1. Automotive September 2006 www.imacs.in

2. AUTOMOTIVE www.imacs.in Market Overview Government regulations & policy India Advantage and business opportunities Contents

3. AUTOMOTIVE www.imacs.in Market Overview Government regulations & policy India Advantage and business opportunities

4. AUTOMOTIVE www.imacs.in Profile: Indian Automotive Industry The industry has grown at a CAGR of 14% p.a over the last 5 years, with sales of 9 million vehicles in 2005-06 With the potential to emerge as one of the largest in the world. Presently, India is 2 nd largest two wheeler market in the world 4 th largest commercial vehicle market in the world 11 th largest passenger car in the world and is expected to be the 7 th largest market by 2016 The industry has emerged as a key contributor to the Indian economy Source : SIAM Size of around US$ 34 billion in 2006 Market Overview

5. AUTOMOTIVE www.imacs.in Auto components industry has also grown at a rapid pace... 17% The Indian auto components industry has grown at 17% CAGR over the last few years to reach a size of around US$ 10 billion in 2005-06 Market breakup: OEM demand ~ 54%, replacement market ~30%, exports ~16% Source : ACMA FY refers to Financial Year – April to March Market Overview

6. AUTOMOTIVE www.imacs.in Players: Indian auto industry Global OEM Indian OEM Indian Suppliers Global Suppliers Engineering & Development Companies Indian Auto Industry GM Toyota Ford Hyundai Maruti Suzuki Honda Skoda Volvo Mercedes Tata Motors Mahindra & Mahindra Bajaj Auto TVS Motors Hero Honda Bajaj Tempo Ashok Leyland Bharat Forge Sundram Fasteners Rane Group Shriram Pistons RICO Auto Sono Koyo Steering Delphi Visteon Bosch Denso Valeo Thyssen Krupp The Indian auto industry is highly competitive with a number of global and Indian auto companies present Market Overview

7. AUTOMOTIVE www.imacs.in Delhi-Gurgaon-Noida- Ghaziabad Kolkata Mumbai-Pune-Nasik Aurangabad Jamshedpur Chennai Bangalore Hosur Rajkot-Halol Hyderabad Ludhiana Haridwar Pitampur Automotive clusters in India Ashok LeylandEnfield FordGreaves Hindustan Motors Hyundai Mahindra & MahindraTatra Toyota KirloskarTVS Motors Volvo Ashok LeylandEicher Force MotorsHero Honda Hindustan MotorsHonda Honda SIELICML KineticLML MajesticMaruti Suzuki PiaggioYamaha Swaraj MazdaTata Motors North / Central Ashok LeylandAtul Auto Bajaj AutoDaimler Chrysler FIATForce Motors GMGreavesKinetic M & MPremier SkodaTata Motors West Hindustan Motors Tata Motors East South Source: SIAM, IMaCS analysis Major automotive clusters - Mumbai-Pune-Nasik- Aurangabad (West), Chennai -Bangalore-Hosur (South) and Delhi-Gurgaon-Faridabad (North) Market Overview

8. AUTOMOTIVE www.imacs.in Exports are rising - India has the potential to become the global outsourcing hub Indian vehicle exports have grown at a scorching rate of over 40 % over the last few years, while component exports have grown at around 25 % per annum. Key exporters include: Maruti, Tata Motors, M & M and Hyundai for Passenger Cars and MUVs Tata Motors and Ashok Leyland for LCV / M & HCVs Bajaj, TVS Motors and Hero Honda for 2 wheelers 25% Market Overview

9. AUTOMOTIVE www.imacs.in Growth drivers for the Indian automotive industry  Contemporary products  Shorter life cycle  Growth in Income levels  Easier financing Government Policies New product launches Indian Automotive Industry Increasing consumer demand Cost Competitiveness  Overall economic growth  Lower duties & taxes  Export Competitiveness  Reduced cost to consumer  India emerging as a manufacturing hub Market Overview

10. AUTOMOTIVE www.imacs.in Growth potential of the Indian automotive industry The size of the Indian automotive industry is expected to grow at 13% p.a over the next decade to reach around USD 120 - 159 bn by 2016. The total investments required to support the growth is estimated at around USD 35 - 40 bn USD 20 - 25 bn USD 13 - 15 bn The Indian auto component industry is well positioned to capitalise on the growth in outsourcing to low cost countries Exports would lead the growth in the component industry, which is expected to be around USD 33- 40 bn by 2015 Projected size of Auto Components industry - 2015 Source: AMP Vision, ACMA Vision Market Overview

11. AUTOMOTIVE www.imacs.in Government regulations and policy Market Overview Government regulations & policy India Advantage and business opportunities

12. AUTOMOTIVE www.imacs.in Policies relating to the sector: Auto Policy In 2002, the Indian government formulated an auto policy that aimed at promoting integrated, phased, enduring and self-sustained growth of the Indian automotive industry allows automatic approval for foreign equity investment upto 100% in the automotive sector and does not lay down any minimum investment criteria. 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 confirms the government’s intention on harmonising the regulatory standards with the rest of the world Government regulations & policy

13. AUTOMOTIVE www.imacs.in Automotive regulations in India 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 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 Government regulations & policy

14. AUTOMOTIVE www.imacs.in Trends in future regulations – Safety and Emission related 2009 200 8 200 6 2004 200 7 2005 2010 Crash requirements aligned with EU Mandatory Airbags Bharat Stage IV in Metros and Bharat Stage III in rest of the country India is expected to align its crash requirements and emission standards with European standards in the 2008 / 09 timeframe Presently Bharat Stage III ( Equivalent to Euro III) is mandated in Metros and other large cities and Bharat Stage II ( Equivalent to Euro II) for the rest of the country Bharat Stage IV ( equivalent to Euro IV) is expected to be introduced in the large Indian metros around 2009 and Bharat Stage III in the rest of the country Approach Harmonization with ECE standards Homologation and Certification testing agencies and centres Regulation Road Map Targets Industry challenges to development Better vehicles: safer and more environment friendly Government regulations & policy

15. AUTOMOTIVE www.imacs.in State-of-the-art test facilities will support the growth of the auto industry The Government of India is promoting National Automotive Testing and R&D Infrastructure Project (NATRIP) to support the growth of the auto industry in India NATRIP envisages setting up of five independent and up gradation of existing test centres Testing centres at Manesar (Haryana), Chennai (Tamil Nadu), Pune (Maharashtra) Proving ground at Indore (MP) Tractor testing facility at Rae Bareilly (UP) Hill Driving Training Centre at Silchar (Assam) New testing & homologation center at MANESAR Up-gradation of VRDE at AHMEDNAGAR Up-gradation of ARAI at PUNE New testing center for tractors & off- road vehicles, accident data analysis and specialised driving training at RAE BAREILLY New test & homologation center near CHENNAI New complete proving ground at INDORE Hill Area driving training center and Regional In- Use vehicle management center at SILCHAR Government regulations & policy

16. AUTOMOTIVE www.imacs.in India Advantage and business opportunities Market Overview Government regulations & policy India Advantage and business opportunities

17. AUTOMOTIVE www.imacs.in Attractiveness of the Indian automotive industry Large and growing domestic demand Demand growth expected to be around 10 % CAGR making India one of the fastest growing markets Proven product Development capabilities Capabilities to develop complete vehicles and systems More than 125 Fortune 500 (including large auto companies) have R&D centres in India Companies can leverage India’s acknowledged leadership in the IT industry Stable economic policies Continuity in reforms and policies India targets to emerge as the “manufacturing hub” for small cars Competitive manufacturing cost Implementation of VAT, has positioned India as one of the leading low cost manufacturing sources High quality standards 12 Indian component manufacturers have won the Deming Prize for quality Most leading component manufacturers are QS and ISO certified Export Potential Increased outsourcing has led to a large potential to export components and vehicles to other markets Indian Auto Industry India Advantage and business opportunities

18. AUTOMOTIVE www.imacs.in Opportunities in the Indian automotive sector Participate in domestic growth opportunities Exports of vehicles Exports of components Engineering and Design Services Indian Automotive Sector Domestic Opportunities Global outsourcing Opportunities Potential investors can capitalise on opportunities both in the domestic and export oriented segments Investment potential of upto USD 35 - 40 bn in this sector over the next 10 years Investments in the Indian automotive industry can be in various forms 100 % subsidiary - 100 % FDI through automatic route allowed in this sector JVs with local firms Technology support or sharing agreements India Advantage and business opportunities

19. AUTOMOTIVE www.imacs.in Key players in the Indian auto industry - Passenger Cars and CVs The largest player in the Indian industry. Plans to launch new and exciting products in the Indian markets, including the ‘100,000’ car Suzuki’s JV in India and the largest passenger car manufacturer in India 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 India Advantage and business opportunities

20. AUTOMOTIVE www.imacs.in Key players in the Indian auto industry - Passenger Cars and CVs One of the leading players in the Indian premium cars segment. Plans to enter the small car segment by re-launching the Matiz One of the largest players in the UV / MUV segment The 2nd largest CV manufacturer in India Other global players who are in India / have plans for India include - Volvo, Daimler Chrysler, BMW and Nissan Motors India Advantage and business opportunities

21. AUTOMOTIVE www.imacs.in Key players in the Indian auto industry - Two wheelers The largest 2 wheeler manufacturer in the world The 2nd largest 2- wheeler manufacturer in India and the largest 3 wheeler manufacturer. Has plans for establishing a manufacturing facility in Indonesia The third largest 2 wheeler manufacturer in India. Has plans for establishing a manufacturing facility in Indonesia Has recently entered the Indian market through its direct subsidiary ( in addition to its JV – Hero Honda) Has recently entered the Indian market through its direct subsidiary India Advantage and business opportunities

22. AUTOMOTIVE www.imacs.in The India Brand Equity Foundation is a public-private partnership between the Ministry of Commerce & Industry, Government of India and the Confederation of Indian Industry. The Foundation’s primary objective is to build positive economic perceptions of India globally India Brand Equity Foundation c/o Confederation of Indian Industry 249-F Sector 18, Udyog Vihar Phase IV Gurgaon 122015, Haryana, INDIA Tel +91 124 401 4087, 4060 - 67 Fax +91 124 401 3873 Email j.bhuyan@ciionline.org Web www.ibef.org

23. AUTOMOTIVE www.imacs.in Disclaimer This publication has been prepared by ICRA Management Consulting Services (IMaCS) for the India Brand Equity Foundation (“IBEF”). All rights reserved. All copyright in this publication and related works are jointly owned by IBEF and IMaCS. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication), modified or in any manner communicated to any third party except with the written approval of IBEF. This publication is for information purposes only. While due care has been taken during the compilation of this publication to ensure that the information is accurate to the best of knowledge and belief of IBEF and IMaCS, the content is not to be construed in any manner whatsoever as a substitute for professional advice. IBEF and IMaCS neither recommend nor endorse any specific products or services that may have been mentioned in this publication and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this publication. IBEF or IMaCS shall in no way, be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this publication. ICRA Management Consulting Services Limited