IU M AU ST SW RI A IT ZE R LA N D SW ED EN G R EE CE DE NM AR K G DO M IN DI A PO RT U G ER M IR EL AN D NO RW AY FI N LA ND IT AL Y E AN Y KI N FR AN C G AL

2,534 2,488 2,289

1,446

640

538

530

369

320

316

280

196

192

174

147

141

Source: Global Insight Database, Booz & Company analysis

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UN

IT ED

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India will soon be bigger than most other markets

Western Europe (2009) and India (2009)
4,500 4,035 4,000 3,500

Sales Volume (in thousands of units)

3,000 2,500 2,000 1,500

2,678 2,360 2,262 2,216

1,071 1,000 581 500 0

AU ST S R W IA IT ZE R LA N D SW ED EN G R EE CE PO RT U G AL DE NM AR K G DO M IN DI A DS ND E BE LG IU G ER M KI N IR EL AN D IT AL Y M N FR AN C SP AI RL AN RW AY NY NL A A

451

349

294

247

236

203

131

126

102

64

NO

IT ED

Source: Global Insight Database, Booz & Company analysis

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UN

NE

TH E

FI

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Much earlier than 2020, India will exceed the major EU markets
Western Europe (2015) and India (2015)
5,500 5,070

4,500

Sales Volume (in thousands of units)

3,693 3,500 2,598 2,566 2,500 2,434 1,624 1,500 617 500 608 342 341 323 299 245 203 171 160 151

N HE RL AN D S BE LG IU M SW ED EN AU ST SW RI A IT ZE R LA N D PO RT U G AL G R EE CE DE NM AR K

G DO M

IN DI A

FR AN C

G ER M

KI N

SP AI

-500

NO

IT ED

Note: Forecasts for 2015 Source: Global Insight Database, Booz & Company analysis
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UN

NE T

NL AN D IR EL AN D

IT AL Y

RW AY

NY

FI

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India and China dwarf existing automotive markets such as Germany or UK

Automotive sales volume by country
2030

Number of unit sales

> 10 M 3 M - 10 M 1M-3M <1M

Potential for Indian market to Potential for Indian market to reach revenues of $150 -- $200 reach revenues of $150 $200 billion billion

Note: 2030 sales and GDP projections are based on annual GDP growth rates projected by country per GS BRIC report Source: Global Insight Database, March 2009; Goldman Sachs BRIC Report; Booz & Company analyses
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By 2030, India will be among the GLOBAL BIG 3

Light Passenger Vehicle Sales Projections - 2030
Million units 42 40.7 17.6 16 14 12 10 8 6 4 2 0 CHINA UNITED STATES INDIA BRAZIL RUSSIA GERMANY FRANCE UNITED KINGDOM ITALY SPAIN 7.8 11.7

Million Units

5.2 3.7 2.9 2.4 2.4 1.9

Note: Figures for passenger vehicles includes numbers for light commercial vehicles like TATA Ace, TATA Magik, Suzuki Omnivan, Toyota Dyna, Mitsubishi Canter, etc Source: Global Insight Database, Booz & Company analyses
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We expect not just a quantitative but also a qualitative change in the market
Indian household income & car sales distribution
2008
% of households
60%

% of total car sales

60%

Household income distribution

50%

Distribution of car sales by segment

46%

50%

40%

40%

30%

30%

20% 15% 10% 8% 4% 0% 0% 0% 9% 4% 14%

20%

10%

0%

Car Segments Income distribution

A < $1K $1K - $3K

B $3K - $5K

C $5K - $10K

D $10K - $15K

E&F $15K - $25K

MPV

SUV

PUP $35K - $50K

Other $50K - $75K > $75K

$25K - $35K

Source: Global Insight 2009, Booz & Company Analysis

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The market of tomorrow will reflect increased prosperity of the nation

Indian household income & car sales distribution
2030
% of households
40%

% of total car sales

60%

Household income distribution Distribution of car sales by segment

30% 40% 33% 20% 30% 50%

20% 10% 11% 5% 2% 0% 0%

20% 12% 5% 0% 12% 10%

Car Segments Income distribution

A < $1K $1K - $3K

B $3K - $5K

C $5K - $10K

D $10K - $15K

E&F $15K - $25K

MPV

SUV

PUP $35K - $50K

Other $50K - $75K > $75K

$25K - $35K

Source: Global Insight 2009, Booz & Company Analysis

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Interestingly, Indias market is expected to overtake the US auto sales by ~2035

Light Vehicle Sales Projections - US, China, India
Thousand Units 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2004 Chinese automotive sales exceeds U.S Indias automotive sales is expected to exceed U.S CHINA

2004-2040, Thousand Units

INDIA UNITED STATES

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

Note: Figures for passenger vehicles includes numbers for light commercial vehicles like TATA Ace, TATA Magik, Suzuki Omnivan, Toyota Dyna, Mitsubishi Canter, etc Source: Global Insight Database, Booz & Company analyses
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For more information please contact:

Chicago
Vikas Sehgal Partner +1-312-578-4828 vikas.sehgal@booz.com

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