Indian Automotive Industry Perspective and Opportunities

1
The Indian Automotive Industry

A Perspective
2
Global Auto Industry An Analysis
Indian Auto Industry
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
Indian Auto Component Industry
Emerging Opportunities
Overview of Indian Economy
TATA Motors Organisation Structure
3
Organization Structure TATA Motors
Senior Management Team
R N Tata
(Chairman Tata Motors)
Ravi Kant
(Managing Director)
Rajiv Dube
(Sr Vice President Passenger
Cars)
P P Kadle
(ED Finance &
Corporate Affairs)
P M Telang
(President Light and
Small Commercial
Vehicles)
A P Arya
(President Heavy and
Medium Commercial Vehicles
Engineering
Research Centre
4
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
5
0
10000
20000
30000
40000
50000
60000
70000
1997 1998 1999 2000 2001 2002 2003 2004
Year
World Vehicle Production Trends (in '000s)
North America South America European Union Other Europe Japan Asia-other than Japan
Source : OICA.net
Asias share of the
world vehicle
production is growing
significantly..
Data excludes 2-wheelers where Asia is not only the largest producer, but is also the largest market
6
State of the Global Automotive Industry
Intense Product & Price Competition
Stagnant Sales except in Asia
Industry Margins Under Pressure
Over Capacity in most Regions
Most of Industry EVA negative
Global Focus to Asia for growth
7
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
8
INDIA : An Introduction
Population : 1080 million 296 million

States : 28 50
(+ 7 Union Territories) (+14 dependent areas)

Geographical Area : 3.3 mn sq km 9.6 mn sq kms

GDP - Nominal : US $ 0.67 trillion US $ 11.73 trillion

Per Capita Income - Nominal: US $622 US $39,935
Per Capita Income : US $ 3080 US $ 39,496
(at Purchasing Power Parity)
India
USA
Estimates for 2004
Sources: IMF Data, The World Factbook, CIA
Current Exchange Rate: 1 USD = INR 45
Exchange Rate (PPP) : 1 USD = INR 10 (approximately)
9
Real GDP (USD Billion)
60
86
118
159
279
473
548
586
0
100
200
300
400
500
600
1950 1960 1970 1980 1990 2000 2003 2004
Year
1950 1960 1970 1980 1990 2000 2003 2004
4.2%
3.2%
3.0%
5.8%
5.4%
6.9%
After decades of
indifferent growth,
Indias economy
is accelerating in
the new
millenium..
10
Per capita GDP (USD)
164
199
216
231
328
466
511
546
0
100
200
300
400
500
600
1950 1960 1970 1980 1990 2000 2003 2004
Year
1950 1960 1970 1980 1990 2000 2003 2004
2.2%
0.8%
0.7%
3.6%
3.6%
6.9%
Rapid increase in
population in the
last fifty years
have negated the
impact of
economic growth
in the past
11
RANK COUNTRY
GDP
(Purchasing Power Parity)
1 United States 11,750,000,000,000
2 China 7,262,000,000,000
3 Japan 3,745,000,000,000
4 India 3,319,000,000,000
5 Germany 2,362,000,000,000
6 United Kingdom 1,782,000,000,000
7 France 1,737,000,000,000
8 Italy 1,609,000,000,000
9 Brazil 1,492,000,000,000
10 Russia 1,408,000,000,000
(*) Estimates for 2004
Source : The World Factbook - CIA
Indian Economy
already ranks 4
th
in
the world in terms
of GDP adjusted for
Purchasing Power
Parity
Goldman Sachs
predicts India to
be the third
largest economy
in the world in
absolute terms by
2025
GDP Growth Forecast
%
0
2.5
5
7.5
10
2
0
0
0
-
0
5
2
0
0
5
-
1
0
2
0
1
0
-
1
5
2
0
1
5
-
2
0
2
0
2
0
-
2
5
2
0
2
5
-
3
0
2
0
3
0
-
3
5
2
0
3
5
-
4
0
2
0
4
0
-
4
5
2
0
4
5
-
5
0
India
Brazil
China
Russia
12
Average Median Age (Years)
42.64
42.16
38.99 38.85
36.27
32.26
27.81 27.60
24.93
24.66
23.98
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
Japan Germany UK France USA China Brazil World Mexico India South
Africa
Year
Average Median Age (Years)
Source: The World Factbook, CIA
Although it is the most populous country, because of Beijings long-standing one-child policy,
Chinas working age population will begin to decline in the next 10 years. Meanwhile, Indias
youthfulness - 350 million citizens are under age 15 - ensures its workforce will expand for decades,
potentially enabling it to outstrip Chinas economic pace through sheer weight of numbers.
Time Magazine, Issue dated Dec 05, 2005
Indias Demographic Dividend
India has one of the
youngest population
amongst all nations
13
Sectoral Share of GDP
55.8%
45.8% 45.2%
38.1%
34.0%
27.3%
24.0%
15.2%
20.7% 21.9%
25.9%
24.9%
24.2%
24.5%
29.0%
33.5% 32.9%
36.0%
41.1%
48.5%
51.4%
0%
25%
50%
75%
100%
1950 1960 1970 1980 1990 2000 2004
Year
%
Agriculture Industry Services
Sources:
Statistical Outline of India 2004-05
India has transitioned from a predominantly agrarian to a service-based economy in
line with the growth trajectory followed by major developed economies..
The Indian Economy is
now more broad-based
and thus resilient..
14
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
15
3,758,518
203,234
640,934
156,706
4,271,327
212,748
669,719
162,508
5,076,221
276,719
723,330
203,697
5,622,741
356,223
989,560
275,040
6,526,547
374,414
1,209,654
350,033
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
2000-01 2001-02 2002-03 2003-04 2004-05
Year
Automobile Production in India (Nos.)
Two Wheelers Three Wheelers Passenger Vehicles Commercial Vehicles
Automobile production in India has doubled in 4 years, with growth seen across all
four major segments..
By numbers, two wheelers
are the dominant segment
of the Indian Automotive
market
16
In many ways, the Indian Automotive Market is unique

Harsher operating conditions pose unique challenges for product
conceptualization, design and development:
Road inadequacy and quality
High Traffic density
Poor Fuel quality & variety (Gasoline, Diesel, CNG & LPG)

Manufacturing complexity higher despite lower volumes compared to
global standards
Large product portfolios

Product obsolescence policies not articulated and enforced, entailing
longer product life.

Firms able to maintain profitability even at low volumes.

17
Personal Mobility is positively correlated to per capita GDP
18
India is expected to achieve mass motorization status in 2014
Vehicle Density vs. GDP/capita
Note: The above includes both Passenger Vehicles and Commercial Vehicles
Sources: Wards Auto Yearbook 2002, EIU, Goldman Sachs BRICs report, DRI 2002, A.T. Kearney analysis
I
n
h
a
b
i
t
a
n
t
s
/
V
e
h
i
c
l
e

10
Per Capita Income (US$ 000)
50
100
Mature Markets Developing Markets
USA
Italy
Brazil
Mexico
South Korea
Czech
Republic
Spain
China in 2002
India in 2014
UK
Australia
Sweden
Germany
Japan
Belgium
France
Austria
Canada
Poland
India in
2002
Argentina
2 20 25 30 35 15
$1,000
0
40
China in 2014
Inhabitants/Vehicle
02
India 100
China 82
19
Key Challenges facing the industry

Increasingly Stringent Emission &
Safety Regulations
Technological capability
Cost

Increase in input prices
Ferrous & Non-Ferrous Metals
Crude oil & derivatives
Natural rubber

Rising Customer Expectations
Product features
Quality & reliability

Integration with Global Markets
Lowering product life cycles
Reducing time-to-market for new
products
Threat of new competition
YEAR Safety Regulation
Metro Cities Rest of Country
2000 BS 2 (Euro II) BS 1 (Euro I)
Underbody Protection Devices
Advance Warning Triangles
2005 BS 3 (Euro III) BS 2 (Euro II)
Spray Suppression, Noise
Norms, Headlamp levellers
2009 BS 4 (Euro IV) BS 3 (Euro III)
ABS, Pedestrian Protection
(Expected)
Transition of Emission & Safety Regulations for Vehicles
India
Emission Regulation
20
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
21
2,183,785
879,759
640,934
2,906,323
937,506
669,719
3,876,175
848,434
723,330
4,355,168
935,279
989,560
5,193,752
986,208
1,209,654
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
2000-01 2001-02 2002-03 2003-04 2004-05
Year
2-Wheeler Production & Market Sub-Segments (Nos.)
Motorcycles Scooters Moped
Within 2-Wheelers, Motorcycles
contribute 80% of the segment size
CAGR 15%
22
Indian 2-Wheeler Market
Competitive Scenario
Motorcycle
50% 30% 13% 4% 1% 2% <1% - <1%
- 15% 28% - 2% 46% 9% <1% -
- - 82% - - - 8% 10% -
India is now the second
largest two-wheeler
market in the world
Figures denote Mkt Share (Apr-Oct 05)
23
The Indian 2-Wheeler Industry

Basic transportation necessity as against fun & fashion
orientation of the Western Markets. (Primary transportation
vehicle for entire families)

Product design & execution driven by economy rather
performance and power

Presence of strong home-grown players competing against
Global majors.

Dis-similarity with Global
Industry

Large variety of products & choice for the customer
(9 manufacturers, 70+ Models)

Similarity with Global Industry
Characteristics Indian 2-wheeler Industry
24
Key Market Drivers

Increasing disposable incomes

Low operating cost
Higher fuel efficiency of New-
generation motorcycles
Greater reliability resulting in low
maintenance cost

Low interest rates translating to low
financing and acquisition costs
hence greater affordability.

Inadequate urban & rural public
transportation infrastructure

Ease of use in congested city
centres
Key Trends

Eclipse of scooter segment

Emergence of new motorcycle sub-
segments
Economy
Executive
Performance

Shrinking product life-cycles
25
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
26
203,234
212,748
276,719
356,223
374,414
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2000-01 2001-02 2002-03 2003-04 2004-05
Year
3-Wheeler Production (Nos.)
Three Wheeler
Predominantly used for commercial
purposes, for both Goods Transport
(40%) and Passenger Transport (60%).
CAGR 17%
27
Indian 3-Wheeler Market
Sub-segments and Competitive Scenario
68% 24% 2% 1% 3% 3%
23% 40% 12% 13% 7% 6%
India is the largest three-
wheeler market in the world
Passenger
Goods
Scooters
India
60%
40%
Sub
Segments
28
The Indian 3-Wheeler Industry

Product unique to emerging markets in South / South-East
Asia & parts of Africa

Product design & execution focus on technological simplicity
and ease of use.

Lesser competitive intensity as compared to other segments.
Industry

None.
Characteristics Indian 3-wheeler Industry
29
Key Market Drivers

Last Mile Transportation needs.

High product maneuverability &
driveability. Ideal for congested
Indian roads and tropical
conditions.

Inadequate urban & rural public

Low initial ownership cost

Self-employment opportunity for
large segment of urban youth
Key Trends

Goods segment growing at faster
clip.

Ability of product to meet
increasingly stringent emission &
safety regulations is doubtful.

Market push building up for product
upgradation.

30
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
31
513,415
127,519
0
500,301
105,667
63,751
557,410
114,479
51,441
782,562
146,325
60,673
960,505
181,778
67,371
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2000-01 2001-02 2002-03 2003-04 2004-05
Year
Passenger Vehicle Production & Market Sub-Segments (Nos.)
Passenger Cars Utility Vehicles Multi-Purpose Vehicles
Unlike the USA, the Indian Passenger
Vehicle market is dominated by Cars
(79%)
CAGR 17%
(*)
(*) MPVs were part of Passenger Car segment till 2000-01
32
Indian Passenger Vehicle Market Competitive Scenario
Passenger
Cars
52% 17% 19% - 1% 5% 2% 2% 2% 1% - <1% <1%
Utility
Vehicles
2% 18% 1% 42% 21% 1% 10% 1%
<1%
- 4% - <1%
Multi
Purpose
Vehicles
100% - - - - - - - - - - - <1%
4
th
largest Passenger Vehicle Market
in Asia
33
The Indian Passenger vehicle Industry
Market dominated by Mini Cars & Hatchbacks (>80%)
High incidence of taxes in Car Prices.
(24% Excise Duty, 12.5% VAT, Local Taxes as applicable)
Customer preference driven by value for money and cost of
ownership considerations rather than image, performance and
power.
(80% of cars sold are priced below USD 12000)
Large proportion of chauffer driven cars. Rear Passenger comfort
is a critical influence in purchasing decisions.
Emergence of strong domestic players (TATA, Mahindra).
Strong demand pull for Utility vehicles from Private Taxi segment.
Industry
Multiple segmentation across & within major segments
Cars (A, B, C, D & E segments) (Hatchbacks, Sedans, Notchbacks, Station
Wagons & Saloons)
Utility Vehicles (Multi- & Sports Utility)
Large variety of products & choice for the customer
(13 manufacturers, 50+ Models)

Characteristics Indian Passenger Vehicle
Industry
34
Passenger Car Penetration is low in India
The low penetration
presents an opportunity
for industry players to
offer an affordable four-
wheeled alternative to
the mass of 2-wheeler
customers
C
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35
Key Market Drivers
Increasing disposable incomes

Rising aspirational levels

Low interest rates.
Wide variety and easy
availability of Financing options.

High sensitivity to Fuel prices

Lack of urban & rural public

Flourishing Service Sector
Key Trends
Market evolution from Mini
cars to Hatchbacks to
Compact Sedans now evident

Increasing customer emphasis
on aesthetics and comfort.

Shrinking product life-cycles

36
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
37
87,784
68,922
96,752
65,756
120,502
83,195
166,123
108,917
211,143
138,890
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2000-01 2001-02 2002-03 2003-04 2004-05
Year
Commercial Vehicle Production & Market Sub-Segments (Nos.)
Medium & Heavy Commercial Vehicles Light Commercial Vehicles
Unlike most developed markets,
Indian Market has seen dominance
by Medium Commercial vehicles
CAGR 22%
38
Indian Commercial Vehicle Market Competitive Scenario
Medium &
Heavy CV -
Trucks
64% 24% - 8% - 3% - <1% <1%
Buses L, M
& HCV
40% 30% 7% 5% 10% 6% 1% 1% -
Light & Small
Comm Veh
Trucks
59% <1% 32% 4% 3% 3% <1% - -
TATA Motors dominates over 60% of the Indian Commercial Vehicle
Market. It is also the Worlds fifth largest Medium & Heavy commercial
vehicle manufacturer.
39
The Indian CV Industry

Secular long term growth trend
Lower Power to Weight Ratios
Early stage of road development
Less degree of product
sophistication.
Strong price entry barriers created
by domestic players

Dis-similar to
Global CV Industry

Cyclical Similar with Global
CV Industry
Characteristics Indian CV
Industry
0
50
100
150
200
250
7
0
-
7
1
7
2
-
7
3
7
4
-
7
5
7
6
-
7
7
7
8
-
7
9
8
0
-
8
1
8
2
-
8
3
8
4
-
8
5
8
6
-
8
7
8
8
-
8
9
9
0
-
9
1
9
2
-
9
3
9
4
-
9
5
9
6
-
9
7
1
9
9
8
-
9
9
0
0
-
0
1
0
2
-
0
3
N
o
s

i
n

'
0
0
0
Indian CV Industry
CAGR: 5%
40
Key Market Drivers
Growth in Economic Activity

Road Network Development

Low interest rates.
Wide variety and easy availability of Financing options.

High sensitivity to Fuel prices
41
Impact of Road development
Source: VDA (German Automotive Association), Worldbank, DRI Automotive report
0
100
200
300
400
500
600
700
800
900
1000
0 5 10 15 20 25
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Germany
France
UK
Spain
Portugal
India
Indonesia
South Africa
Argentina
Brazil
China Romania
Hungary
Mexico
1
2
3
4
Stage
GDP per capita
1000 US$ / head
0
100
200
300
400
500
600
700
800
900
1000
0 0.5 1 1.5 2

T
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m

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Germany
France
UK
Spain
Portugal
Turkey
Australia
India
Indonesia
South Africa
China
Brazil
Argentina
Russia
1
2
3
4
Stage
Road Density
Paved Highway (km) / Area (km
2
)
Dramatic impact in
initial stage of road
development
Gradual impact
Indian CV Industry: Trucks
Impact of GDP Growth.
The growth of the Commercial vehicle industry is critically dependent on Infrastructure
development & economic activity
India (AL)
42
Road network development in India
Golden
Quadrilateral
N S E W
Corridors
Feeder
Roads
Source: CrisInfac, NHAI
Year-wise completion schedule of NHDP
Planned length 14,000 km
2005-07
52%
Completed
15%
2004
21%
2003
12%
Between 2003-04 to 2007-08 each year ~2000 Kms of 4-laned highways will be added
Impact on Domestic CV Industry
Faster turnaround
Increased freight movement
Lower operating cost of vehicles
Replacement demand
Between 1997 - 2002, Highway length in China increased by around 15,000 km and CV
volumes nearly doubled from 1.2 mn to 2.1mn
.. Indicative of future likely directions in Indian market
43
2
4
6
8
10
12
14
16
18
15 25 35 45
GVW (Tonnes)
A
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P
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Key Trends
Migration from erstwhile Basic
MCV Workhorse to Hub &
Spoke Model

Increasing Power to weight
ratio

Increasing customer emphasis
on aesthetics and comfort.

Arrival of Global Players

Divergence in Truck and Bus
Technology

Focus on Fully Built Transport
Solutions
Europe
Japan
Brazil
India
Average Power To Weight Ratios
Of Selected Countries
China
44
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
45
3,340
625
3,892
578
4,670
760
5,710
1,020
7,300
1,400
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2000-01 2001-02 2002-03 2003-04 2004-05
Year
Automobile Component Business - India
(In USD Million)
Domestic Export
The growth rate in Auto Components
business has kept pace with OEM
growth
CAGR 22%
46
Key Market Drivers
Linked to growth of OEM Industry

Highly sensitive to input cost
escalation.

Competitiveness driven by
Manpower Large pool of
qualified engineers & skilled
technicians at lower cost
Lower investment cost Through
appropriate, low cost automation.

Key Trends
Indias emergence as low cost
global sourcing destination.
Indian ancillary manufacturers are
shifting focus from global after-
market to global OEM supplies.
Firms focus on operational
excellence to improve quality &
reliability of products.
(8 Deming Award winners)
Increasing relevance of Global Tier
1 suppliers (Bosch, Denso, Visteon,
Delphi)
47
Rotating Auto
Electricals
Tyres & Tubes
Heavy Forgings
Wheel Rims
Small Castings &
Forgings
Plastic Components
Hand Tools
Metal bonded &
Moulded Rubber Parts

Aftermarket
Customer complexity
Tier 2-n supplier Tier 1 supplier
L
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The Indian Auto component industry is now transitioning from
being a supplier for the global aftermarket to becoming a full-
scale global Tier 1 supplier
48
Indian Component suppliers are adopting different approaches
for Global expansion & growth
Exports from India
Suppliers of:
Castings
Forgings
Machined Items
Rubber Items
Wheel Rims
Greenfield Overseas Locations
Sundaram Fasteners: China
Minda Group: Indonesia
Overseas Acquisitions
Bharat Forge
(CDP-Germany; Federal Forge-
USA)

Sundaram Fasteners
(Cramlington Precision, UK;
Peiner-Germany)

49
Two Wheelers
Three Wheelers
Passenger Cars
Commercial Vehicles
50
111,138
16,263
27,112
13,770
104,183
15,462
53,165
11,870
179,682
43,366
72,005
12,255
265,052
68,144
129,291
17,432
366,724
66,801
166,413
29,949
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2000-01 2001-02 2002-03 2003-04 2004-05
Year
Automobile Exports from India (Nos.)
Two Wheelers Three Wheelers Passenger Vehicles Commercial Vehicles
CAGR
Overall 22%
Passenger Veh 57%
2-Wheelers 35%
International Business
growth presents a huge
opportunity, as well as
a challenge for the
Indian Automotive
Industry
51
Opportunities for the industry are emerging both in the areas of Automotive
Manufacturing and Engineering Services
Manufacturing:
Emerging World hub:
Small Cars (Suzuki, Hyundai)
Castings & Forgings

Regional Sourcing base
Aggregates for Entire Vehicle Programs
(e.g. Transmissions for Toyota IMV)

Globalisation opportunities for Indian
Manufacturers
Increasing exports of Made In India
vehicles
Establishing manufacturing facilities at
foreign locations (e.g. TVS Indonesia)
Contract Manufacturing (e.g. Sub-150cc
Bajaj motor cycles for Kawasaki)
Growth through Mergers & Acquisitions
(TATA Motors acquisition of Daewoo
Commercial Veh, Korea & Hispano,
Spain
Engineering Services:
Indian IT Majors offering on-shore and
off-shore engineering services to Global
IT players.
(e.g. TCS, TATA Technologies, Infosys,
Satyam)

Global Auto & Auto component majors
putting up Development Centres in
India, either on their own or in
partnership with local players
(e.g. General Motors, Daimler Chyrsler,
Johnson Controls, Delphi, Bosch)

Independent Indian OEMs focusing on
upgrading their design & engineering
capabilities.
(e.g. TATA Motors European Development
Centre & Acquisition of INCAT plc, UK)
52
Thank You

Indian Automotive Industry Perspective and Opportunities

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The Indian Automotive Industry

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