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Saurabh Kalra Global Logistics and Supply Chain Management April 2011 batch S P Jain School of Global Management (Singapore Dubai)

Why Foton
Number one in China and growing at rapid pace 2020 Development strategy

Becoming one of worlds top vehicle manufacturer Established strong partnership and joint ventures with global leaders Cummins; Daimler Potential growth of automotive sector in India Stupendous!! Driver for Foton in India Relevant local experience, world best proven Foton technology and innovative principles

Industry Analysis Indian Commercial Vehicle (CV)

Indian Commercial Vehicle Industry 4th largest Domestic market - 90%, balance contributed by exports

CV domestic Industry grow at 25% FY14E, 20% FY13E

CV export grow at 30% FY13E Increase in logistics spending and hike in railway freight

good indicators for growth in CV industry

Sources : 1. Karvy Institutional Equities India Research April 2012 2. Avendus, India Equity research Automobiles, Commercial Vehicles, Feb 23. 2012 3. Care Research Indian Commercial Vehicle Industry September 2011

Industry Analysis Indian CV (Cont..)

Ashok Leyland, Volvo Eicher, Tata Motors 3 biggest players Other potential threats M&M and Navistar JV, Swaraj

Mazda Dominance of top 3 players due to sales and service network resale value diversified product portfolio captive financing abilities CV industry highly dependent on interest rates, fuel prices and raw material prices
Sources : 1. Karvy Institutional Equities India Research April 2012 2. Avendus, India Equity research Automobiles, Commercial Vehicles, Feb 23. 2012 3. Care Research Indian Commercial Vehicle Industry September 2011

Industry Analysis - LCV

LCV mainly due to growing need for last mile transportation LCV CAGR 19% FY12E FY14E (domestic market) SCV export CAGR 23% FY12E FY14E

Sources : 1. Karvy Institutional Equities India Research April 2012 2. Avendus, India Equity research Automobiles, Commercial Vehicles, Feb 23. 2012 3. Care Research Indian Commercial Vehicle Industry September 2011

Industry Analysis - MHCV

MHCV CAGR - 10% FY13E; 6% FY12E (domestic market) MHCV flat growth in FY12E due to expiration of Jawaharlal

Nehru National Urban Renewal Mission scheme in Dec 11 and moderation in IIP growth HCV CAGR 13.3% FY12E FY14E (domestic) mainly due to completion of golden Quadrilateral & North-South-EastWest corridor

Sources : 1. Karvy Institutional Equities India Research April 2012 2. Avendus, India Equity research Automobiles, Commercial Vehicles, Feb 23. 2012 3. Care Research Indian Commercial Vehicle Industry September 2011

Foton - Supply Chain Strategy for India

Control of end to end Supply Chain Cost desired

Why : Upsurge in technological developments expected

Results : Higher price and stiff competition Costs include development costs in case of domestic

manufacturing and import costs in case of imports Importance of distribution channel: Product availability High after sales service levels desired

Some major components in supply chain strategy discussed in subsequent slides

Facility Decisions
A test market (e.g. Andhra Pradesh) to be selected for

vehicle sales. spare parts distribution and after sales service Subsequently, direct retail shop delivery of vehicles from Pune in selected states Distribution network to be expanded pan India in subsequent years Centralized warehouses in major metros like Delhi, Kolkata, Chennai with increase in volume

Make/Buy decision
Initially, Engine to be outsourced to domestic/ overseas vendor Engine to be assembled inhouse in subsequent years Other components To be bought out This would result in cost saving, risk sharing and benefits of

leveraging technology developed vendor base Initially some components to be imported from China, Indonesia, Pakistan, Kenya Localization of imported components in subsequent years:
Development cost minimized in initial years

Cost savings in later years

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Inventory Decisions
Inventory decisions Tactical and operational Inventory decisions highly dependent on demand of product,

supply of components, roll out time etc First year inventory decisions to be based on First year sales forecast Quick product delivery at customer end

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Export/ Domestic market

Product development and Supply Chain strategy initially to

be based on domestic market Export considerations in subsequent years E.g. choice of Mumbai/ Gujarat/ Chennai as a port for export in later years

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Thank you