Passenger Cars

Profile of the Automotive Industry

Vehicle sales in India in 2005 - 06 (in million) 0.36 7.05 0.35 1.14

Size of around USD 34 billion in 2006

0
Cars

2
CVs

4
Two wheelers

6
Three Wheelers

The industry has grown at a CAGR of 14% p.a over the last 5 years, with total sales of vehicles reaching around 9 million vehicles in 2005-06
The Indian auto industry has the potential to emerge as one of the largest in the world. Presently, India is 2nd largest two wheeler market in the world

4th largest commercial vehicle market in the world

11th largest passenger car in the world and is expected to be the 7th largest market by 2016

The industry has emerged as a key contributor to the Indian economy

Players in the Auto industry

Auto Industry

GM Toyota Ford Hyundai Maruti Suzuki Honda Skoda Volvo Mercedes

Global OEM

Domestic OEM

Global Suppliers
Engineering & Development Companies

Domestic Suppliers

Tata Motors Mahindra & Mahindra Bajaj Auto TVS Motors Hero Honda Bajaj Tempo Ashok Leyland

The auto industry is highly competitive with a number of global and domestic auto companies present in the country.
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Current Scenario
5th largest commercial vehicle manufacturer in the world 4th largest car market in Asia - crossed the 1 million mark Unlike the USA, the Indian passenger vehicle market is dominated by cars (79%) India became the fastest growing car market in the world in 2004, growth rate of 20% India is the second-biggest market for small cars after Japan

Automobile Production Trends

Category 2001-02 2002-03 2003-04 2004-05 2005-06

Passenger Cars

500301

557410

782562

960487

1045881

Utility Vehicles

105667

114479

146325

182018

196371

MPVs

63751

51441

60673

67371

66661

Total Passenger Vehicels

669719

723330

989560

1209876

1308913

Automobile Domestic Sales Trends

Category
Passenger Cars Utility Vehicles MPVs Total Passenger Vehicles

2001-02
509088 104253 61775

2002-03
541491 113620 52087

2003-04
696153 146388 59555

2004-05
820179 176360 65033

2005-06
882094 194577 66366

675116

707198

902096

1061572

1143037

Automobile Exports Trends

Category
Passenger Cars Utility Vehicles MPVs Total Passenger Vehicles

2001-02
49273 3077 815

2002-03
70263 1177 565

2003-04
125320 3049 922

2004-05
160670 4505 1227

2005-06
170193 4486 1093

53165

72005

129291

166402

175772
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Key Players in the Indian Auto Industry Passenger Cars

MUL is the largest passenger car manufacturer in India

The largest player in the Indian industry. Plans to launch new and exciting products in the Indian markets, including the 1 lacs car
The third largest passenger car manufacturer in India and one of the largest exporters of vehicles. Has established India as one of its manufacturing bases in the world. Is planning to invest heavily to boost exports from India. Has vision of capturing 10% share of the Indian passenger car market by 2010

One of the leading players in the Indian premium cars segment

One of the leading players in the Indian premium cars segment

Key Players in the Indian Auto Industry Passenger Cars

One of the leading players in the Indian premium cars segment. Plans to enter the small car segment by relaunching the Matiz

One of the largest domestic players in the UV / MUV segment

Tata Motors manages the marketing and distribution of the Fiat branded cars through selected Tata outlets throughout India One of the original three car manufacturers in India, founded in 1942, it was a leader in car sales until the 1980s, when the industry was opened up from protection HM has a joint venture with Mitsubishi, producing versions of the Lancer & Pajero. E, C and S Class passenger cars are assembled in India, other models are imported as completely built units 8 (CBUs) and retailed in India.

Passenger Vehicle Clusters in India

North/Central Hindustan Motors Honda SIEL Maruti Suzuki Tata Motors
Pithampur Rajkot-Halol Jamshedpur Kolkata

Delhi-Gurgaon-Noida-Ghaziabad

East Tata Motors Hindustan Motors

West Daimler Chrysler FIAT GM M&M Skoda Tata Motors

Mumbai-Pune-Nasik Aurangabad

Hyderabad

South Ford Hindustan Motors Hyundai Mahindra & Mahindra Toyota Kirloskar Volvo
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Chennai-Bangalore-Hosur

Segmentation (based on car prices)

Under Rs. 3 Lakhs Rs. 3-5 Lakhs
Maruti 800 Alto Omni Reva Ambassador Fiat Palio Hyundai Santro Getz Chevrolet Opel Corsa Maruti Zen Wagon R Versa Esteem Gypsy Ford Icon & Fiesta Tata Indica Indigo Mahindra Bolero

Rs. 5-10 Lakhs

Chevrolet Swing Optra Tavera Hyundai Accent Elantra Mahindra Scorpio Maruti Baleno Toyota Corolla Innova Tata Safari Mitsubishi Lancer Lancer Cedia Honda City

Rs. 10-15 Lakhs Rs. 15-30 Lakh

Ford Mondeo & Endeavour Chevrolet Forester Skoda Octavia Classic & Combi Honda Civic & CR-V Maruti Suzuki Grand Vitara Hyundai Sonata Embera Terracan & Tucson Mitsubishi Pajero Audi A4 Opel Vectra Honda Accord Mercedes C Class Toyota Camry

Rs. 30-90 Lakhs

Audi A6 A8 & TT BMW X5 5 Series & 7 Series Mercedes E Class, S Class, SLK, SL & CLS-Class Porsche Boxster Cayenne 911 Toyota Prado

Above Rs. 1 Crore

Bentley Arnage Continental GT & Flying Spur Rolls Royce Phantom Maybach

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Regulations - Auto Policy

In 2002, the Central Government formulated an auto policy that aimed at promoting an integrated, phased, enduring and selfsustained growth of the Indian automotive industry. The Auto Policy allows automatic approval for foreign equity investment upto 100% in the automotive sector and does not lay down any minimum investment criteria. The auto policy lays emphasis on R & D activities carried out by companies in India.
Weighted tax deduction of upto 150% for in-house research and R & D activities.

Formulation of an appropriate auto fuel policy to ensure availability of adequate amount of appropriate fuel to meet emission norms. The auto policy confirms the governments intention on harmonizing the regulatory standards with the rest of the world.

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Automotive Regulations
Indian automotive regulations are closely aligned to the ECE regulations. The table below shows the level of alignment of the Indian regulations with the ECE regulations.
Status of Indian Regulation Fully / Partially aligned In process of being aligned Items / Regulations to be covered Total Number of regulations 43 32 39 114
Source: IMaCS Analysis

The key regulations that are likely to impact the auto industry in the future are: Crash-related regulations Introduction of Bharat Stage IV norms
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Future Regulations
Regulation Road Map Targets Industry challenges to development Better vehicles: more safer and environmental friendly Approach Harmonization with ECE standards Homologation and certification testing agencies and centres

Crash requirements aligned with EU Mandatory airbags Emission standards: Bharat Stage IV in Metros and Bharat Stage III in rest of the country

2009

Presently, Bharat Stage III ( Equivalent to Euro III) is mandated in Metro and other large cities and Bharat Stage II ( Equivalent to Euro II) is mandated for rest of the country Bharat Stage IV ( equivalent to Euro IV) is expected to be introduced in the large Metros around 2009 and Bharat Stage III in the rest of the country
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Demand Drivers
The growth in domestic demand is driven by a number of factors including:
Overall economic growth Rising income levels Low cost of finance and easy availability of finance Increased consumer awareness Closer linkages with global auto trend leading to introduction of contemporary models Governments specific policy initiatives such as lower excise duties on smaller cars Increased job demands Growth of satellite towns Onset of consumerism and travelling culture Completion of Golden Quadrilateral project
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Key Success Factors Market Leaders

Presence across segments - Manufacturers with presence across various segments can ensure higher volumes and better capacity utilization by using common manufacturing facilities. Cost-competitive operations - Higher localization, reduction in the vendor base, use of common components, manufacturing a larger number of models on a single platform have helped bring down prices. Wide dealer network - After sales service and access to original spare parts act as distinct advantages in the marketing of a model. Easy availability of finance - MUL tied up with State Bank of India (SBI) in June 2003 to offer finance to its rural and semi-urban customers through the latter's 13,000 plus strong branch network. Strong support from parent companies:
Strong brand Strong financial and technological support Access to latest technology for launching new models, enhanced export capability
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Customer Segmentation (by car ownership and use)

Individual customer segment Common people who don't fall under any specific category/not covered by any corporate scheme. Share Around 55% in the overall car demand - being the highest in the mini and compact segments. Self employed persons Car is purchased in the name of the company -use could be personal, official or both. Around 15% in the overall car market sales relatively large share in the executive and premium segment. Corporate Car is registered in the name of the company at the time of purchase. Commercial Includes taxi and tourist (TT) segment and the lease rental segment.

15% to the overall car sales - 28% of the sales in the mid-size segment with a greater presence in the HMS.

12% share in the overall car sales with a greater share in the compact and mid-size segment.

Demand Driver Cost of ownership-price, taxation, running cost ,finance cost (highest sensitivity) Promotional efforts discounts, advertising New model launches

Running cost instead of financing cost New models and variants with improved technology (improved diesel technologies CRDi & TDi)

Business expansion or stagnation Changes in depreciation and tax rules Marketing schemes Brand image of the car manufacturer

Fuel cost per km, driven by fuel efficiency (km per litre) and cost of fuel (Rs per litre) drives demand, as well as model preference

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Changing Dynamics of Segmental Demand

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Player-wise Market Share

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Cars: Sales Trend and Market Share (key segments)

A1:Mini

A2:Compact

A3:Midsize

A4 Executive

A5:Premium

A6:Luxury
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Comparison Tests: Differences in Marketing

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Hot Hatch Face-Off

Suzuki Swift versus Hyundai Getz

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Background
Suzuki Swift Esteem in India: known overseas as Swift earlier Now Suzukis Global Car All new car launched at Paris Auto show 04 Well appreciated in Europe. Hyundai Getz Not a very well-known model Few awards won here and there. For example, Budget car of the year by What Car? (UK, 2003)

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Marketing: Swift
Buzz in the industry: Marutis first new car in two decades! Differentiating factor: Hot shot looks and also awards in India (Car of the Year awards) USP: Killer Price! OTL: TVCs that communicate hardly anything BTL:
Separate sections at showrooms Personnel trained specially for Swift selling
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Marketing: Getz
Initially marketed as feature packed: failed Now being marketed as a big, spacious car USP: Space Price about Rs. 50,000 more than the Swift Not as successful as the Swift so far

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C Segment Cars Competition

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Marketing: City
Fairly advanced stage of the product lifecycle: Growth/Maturity
Undergone a full makeover since its launch: all new city launched 4 years back

USP: Honda brand name Advertising

Hi tech car: Honda name (esp. VTEC) Rising diesel costs in India relative to petrol (so cost saving due to diesel is unsustainable) Quality (good scores on JD Power surveys): lower maintenance costs overall in comparison
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Marketing: Fiesta
Newest in the line of made for India Ford cars Exists as a hatchback in Europe, suitably modified for India Abhishek Bacchan (movie star in India) was hired as brand ambassador Go fida campaign: a car that will bowl you over this was the message communicated Mileage: 31 kilometers/litre record (published recently in an auto magazine)

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Marketing: Verna
Latest car from Hyundai, India. (Originally) Intended as replacement for the Accent sandwiched on both sides Good features: Diesel economy with high technology (VGT) and power (110 bhp / 24kgm). Market response time will tell!

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D Segment Cars

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Marketing: Octavia
Skodas first car in India: need to build the Skoda brand first Quality differentiator: Obsessed with quality, since 1895 this was the tagline used Built on the golf platform Skoda is part of the VW group USP: Diesel economy (users have reported 19 km per litre mileage) Replacement of the Octavia (Skoda Laura) falls in the next segment, i.e. competes with Honda Accord

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Marketing: Corolla
Best selling car in the world (over the years) Not as successful as Toyota would like Marketing changed over time
Initial: Successful people use Corolla Now: Trying to cash in on its worldwide acceptance

Quality niggles (on a Toyota!) in the interior have been a cause for complaint among owners

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Marketing: Civic
One of Hondas best selling brands worldwide: eagerly awaited before its launch in India Currently outsells the Corolla in markets abroad, too. Brand communication: Pure Exhilaration tagline used to communicate sporty nature Scores on the styling front especially the interior Aggressive salespeople Already the leading seller in the segment

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Future Trends
Individual buyers, lease rental-based bulk buyers for high volume growth More importance to fuel efficiency, adaptability with road condition, heavy traffic Not many crave a status symbol small car is the choice of the hour Government regulations favouring manufacturing of small cars The development of a vibrant used car market will drive the growth of new car and UV sales by
Helping owners: Dispose old car; Upgrade to a new car Creating potential customers for new cars: Used car owners upgrade to new models Demand from two-wheeler owners who want to upgrade to used cars

All major players to launch diesel variants and models with increasing frequency. However, the following player initiatives will have a significant impact on diesel share:
Maruti setting up an initial 100,000 diesel engine capacity by the end of 2006, which it eventually plans to expand to 300,000 units Tata Motors' Rs 100,000 car, targeted for launch by mid-2008

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