Auto 000

7/28/2019 Auto 000

1/75

EXECUTIVE SUMMARY

The Indian Automobile Industry is manufacturing over 11 million vehicles and exporting about 1.5 million

every year. The dominant products of the industry are two wheelers with a market share of over 75% and

passenger cars with a market share of about 16%. Commercial vehicles and three wheelers share about9% of the market between them. About 91% of the vehicles sold are used by households and only about

9% for commercial purposes. The industry has attained a turnover of more than USD 35 billion and

provides direct and indirect employment to over 13 million people.

The supply chain of this industry in India is very similar to the supply chain of the automotive industry in

Europe and America. This may present its own set of opportunities and threats. The orders of the industry

arise from the bottom of the supply chain i. e., from the consumers and goes through the automakers and

climbs up until the third tier suppliers. However the products, as channelled in every traditional automotive

industry, flow from the top of the supply chain to reach the consumers.

Interestingly, the level of trade exports in this sector in India has been medium and imports have been

low. However, this is rapidly changing and both exports and imports are increasing. The demand

determinants of the industry are factors like affordability, product innovation, infrastructure and price of

fuel. Also, the basis of competition is the sector is high and increasing and the life cycle stage is growth.

With a rapidly growing middle class, all the advantages of this sector in India are yet to be leveraged.

Note that, with a high cost of developing production facilities, limited accessibility to new technology and

soaring competition, the barriers to enter the Indian Automotive sector are high and these barriers are

study. On the other hand, India has a well-developed tax structure. The power to levy taxes and duties is

distributed among the three tiers of Government. The cost structure of the industry is fairly traditional, but

the profitability of motor vehicle manufacturers has been rising over the past five years. Major players, likeTata Motors and Maruti Suzuki have material cost of about 80% but are recording profits after tax of

about 6% to 11%.

The level of technology change in the Motor vehicle Industry has been high but, the rate of change in

technology has been medium. Investment in the technology by the producers has been high. System-

suppliers of integrated components and sub-systems have become the order of the day. However, further

investment in new technologies will help the industry be more competitive. Over the past few years, the

industry has been volatile. Currently, Indias increasing per capita disposable income which is expected to

rise by 106% by 2015 and growth in exports is playing a major role in the rise and competitiveness of the

industry.

Tata Motors is leading the commercial vehicle segment with a market share of about 64%. Maruti Suzuki

is leading the passenger vehicle segment with a market share of 46%. Hyundai Motor India and Mahindra

and Mahindra are focusing expanding their footprint in the overseas market. Hero Honda Motors is

occupying over 41% and sharing 26% of the two wheeler market in India with Bajaj Auto. Bajaj Auto in

itself is occupying about 58% of the three wheeler market.

7/28/2019 Auto 000

2/75

Consumers are very important of the survival of the Motor Vehicle manufacturing industry. In 2008-09,

customer sentiment dropped, which burned on the augmentation in demand of cars. Steel is the major

input used by manufacturers and the rise in price of steel is putting a cost pressure on manufacturers and

cost is getting transferred to the end consumer. The price of oil and petrol affect the driving habits of

consumers and the type of car they buy.

The key to success in the industry is to improve labour productivity, labour flexibility, and capital

efficiency. Having quality manpower, infrastructure improvements, and raw material availability also play a

major role. Access to latest and most efficient technology and techniques will bring competitive advantage

to the major players. Utilising manufacturing plants to optimum level and understanding implications from

the government policies are the essentials in the Automotive Industry of India.

Both, Industry and Indian Government are obligated to intervene the Indian Automotive industry. The

Indian government should facilitate infrastructure creation, create favourable and predictable business

environment, attract investment and promote research and development. The role of Industry will

primarily be in designing and manufacturing products of world-class quality establishing costcompetitiveness and improving productivity in labour and in capital. With a combined effort, the Indian

Automotive industry will emerge as the destination of choice in the world for design and manufacturing of

automobiles.

Industry DefinitionThis class consists of units mainly engaged in manufacturing motor vehicles or motor vehicle engines.

Products and Services

The primary activities of this industry are:

Motor cars manufacturing

Motor vehicle engine manufacturing

The major products and services in this industry are:

Passenger motor vehicle manufacturing segment (Passenger Cars, Utility Vehicles & Multi Purpose

Vehicles)

Commercial Vehicles (Medium & Heavy and Light Commercial Vehicles)

Two Wheelers

Three Wheelers

7/28/2019 Auto 000

3/75

Key StatisticsPrices

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Motor Vehicle

Production8,467,853 9,743,503 11,087,997 10,853,930 11,175,479

Industry Revenue1 24,379 26,969 30,507 32,383 33,342* USD

Exports (Units) 629,544 806,222 1,011,529 1,238,333 1,530,660

Exports (Revenue) 1,915 2,231 2,552 3,008 3,718* USD

Source: Department of Heavy Industry, Society of Indian Automotive Manufacturing (SIAM), National

Accounts Division, *ImaginMor estimates, USD 1 = INR 46

Automobile Production

Type of Vehicle 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Units

Passenger Vehicles 1,209,876 1,309,300 1,545,223 1,777,583 1,838,697 Number

Commercial Vehicles 353,703 391,083 519,982 549,006 417,126 Number

Three Wheelers 374,445 434,423 556,126 500,660 501,030 Number

Two Wheelers 6,529,829 7,608,697 8,466,666 8,026,681 8,418,626 Number

Total 8,467,853 9,743,503 11,087,997 10,853,930 11,175,479 Number

Source: Society of Indian Automotive Manufacturing (SIAM)

Automobile Sales

7/28/2019 Auto 000

4/75

Type of Vehicle 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Passenger Vehicles 1,061,572 1,143,076 1,379,979 1,549,882 1,551,880

Commercial Vehicles 318,430 351,041 467,765 490,494 384,122

Three Wheelers 307,862 359,920 403,910 364,781 349,719

Two Wheelers 6,209,765 7,052,391 7,872,334 7,249,278 7,437,670

Total 7,897,629 8,906,428 10,123,988 9,654,435 9,723,391


Automobile Exports

Type of Vehicle 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Passenger Vehicles 166,402 175,572 198,452 218,401 335,739

Commercial Vehicles 29,940 40,600 49,537 58,994 42,673

Three Wheelers 66,795 76,881 143,896 141,225 148,074

Two Wheelers 366,407 513,169 619,644 819,713 1,004,174

Total 629,544 806,222 1,011,529 1,238,333 1,530,660


Supply ChainSupply Chain of Automobile Industry:

7/28/2019 Auto 000

5/75

Source: ImaginMor, Inderscience Enterprises Ltd and United Nations Industrial Development

Organisation

The supply chain of automotive industry in India is very similar to the supply chain of the automotive

industry in Europe and America. The orders of the industry arise from the bottom of the supply chain i. e.,

from the consumers and goes through the automakers and climbs up until the third tier suppliers.

However the products, as channelled in every traditional automotive industry, flow from the top of the

supply chain to reach the consumers. Automakers in India are the key to the supply chain and areresponsible for the products and innovation in the industry.

The description and the role of each of the contributors to the supply chain are discussed below.

Third Tier Suppliers: These companies provide basic products like rubber, glass, steel, plastic and

aluminium to the second tier suppliers.

7/28/2019 Auto 000

6/75

Second Tier Suppliers: These companies design vehicle systems or bodies for First Tier Suppliers and

OEMs. They work on designs provided by the first tier suppliers or OEMs. They also provide engineering

resources for detailed designs. Some of their services may include welding, fabrication, shearing, bending

etc.

First Tier Suppliers: These companies provide major systems directly to assemblers. These companieshave global coverage, in order to follow their customers to various locations around the world. They

design and innovate in order to provide black -box solutions for the requirements of their customers.

Black-box solutions are solutions created by suppliers using their own technology to meet the

performance and interface requirements set by assemblers.

First tier suppliers are responsible not only for the assembly of parts into complete units like dashboard,

breaks-axel-suspension, seats, or cockpit but also for the management of second-tier suppliers.

Automakers/Vehicle Manufacturers/Original Equipment Manufacturers (OEMs): After researching

consumers wants and needs, automakers begin designing models which are tailored to consumers

demands. The design process normally takes five years. These companies have manufacturing units

where engines are manufactured and parts supplied by first tier suppliers and second tier suppliers are

assembled. Automakers are the key to the supply chain of the automotive industry. Examples of these

companies are Tata Motors, Maruti Suzuki, Toyota, and Honda. Innovation, design capability and

branding are the main focus of these companies.

Dealers: Once the vehicles are ready they are shipped to the regional branch and from there, to the

authorised dealers of the companies. The dealers then sell the vehicles to the end customers.

Parts and Accessory: These companies provide products like tires, windshields, and air bags etc. to

automakers and dealers or directly to customers.

Service Providers: Some of the services to the customers include servicing of vehicles, repairing parts,

or financing of vehicles. Many dealers provide these services but, customers can also choose to go to

independent service providers.

SegmentationProduct and Service Segmentation

7/28/2019 Auto 000

7/75


The automotive industry of India is categorised into passenger cars, two wheelers, commercial vehicles

and three wheelers, with two wheelers dominating the market. More than 75% of the vehicles sold are

two wheelers. Nearly 59% of these two wheelers sold were motorcycles and about 12% were scoters.

Mopeds occupy a small portion in the two wheeler market however; electric two wheelers are yet to

penetrate.

The passenger vehicles are further categorised into passenger cars, utility vehicles and multi-purpose

vehicles. All sedan, hatchback, station wagon and sports cars fall under passenger cars. Tata Nano, is

the worlds cheapest passenger car, manufactured by Tata Motors - a leading automaker of India. Multi-

purpose vehicles or people-carriers are similar in shape to a van and are taller than a sedan, hatchback

or a station wagon, and are designed for maximum interior room. Utility vehicles are designed for specific

tasks. The passenger vehicles manufacturing account for about 15% of the market in India.

Commercial vehicles are categorised into heavy, medium and light. They account for about 5% of the

market. Three wheelers are categorised into passenger carriers and goods carriers. Three wheelersaccount for about 4% of the market in India.

Product and Service Segmentation

Segment 2003-04 2004-05 2005-06 2006-07 2007-08 Unit

7/28/2019 Auto 000

8/75

Passenger Vehicles (PVs)

Passenger Car 10.22 10.39 9.91 10.65 12.42 %

Utility Vehicles (UVs) 2.15 2.23 2.18 2.18 2.39 %

Multi Purpose Vehicles (MPVs) 0.87 0.82 0.75 0.82 0.98 %

Total Passenger Vehicles 13.25 13.44 12.83 13.65 15.79 %

Commercial Vehicles (CVs)

Medium and Heavy Commercial

Vehicles (M&HCVs)

Passenger Carriers 0.36 0.32 0.32 0.28 0.43 %

Goods Carriers 2.01 2.19 2.01 2.44 2.10 %

Total M&HCVs 2.37 2.51 2.33 2.73 2.53 %

Light Commercial Vehicles (LCVs)


Goods Carriers 1.17 1.27 1.36 1.67 1.77 %

Total LCVs 1.45 1.52 1.61 1.90 2.10 %

Total Commercial Vehicles 3.82 4.03 3.94 4.63 4.63 %

Three Wheelers


7/28/2019 Auto 000

9/75

Goods Carriers 1.61 1.73 1.65 1.65 1.51 %

Total Three Wheelers 4.17 3.90 4.04 4.00 4.01 %

Two Wheelers

Scoters/Scooterettee 13.01 11.68 10.21 9.31 11.57 %

Motorcycles/Step-Throughs 61.24 62.86 65.24 64.83 59.35 %

Mopeds 4.52 4.08 3.74 3.52 4.47 %

Electric Two Wheelers - - - 0.07 0.19 %

Total Two Wheelers 78.76 78.63 79.18 77.73 75.57 %

Grand Total 100.00 100.00 100.00 100.00 100.00 %


Vehicle Registration:

India had over 100 million vehicles registered on its roads in the year 2008. This is a growth of about

100% in the past 9 years. Over 77% and about 77 million of these vehicles are two wheelers, about 14%

and over 14 million are cars, jeeps and taxis. Over 5 million and over 1 million vehicles registered are

goods vehicles and buses respectively.

Two wheelers account a significant market share. Tata Motors with the launch of Tata Nano is trying to

attract some of these two wheeler buyers to buy a small, cheap and affordable passenger car.

Total Number of Vehicle Registrations in India from 2001 to 2008

Year

All Vehicles Two WheelersCars, Jeeps and

TaxisBuses Goods Vehicles

Other

VehiclesUnits

2001 54,991 38,556 70,58 634 2,948 5,795 Thousan

7/28/2019 Auto 000

10/75

2002 58,924 41,581 76,13 635 2,974 6,121 Thousan

2003 67,007 47,519 85,99 721 3,492 6,676 Thousan

2004 72,718 51,922 94,51 768 3,749 6,828 Thousan

2005* 80,045 57,417 10,460 822 4,053 7,337 Thousan

2006* 88,068 63,487 11,571 879 4,345 7,891 Thousan

2007* 96,808 70,141 12,810 936 4,652 8,464 Thousan

2008* 106,591 77,588 14,222 1,003 5,018 9,065 Thousan

Source: Department of Road Transport & Highways, includes tractors, trailors, three wheelers

(passenger vehicles), and vehicles which are not separately classified, *ImaginMor estimates

Major Market Segments

7/28/2019 Auto 000

11/75


Geographic Segmentation

7/28/2019 Auto 000

12/75

Source: Department of Road Transport & Highways, *ImaginMor estimates

The total number of new vehicles registered in the 28 states and 7 union territories of India in the year

2008 were about 106,591,000. The diagram above displays the registration of new vehicles in various

states and union territories. About 16 states and 1 union territory had over a million new vehicles

registered. Tamil Nadu had about 16 million new vehicles registered, Maharashtra had over 13 million,

and Gujarat had over 10 million. About 91% of these vehicles are non-commercial vehicles purchased by

households looking for a two wheeler, or a car. Only about 9% of new vehicles registered are used for

commercial purposes. Details of category wise new vehicle registrations in the various states and union

7/28/2019 Auto 000

13/75

territories are displayed in Appendix 1. The number of new vehicles registrations has grown by about

66% in the past five years.

Exports

India exports automobiles in about 203 countries. The total revenues from exports of automobiles, in theyear 2008-2009 were USD 6,001.81 million with a growth of 33.85% from the previous year. The total

exports from India in the year 2008-2009 were USD 185,295.36 million and in the year 2007-2008 were

USD 163,132.18 million. The automobile industry in India contributes 3.24% of total exports in the year

2008-2009 compared to 2.75% in the year 2007-2008.

Top 20 Export destinations in 2007-2008 and growth from previous year

Rank Country

Value in USD Millions

Percentage Growt

2007-2008 2008-2009

1 United States of America 593.64 525.24 -

2 Italy 332.35 359.68

3 Sri Lanka 249.14 216.11 -

4 South Africa 224.93 188.57 -

5 United Kingdom 165.57 246.32 4

6 United Arab Emirates 164.44 192.74

7 Algeria 147.34 265.63

8 Bangladesh 137.26 164.86 2

9 Egypt 134.43 143.54

10 Germany 133.52 409.63 2

7/28/2019 Auto 000

14/75

11 Colombia 118.88 120.71

12 Nepal 111.33 98.13 -

13 Mexico 93.80 94.10

14 Turkey 83.53 73.82 -

15 Spain 81.01 56.96 -2

16 France 76.77 134.21 7

17 Nigeria 66.01 148.74 12

18 Greece 65.75 127.63

19 Netherland 65.19 163.66 15

20 Ghana 59.91 38.30 -3

Source: Ministry of Commerce and Industry

Market CharacteristicsMarket Size

The Indian Automotive Industry after de-licensing in July 1991 has grown at a spectacular rate on an

average of 17% for last few years. The industry has attained a turnover of USD 35.8 billion, (INR 165,000

crores) and an investment of USD 10.9 billion. The industry has provided direct and indirect employment

to 13.1 million people. Automobile industry is currently contributing about 5% of the total GDP of India.

Indias current GDP is about USD 650 billion and is expected to gro w to USD 1,390 billion by 2016. The

projected size in 2016 of the Indian automotive industry varies between USD 122 billion and UDS 159

billion including USD 35 billion in exports. This translates into a contribution of 10% to 11% towards

Indias GDP by 2016, which is more than double the current contribution. (Source: Department of Heavy

Industry & Public Enterprises Government of India)

7/28/2019 Auto 000

15/75

Demand Determinants

Determinants of demand for this industry include vehicle prices (which are determined largely by wage,

material and equipment costs) and exchange rates, preferences, the running cost of a vehicle (mainly

determined by the price of petrol), income, interest rates, scrapping rates, and product innovation.

Exchange Rate:Movement in the value of Rupee determines the attractiveness of Indian products

overseas and the price of import for domestic consumption.

Affordability: Movement in income and interest rates determine the affordability of new motor vehicles.

Allowing unrestricted Foreign Direct Investment (FDI) led to increase in competition in the domestic

market hence, making better vehicles available at affordable prices.

Product Innovation is an important determinant as it allows better models to be available each year and

also encourages manufacturing of environmental friendly cars.

Demographics: It is evident that high population of India has been one of the major reasons for largesize of automobile industry in India. Factors that may be augment demand include rising population and

an increasing proportion of young persons in the population that will be more inclined to use and replace

cars. Also, increase in people with lesser dependency on traditional single family income structure is likely

to add value to vehicle demand.

Infrastructure: Longer-term determinants of demand include development in Indians infrastructure.

Indias banking giant State Bank of India and Australias Macquarie Group has launched an infrastructure

fund to rise up to USD 3 billion for infrastructure improvements. India needs about $500 billion to repair

its infrastructure such as ports, roads, and power units. These investments are been made with an aim to

generate long-term cash flow from automobile, power, and telecom industries. (Source: Silicon India)

Price of Petrol:Movement in oil prices also have an impact on demand for large cars in India. During

periods of high fuel cost as experienced in 2007 and first half of 2008, demand for large cars declined in

favour of smaller, more fuel efficient vehicles. The changing patterns in customer preferences for smaller

more fuel efficient vehicles led to the launch of Tata Motors Nano one of worlds smallest and cheapest

cars.

International Markets

International Markets Exports

The level of trade export is medium

The level of trade export is increasing

International Markets Imports

The level of trade import is low

7/28/2019 Auto 000

16/75

The level of trade import is increasing

International Markets Analysis

The Indian automotive industry embarked a new journey in 1991 with de-licensing of the sector and

subsequent opening up for 100% foreign direct investment (FDI). Since then almost all global majorshave set up their facilities in Indian taking the level of production from 2 million in 1991 to over 10 million

in recent years. The exports in automotive sector have grown on an average compound annual growth

rate of 30% per year for the last seven years. The export earnings from this sector are over USD 6 billion.

Even with this rapid growth, the Indian automotive industrys contribution in global terms is very low. This

is evident from the fact that even thought passenger and commercial vehicles have crossed the

production figures of 2.3 million in the year 2008, yet Indias share is about 3.28% of world production of

70.53 million passenger and commercial vehicles. Indias automotive exports constitute only about 0.3%

of global automotive trade.

(Source: Department of Heavy Industry & Public Enterprises Government of India)

Basis of Competition

Competition in this industry is high

Competition in this industry is increasing

Automotive industry is a volume driven industry and certain critical mass is a pre-requisite for attracting

the much needed investment in research and development and new product design and development.

Research and development investment is needed for innovations which is the lifeline for achieving and

retaining competitiveness in the industry. This competitiveness in turn depends on the capacity and the

speed of the industry to innovate and upgrade. The most important indices of competitiveness are

productivity of both labour and capital.

The concept of attaining competitiveness on the basis of low cost and abundant labour, favourable

exchange rates, low interest rates and concessional duty structure is becoming inadequate and therefore,

not sustainable. A greater emphasis is required on the development of the factors like innovation which

can ensure competitiveness on a long-term basis.

India with a rapidly growing middle class (450 million in 2007 as per NCAER Report), market oriented

stable economy, availability of trained manpower at competitive cost, fairly well-developed credit andfinancing facilities and local availability of almost all the raw materials at a competitive cost has emerged

as one of the favourite investment destinations for the automotive manufacturers. These advantages

need to be leveraged in a manner to attain the twin objective of ensuring availability of best quality

product at lower cost to the consumers on the one hand and developing and assimilating the latest

technology in the industry on the other hand.

7/28/2019 Auto 000

17/75

As per Automotive Mission Plan 2006-2016 (2008), the Indian Government recognises its role as a

catalyst and facilitator to encourage the companies to move to higher level of competitive performance.

The Indian Government wants to create a policy environment to help companies gain competitive

advantage. The government aims that with its policies its encourage growth, promote domestic

competition and stimulate innovation.


Life Cycle

The life cycle stage is growth

Life Cycle Reasons

The market for manufacturing motor vehicles is consistently increasing.

The products manufactured by this industry are profitable.

Companies have been consistently opening new plats and employing over the past five years.

Japanese and European manufacturers of motor vehicles have entered the market.

Industry value added has been rising, along with the rise in GDP.

Life Cycle Analysis

General improvement in availability of trained manpower and good infrastructure is required for

sustainable growth of the industry. Keeping this in view, the Indian Government has launched a unique

initiative of National Automotive Testing and R&D Infrastructure Project (NATRIP) to provide specialised

facilities for Testing, Certification and Homologation to the industry. A similar initiative is required forcreating specialised institutions in automotive sector for education, training and development.

The auto industry has grown in the clusters of interconnected companies which are linked by

commonalities and complementarities. The major clusters are in and around Manesar in North, Pune in

West, Chennai in South, Jamshedpur-Kolkata in East and Indore in Central India. The Government is

planning to create a National Level Specialises Education and Training Institute for Automotive Sector

and to enhance the transportation, communication and export infrastructure facilities.

The contribution of automotive sector in the GDP of India is expected to double by 2016 through major

spotlight on export of small cars, Multi-Utility Vehicles, Two and Three wheelers.


Industry ConditionsBarriers to Entry

7/28/2019 Auto 000

18/75

Barriers to entry in this industry is high

These barriers are study

The cost of developing high volume production facilities.

The ability to gain access to technology of major global operators.

The relatively high competition between established domestic companies and foreign companies.

The automobile manufacturing sector is characterised by a high cyclical growth patterns, high fixed cost

and break-even point levels, and an excessive number of participants. Barriers to entry into automobile

manufacturing activity are formidable. Some of the barriers that need to be overcome by a new entrant

include: the cost of developing high volume production facilities, in order to benefit from economies of

scale; and the ability to gain access to technology of major operators, as the present incumbents include

some of the largest multinationals, that have considerable claims to new technology. The relative large

size of domestic market, together with high competition, has already seen significant rationalisation of this

industry.

Taxation

India has a well developed tax structure. The power to levy taxes and duties is distributed among the

three tiers of Government, in accordance with the provisions of the Indian Constitution. The main

taxes/duties that the Union Government is empowered to levy are:- Income Tax (except tax on

agricultural income, which the State Governments can levy), Customs duties, Central Excise and Sales

Tax and Service Tax. The principal taxes levied by the State Governments are:- Sales Tax (tax on intra-

State sale of goods), Stamp Duty (duty on transfer of property), State Excise (duty on manufacture of

alcohol), Land Revenue (levy on land used for agricultural/non-agricultural purposes), Duty onEntertainment and Tax on Professions & Callings. The Local Bodies are empowered to levy tax on

properties (buildings, etc.), Octroi (tax on entry of goods for use/consumption within areas of the Local

Bodies), Tax on Markets and Tax/User Charges for utilities.

Excise Duty

Central Excise duty is an indirect tax levied on those automobiles which are manufactured in India and

are meant for home consumption. The taxable event is 'manufacture' and the liability of central excise

duty arises as soon as the automobiles are manufactured. It is a tax on manufacturing, which is paid by a

manufacturer, who passes its incidence on to the customers.

Types of Excise Duties

Basic Excise Duty: This is the duty leviable under First Schedule to the Central Excise Tariff Act, 1985 at

the rates mentioned in the said Schedule.

Special Excise Duty: This is the duty leviable under Second Schedule to the Central Excise Tariff Act,

1985 at the rates mentioned in the said Schedule. At present this is leviable on very few items.

7/28/2019 Auto 000

19/75

Basic Central VAT (CENVAT) or Excise Tax Structure for Automobiles

Year

Commercial

Vehicles

MUVs Cars

2 Wheelers

3 Wheelers Unit

75 CC > 75CC

2001-02 16 32 32 16 16 16 %

2002-03 16 32 32 16 16 16 %

2003-04 16 24+1* 24+1* 16+1* 16+1* 16 %

2004-05 16 24+1* 24+1* 16+1* 16+1* 16 %

2005-06 16 24+1* 24+1* 16+1* 16+1* 16 %

2006-07 16 24+1* 24/16**+1* 16+1* 16+1* 16 %

2007-08 16 24+1* 24/16**+1* 16+1* 16+1* 16 %

Source: Society of Indian Automotive Manufacturing (SIAM) - Based on Government of IndiaNotifications, Additional higher & Secondary Education Cess of 1%, *National Calamity Contingent Duty

(NCCD) of 1 %, **16% on cars (up to 4000mm in length &1200cc for petrol & up to 4000mm in length &

1500cc for diesel) and 24% for rest

National Calamity Contingent Duty (NCCD): Normally known as NCCD. This duty is levied as per

section 136 of the Finance Act, 2001, as a surcharge on specified goods.

Excise Duties and Cesses Leviable under Miscellaneous Act:On certain specified goods, in addition

to the aforesaid duties, prescribed rate of excise duty and cess is also leviable.

Education Cesson excisable goods is levied in addition to any other duties of excise chargeable on suchgoods, under the Central Excise Act, 1944 or any other law for the time being in force.

MODVAT and CENVAT

Taxation of inputs, like raw materials, components and other intermediaries has a number of limitations.

In production process, raw material passes through various processes stages till a final product emerges.

Thus, output of the first manufacturer becomes input for second manufacturer and so on. When the inputs

7/28/2019 Auto 000

20/75

are used in the manufacture of product À', the cost of the final product increases not only on account of

the cost of the inputs, but also on account of the duty paid on such inputs. As the duty on the final product

is on ad valorem basis and the final cost of product À' includes the cost of inputs, inclusive of the duty

paid, duty charged on product À' meant doubly taxing raw materials. In other words, the tax burden goes

on increasing as raw material and final product passes from one stage to other because, each

subsequent purchaser has to pay tax again and again on the material which has already suffered tax.

This is called cascading effect or double taxation.

This very often distorted the production structure and did not allow the correct assessment of the tax

incidence. Therefore, the Government tried to remove these defects of the Central Excise System by

progressively relieving inputs from excise and countervailing duties. An ideal system to realize this

objective would have been to adopt value added taxation (VAT). However, on account of some practical

difficulties it was not possible to fully adopt the value added taxation.

Hence, Government evolved a new scheme, `MODVAT' (Modified Value Added Tax). MODVAT Scheme

which essentially follows VAT Scheme of taxation. i.e. if a manufacturer A purchases certaincomponents(raw materials) from another manufacturer B for use in its product. B would have paid excise

duty on components manufactured by it and would have recovered that excise duty in its sales price from

A. Now, A has to pay excise duty on product manufactured by it as well as bear the excise duty paid by

the supplier of raw material B. Under the MODVAT scheme, an Original Equipment Manufacturer can

take credit of excise duty paid by First Tier and Second Tier suppliers. It amounts to excise duty only on

additions in value by each manufacturer at each stage.

MODVAT Scheme ensures the revenue of the same order and at same time the price of the final product

could be lower. Apart from reducing the costs through elimination of cascade effect, and bringing in

greater rationalization in tax structure and also bringing in certainty in the amount of tax leviable on the

final product, this scheme will help the consumer to understand precisely the impact of taxation on the

cost of any product.

Subsequently, MODVAT scheme was restructured into CENVAT (Central Value Added Tax) scheme. A

new set of rules 57AA to 57AK , under The CENVAT Credit Rules, 2004, were framed and whatever

restrictions were there in MODVAT Scheme were put to an end and comparatively, a free hand was given

to the assesses.

Under the CENVAT Scheme, a manufacturer of final product or provider of taxable service shall be

allowed to take credit of duty of excise as well as of service tax paid on any input received in the factory

or any input service received by manufacturer of final product. Inputs include goods used in themanufacture of capital goods which are further used in the factory of the manufacturer.

Customs Duty

Customs Duty (Import duty and Export tax) is a type of indirect tax levied on goods imported into India as

well as on goods exported from India. Taxable event is import into or export from India. In India, the basic

law for levy and collection of customs duty is Customs Act 1962. It provides for levy and collection of duty

7/28/2019 Auto 000

21/75

on imports and exports, import/export procedures, prohibitions on importation and exportation of goods,

penalties, offences, etc.

Basic Customs Tax Structure for Automobiles

Year CVs1 MUVs2 Cars Two Wheelers Three Wheelers U

2001-02 35 105/60/35 105/60/35 105/60/35 105/60/35 %

2002-03 30 105/60/35 105/60/35 105/60/35 105/60/35 %

2003-04 25 105/60/35 105/60/35 105/60/35 105/60/35 %

2004-05 20 105/60/35 105/60/35 105/60/35 105/60/35 %

2005-06 15 100/60/15 100/60/15 100/60/15 100/60/15 %

2006-07 12.5 100/60/12.5 100/60/12.5 100/60/12.5 100/60/12.5 %

2007-08 10 100/60/10 100/60/10 100/60/10 100/60/10 %

Source: Society of Indian Automotive Manufacturing (SIAM) - Based on Government of IndiaNotifications, *For Used Vehicle/New CBU/CKD & Components respectively, 1CVs = Commercial

Vehicles 2MUVs = Multi-Utility Vehicles

Export duties are levied occasionally to mop up excess profitability in international prices of goods in

respect of which domestic prices may be low at the given time. But the sweep of import duties is quite

wide.

For detailed Central Value Added Tax and Customs Tax on each category of vehicle refer to Appendix 2.

Service Tax

Service tax is a tax levied on services rendered by a person and the responsibility of payment of the tax is

cast on the service provider. It is an indirect tax as it can be recovered from the service receiver by the

service provider in course of his business transactions. Service Tax was introduced in India in 1994 by

Chapter V of the Finance Act, 1994. It was imposed on an initial set of three services in 1994 and the

scope of the service tax has since been expanded continuously by subsequent Finance Acts. The

Finance Act extends the levy of service tax to the whole of India, except the State of Jammu & Kashmir.

7/28/2019 Auto 000

22/75

(Source: National Information Centre)

Industry Assistance

The automobile industry has a defined its target in the Automotive Mission Plan as To emerge as the

destination of choice in the world for design and manufacture of automobiles with output reaching a levelof USD 145 billion accounting more than 10% of GDP and providing additional employment to 25 million

people by 2016. In order to achieve this plan interventions are required from both Industry and Indian

Government. The Indian Government would play a key enabling role in facilitating infrastructure creation,

promote the countrys capabilities, create a favourable and predictable business environment, attract

investment and promote research & development. The role of Industry will primarily be in designing and

manufacturing products of world-class quality standards, establishing cost competitiveness, improving

productivity of both labour and capital, achieving scale and R&D enhancing capability and showcasing

Indias products in potential markets.

In order to achieve these goals the following key recommendations have been made in the Automotive

Mission Plan to the Indian Government and Industry:

1. Manufacturing and export of small cars, multi-utility vehicles, two and three wheelers, tractors,

components to be promoted

2. Care to be taken of negative like and rules of the country with current negotiation of Free Trade

Agreement and Regional Trade agreement with countries like Thailand, Singapore, Malaysia,

China, Korea, Egypt, Gulf etc.

3. Attractive Tariff Policy which may follow attractive investment.

4. Specific measures will be taken for expansion of domestic market.

5. Incremental investment of USD 35 to 40 billion to Automotive Industry during the next 10 years.

6. National Road Safety Board to act as the coordinating body for promoting safety.

7. Inspection and Certification system to be strengthened by encouraging public-private partnership.

8. National level Automotive Institute for training on automobile at International Training Institutes

(ITIs) and Automotive Training Institute (ATIs) to be set up.

9. An Auto Design Centre to be established at National Institute of Design, Ahmadabad.

10. National Automotive Testing and R&D Implementation Project (NATRIP) to act as Centre of

Excellence for Technical Design Data.

11. Integration of Information Technology in manufacturing to be promoted.12. R&D for product, process and technology to be incentivised.

13. Road Map for Auto Fuel Policy beyond 2010 would be drawn.

Cost Structure

7/28/2019 Auto 000

23/75

Source: Maruti Suzuki 2008-2009

The profitability of motor vehicle manufacturers has been rising over the past five years, mainly due to

rising demand and growth of Indian middle class. Major players of the industry, like Maruti Suzuki India

and Tata Motors have been recording profits of 6% to 11% from the past five years. Whereas, earlier

profit margins in the industry were only 1.5% to 3%.

Cost of material has reduced from over 85% in the year 2001-2002 to under 80% in the year2008-2009.

Wages and salary as a percentage of revenue has been declining and with the increasing labour

productivity this is expected to decline further in the coming years.

Capital and Labour Intensity

The level of Capital Intensity is high

The level of Labour intensity in medium

The motor vehicle manufacturing industry requires significant level of capital investment.

Value is added through the automated manufacturing and assembly of costly components.

Labour input is required in the manufacturing, assembly, and finishing processes.

In order to achieve and retain competitiveness, vehicle manufacturing industry depends on its capacity

and speed to innovate and upgrade. The most imperative indices for competitiveness in the industry are

productivity in both labour and capital.

7/28/2019 Auto 000

24/75

Technology and Systems

The level of technology change is high

The rate of change in technology is medium

Investment in technology by producers has been on the rise. The automobile industry in India has seen

an enormous development in the engines which are being used. Carburettor engines have become

obsolete and Multi Point Fuel Injection (MPFI) engines are the order of the days in patrol cars. The Diesel

engines have also under gone a sea change from the time Rudolf Diesel invented it way back in the

1892. Today Common Rail Direct Injection (CRDI) is the order of the day.

Multi Point Fuel injection (MPFI)

The fuel injects were used to meet stricter emission norms as it keeps pollutants to bare minimum and

drives the maximum performance out of a vehicle by squeezing out the maximum mileage even from the

last drop of fuel that goes into the engine.

MPFI system injects fuel into individual cylinders after receiving command from the on board engine

management system computer or Engine Control Unit (ECU).

This technology results in superior fuel combustion, better fuel management, engine performance and

reduced pollution. To get the maximum out from these types of engine one should use Premium petrol

like XTRA Premium, Speed, and Power.

Common Rail Direct Injection (CRDI)

CRDI engine cars offer 25% more power than the normal direct injection engine with a superior pickup

and torque, offering sometimes up to 70% more power than the conventional diesel engines.

They are smooth, less strident, and immensely fuel efficient giving around 24 kilometres to a litre of

Diesel. The fact that Diesel is cheaper than petrol in India further attributes greatness to the engine. In a

CRDI engine, a tube or a common rail connects all the injectors and contains fuel at a constant pressure.

The high pressure in the common rail ensures that when injected, the fuel breaks up into small particles

and mixes evenly with the air, thereby leaving little un-burnt fuel thus reducing pollution. The common rail

principle has been used to reduce the noise which used to be a downside with earlier Diesel engines; the

technology has been pioneered by the Fiat group, only to be adopted by other automobile companies

around the world.

However, these engines are 25% more costly than the conventional engines. They also require higher

degree of maintenance and spares are also expensive.

The Indian automotive industry is in the mindset of a major structural transformation in todays globalised

scenario. System Supplies of integrated components and sub-systems has become the order of the

7/28/2019 Auto 000

25/75

day, with individual small components being supplied to the system integrators instead of vehicle

manufacturers. In this process most of the Small Scale Industrial units, manufacturing smaller individual

components, have become tier 2 and tier 3 suppliers, while the large companies including most Multi

National Companies are being transformed into tier 1 companies who purchase from tier 2 and tier 3, and

sell to the auto manufacturers. (Source: Department of Heavy Industry)

Investment in new technology such as supply-chain management and collaborative forecasting (where

members of the supply chain share forecasting data to reduce bottlenecks) will help make industry more

competitive.

Industry Volatility

The level of volatility is medium.

Over the past few years, the Motor Vehicle Manufacturing industry has become more volatile. This has

been the result of fluctuations in metal prices and fuel prices, as well as changes in legislation and

assistance packages. Indias increasing per capita disposable income and growth in exports is playing a

major role in the rise and the competitiveness of the industry. As per the BRIC report Indias per capita

disposable income from current year will rise by 106% in 2015. This increase in the spending power has

been a forefront of the economic development. According to the Economic Times of India, economic

liberalization allowing unrestricted Foreign Direct Investment (FDI) and removing foreign currency

neutralisation and export obligations has been also been one of the key to Indias automotive volatility.

(Source: Quantum Information Services Ltd. & The Truth About Cars)

Key CompetitorsMajor Players

7/28/2019 Auto 000

26/75

7/28/2019 Auto 000

27/75


Players Performance:

7/28/2019 Auto 000

28/75

Tata Motors

Market Share: Commercial Vehicles 63.94%, Passenger Vehicles 16.45%

Tata Motors Limited is Indias largest automobile company, with consolidated revenues of USD 14 billion

in 2008-09. It is the leader in commercial vehicles and among the top three in passenger vehicles.Tata Motors has winning products in the compact, midsize car and utility vehicle segments. The company

is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer with

over 24,000 employees. Since first rolled out in 1954, Tata Motors as has produced and sold over 4

million vehicles in India.

Tata Motors is the first company from India's engineering sector to be listed in the New York Stock

Exchange (September 2004), has also emerged as an international automobile company. Through

subsidiaries and associate companies, Tata Motors has operations in the United Kingdom, South Korea,

Thailand and Spain. Among them is Jaguar Land Rover, a business comprising the two British brands

which was acquired in 2008. In 2004, it acquired the Daewoo Commercial Vehicles Company, South

Korea's second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has

launched several new products in the Korean market, while also exporting these products to several

international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from

Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus

and coach manufacturer, and subsequently the remaining stake in 2009. Hispano's presence is being

expanded in other markets.

In 2006, Tata Motors formed a joint venture with the Brazil-based Marcopolo, a global leader in body-

building for buses and coaches to manufacture fully-built buses and coaches for India and select

international markets. In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly

Plant Company of Thailand to manufacture and market the company's pickup vehicles in Thailand. The

new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with the Xenon

having been launched in Thailand in 2008. Tata Motors is also expanding its international footprint by

franchises and joint ventures assembly operations in Kenya, Bangladesh, Ukraine, Russia, Senegal and

South Africa.

With over 3,000 engineers and scientists, the company's Engineering Research Centre, established in

1966, has enabled pioneering technologies and products. The company today has R&D centres in Pune,

Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. It was Tata Motors,

which developed the first indigenously developed Light Commercial Vehicle, India's first Sports Utility

Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car. Within two years oflaunch, Tata Indica became India's largest selling car in its segment. In 2005, Tata Motors created a new

segment by launching the Tata Ace, India's first indigenously developed mini-truck.

In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, a development which signifies a

first for the global automobile industry. Nano brings the comfort and safety of a car within the reach of

thousands of families. The standard version has been priced at USD 2,200 or 100,000 (excluding VAT

7/28/2019 Auto 000

29/75

and transportation cost). The Tata Nano has been subsequently launched as planned, in India in March

2009.

Maruti Suzuki India

Market Share: Passenger Vehicles 46.07%

Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, is India's largest

passenger car company, accounting for over 45% of the domestic car market. The company offers a

complete range of cars from entry level Maruti-800 and Alto, to stylish hatchback Ritz, A star, Swift,

Wagon-R, Estillo and sedans DZire, SX4 and Sports Utility vehicle Grand Vitara.

Since inception in 1983, Maruti Suzuki India has produced and sold over 7.5 million vehicles in India and

exported over 500,000 units to Europe and other countries. The c ompanys revenue for the fiscal 2008-

2009 stood over USD 4 billion and Profits After Tax at over USD 243 million.

Hyundai Motor India

Market Share: Passenger Vehicles 14.15%

Hyundai Motor India Limited is a wholly owned subsidiary of worlds fifth largest automobile company,

Hyundai Motor Company, South Korea, and is the largest passenger car exporter. Hyundai Motor

presently markets 49 variants of passenger cars across segments. These includes the Santro in the B

segment, the i10, the premium hatchback i20 in the B+ segment, the Accent and the Verna in the C

segment, the Sonata Transform in the E segment.

Hyundai Motor, continuing its tradition of being the fastest growing passenger car manufacturer,

registered total sales of 559,880 vehicles in the year 2009, an increase of 14.4% over 2008. In the

domestic market it clocked a growth of 18.1% as compared to 2008 with 289,863 units, while overseas

sales grew by 10.7%, with export of 270,017 units. Hyundai Motor currently exports cars to more than 110

countries across European Union, Africa, Middle East, Latin America and Asia. It has been the number

one exporter of passenger car of the country for the sixth year in a row.

In a little over a decade since Hyundai has been present in India, it has become the leading exporter of

passenger cars with a market share of 66% of the total exports of passenger cars from India, making it a

significant contributor to the Indian automobile industry. In 2009, in spite of a global slowdown, Hyundai

Motor Indias exports grew by 10.7%. In 2010 Hyundai plans to add 10 new markets with Australia being

the latest entrant to the list. The first shipment to Australia is of 500 units of the i20 and the total i20exports to Australia are expected to be in the region of 15,000 per annum.

Mahindra & Mahindra

Market Share: Commercial Vehicles 10.01%, Passenger Vehicles 6.50%, Three Wheelers 1.31%

7/28/2019 Auto 000

30/75

Mahindra & Mahindra is mainly engaged in the Multi Utility Vehicle and Three Wheeler segments directly.

The company competes in the Light Commercial Vehicle segment through its joint venture subsidiary

Mahindra Navistar Automotives Limited and in the passenger car segment through another joint venture

subsidiary Mahindra Renault. In the year 2009, on the domestic sales front, the Company along with its

subsidiaries sold a total of 220,213 vehicles (including 44,533 three wheelers, 8,603 Light Commercial

Vehicles through Mahindra Navistar Automotives and 13,423 cars through Mahindra Renault), recording

a growth of 0.6% over the previous year.

The companys domestic Multi Utility Vehicle sales volumes increased by 3.3%, as against a decline of

7.4% for industry Multi Utility Vehicle sales. A record number of 153,653 Multi Utility Vehicles were sold in

the domestic market in 2009 compared to 148,761 MUVs in the previous year.Hence, Mahindra &

Mahindra further strengthened its domination of the domestic Multi Utility Vehicle sub-segment during the

year, increasing its market share to 57.2% over the previous years market share of 51.3%.

Mahindra & Mahindra is expanding its footprint in the overseas market. In 2009 the Xylo was launched in

South Africa. The company formed a new joint venture Mahindra Automotive Australia Pty. Limited, tofocus on the Australian Market.

(Source: Mahindra & Mahindra Annual Report)

Ashok Leyland

Market Share: Commercial Vehicles 16.47%

Against the backdrop of the sharp slump in demand for commercial vehicles, during 2008-09, Ashok

Leyland registered sales of 47,118 medium and heavy commercial vehicles (M&HCV), 37.5% less than in

the previous year. This includes 16,049 M&HCV buses and 31,069 M&HCV trucks respectively, 8.7% and46.3% less than in the previous year.

The company lost 1.8% market share in the Indian medium and heavy commercial vehicle market during

the financial year 2008-09, mainly due to loss of sales in the truck segment. This was because the

Eastern Region, where the Companys presence had been historically weak, was relatively stable, whilst

the market declined sharply in other regions.

While total industry volume of the medium and heavy duty buses declined by about 8.7%, the Companys

market share grew marginally and Ashok Leyland retained its number one position in this segment.

The Company sold 6,812 vehicles in the overseas markets during 2008-09. This represents a decrease ofapproximately 6.5% over the previous year. Total industry volume related to overseas markets to which

the Company exports (such as Sri Lanka, the Middle East) witnessed a reduction of about 25% over the

previous year.

To combat the impact of decline in CV sales, the Company focused on non-cyclical businesses in the

portfolio.

7/28/2019 Auto 000

31/75

The Company produced in all 54,049 vehicles during the year. To contain costs and conserve cash, the

Company worked only about 50% of the working days in all its manufacturing units during the second half

of the year.

(Source: Ashok Leyland Annual Report)

Hero Honda Motors

Market Share: Two Wheelers 41.35%

Hero Honda has been the largest two wheeler company in the world for eight consecutive years. The

company crossed the 15 million unit milestone over a 25 year span. Hero Honda sold more two wheelers

than the second, third and fourth placed two-wheeler companies put together.

As one of the world's technology leaders in the automotive sector, Honda has been able to consistently

provide technical know-how, design specifications and R&D innovations. This has led to the development

of world class, value - for- money motorcycles and scooters for the Indian market. On its part, the HeroGroup has took the responsibility of creating world-class manufacturing facilities with robust processes,

building the supply chain, setting up an extensive distribution networks and providing insights into the

mind of the Indian customer. Since both partners continue to focus on their respective strengths, they

have been able to complement each other. In the process, Hero Honda is recognized today as one of the

most successful joint ventures in the world. It is therefore no surprise that there are more Hero Honda

bikes on this country's roads than the total population of some European countries.

Hero Honda's bikes are sold and serviced through a network of over 3500 customer touch points,

comprising a mix of dealers, service centres and stockists located across rural and urban India. Hero

Honda has built two world-class manufacturing facilities at Dharuhera and Gurgaon in Haryana, and

Hero Honda was the torchbearer for the two-wheeler industry during 2008-2009. It sold more two-

wheelers during the year than the combined volumes of the second, third and fourth placed competitor.

Overall, the company sold 3.72 million two-wheelers, growth of 12% over previous year. Motorcycle sales

in the domestic market, which account for more than 95 per cent of Hero Honda's sales, were up by 11%.

The company posted sales of USD 2.4 billion and profits after tax of USD 256.40 million during the year

2008-2009. During the year under review, your Company exported 81,194 two-wheelers, a decline of

10%. Its third and most sophisticated manufacturing plant at Haridwar has just completed a full year of

operations.

During the year, the company also turned in a rollicking performance with its scooter portfolio, with a 49%

growth in domestic sales to 156,210 units. This performance allowed Hero Honda to increase its share in

the domestic scooter market by more than three percentage points. Hero Honda's performance in the

two-wheeler industry was the only standout performance during the year amongst the large players.

Without Hero Honda's numbers, the two wheeler industry growth would have been marginal.

(Source: Hero Honda Motors Annual Report 2008-2009)

7/28/2019 Auto 000

32/75

Bajaj Auto

Market Share: Two Wheelers 26.70%, Three Wheelers 58.60%

Bajaj Auto is ranked as the world's fourth largest two and three wheeler manufacturer and the Bajaj brand

is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia.Despite falling demand in the motorcycle segment, the company has succeeded in maintaining an

operating EBITDA (earnings before interest, taxes, depreciation and amortisation) margin of 13.6% of net

sales and other operating income. From 1.66 million motorcycles in 2007-2008, the companys domestic

sales fell by 23% to 1.28 million units in 2008-2009.

Bajaj Auto is the countrys largest exporterof two- and three-wheelers.During 2008-2009, Bajaj Autos

international sales achieved an all-time high of 772,519 units of two and three wheelers, representing a

growth of 25% over the previous year.The growth was driven by the export of two-wheelers, which

increased by 31% over 2007-2008 to achieve sales of 633,463 units in 2008-2009. The company

expanded its footprint in Africa and Middle East, where the regions share rose from 30% of the export

business in 2007-2008 to 43% in 2008-2009. The total value of exports was USD 528 million,

representing a growth of 29%.

The companys domestic sales of three wheelers in 2008 -209 were 12% lower compared to the previous

year, and stood at 135,473 units. Exports of three wheelers grew at 2% to 139,056 units

(Source: Bajaj Auto Annual Report)

Key FactorsKey Sensitivity

Consumer Sentiment Index

Description: Customer Sentiment Index, 12 month rolling average of the Index; historical and forecast

data and analysis.

End customers are very important to ensure the survival of the Motor Vehicle Manufacturing industry.

Economic downturns and other events can affect the expenditure decision of households. When

customers are not happy or optimistic about the future of the economy, they will tend to postpone

expenditure until times are better. In 2008-09, customer sentiment is expected to fall, which will have a

brunt on the augmentation in demand of cars.

Domestic Goods Price Metal Iron and Steel

Description: The price of input such as steel.

7/28/2019 Auto 000

33/75

Steel is a major input used when manufacturing a motor vehicle. Rises in the price of steel puts cost

pressures on manufacturers, which often leads to a fall in profitability. Over the past five years, the price

of steel has been rising rapidly. These rises in price eventually pass from the manufacturers to the end

customers.

Import and Export Taxes (Duties)

Motor Vehicle Tariffs

Description: Tariff rates applicable to the industry

High taffies may restrict flow of trade but may attract investment if domestic market is big enough and

growing. Over the last few years Indias tariff policies and conditions of import of vehicles have served the

purpose of attracting investments. Industry is keen that the existing tariff structure roadmap and

conditions of import of vehicles are retained without any modifications because of certain systematic

deficiencies which make manufacturing less cost competitive in India as compared to some of the

neighbouring countries like China, Thailand, Indonesia, etc.

Wold Price - Energy

Crude Oil

Description: The world price of crude oil, $US/barrel, and price analysis.

The price of oil and petrol affect the driving habits of consumers and the type of car they buy. Over the

past five years, the price of petrol has been influenced the buying decision of motorists, who are switching

more to fuel efficient options. These include cars that run on liquefied petroleum gas (LPG), diesel and

small cars that achieve better mileage. The trucking sector has also been struggling with the rise in the

price of fuel, which has put enormous pressures on their costs.

Key Success Factors

The Key Success factors in the Motor Vehicle Manufacturing industry are:

Efficiency factor - Improve labour productivity, labour flexibility, and capital efficiency

Resource Availability - Quality manpower availability, infrastructure improvements, and raw material

availability

Effective cost controls - Close relationship with supplies and goods distribution channels.

Establishment of export markets - Growth of export markets

Having an extensive distribution/collection network - Goods distribution channels

Successful industrial relations policy - Ethical and tactical industrial relations

Access to the latest available and most efficient technology and techniques - The degree of investment in

technological improvements and product development

Optimum capacity utilisation - The level of plant utilisation

Management of high quality assets portfolio - Understanding implications from Government policies

7/28/2019 Auto 000

34/75

AppendicesAppendix 1: Detailed Geographic Segmentation

Geographical Segmentation:Sate-wise motor vehicles registration in India from 2001 - 2008

States

Year 2001 2002 2003 2004 2005* 2006* 2007* 2008*

Andhra Pradesh 3,966 4,389 5,002 5,720 6,446 7,232 8,042 8,98

Arunachal Pradesh 21 21 21 21 21 21 21 2

Assam 542 596 657 727 798 883 973 1,08

Bihar 949 1,024 1,121 751 726 694 647 59

Chhattisgarh 857 948 1,076 1,216 1,367 1,536 1,726 1,93

Goa 341 366 397 436 483 537 585 63

Gujarat 5,576 6,008 6,508 7,087 7,892 8,785 9,633 10,54

Haryana 1,949 2,122 2,279 2,548 2,883 3,267 3,689 4,16

Himachal Pradesh 217 244 269 289 329 375 421 48

Jammu & Kashmir 330 364 399 439 493 556 628 71

Jharkhand 909 984 1,101 1,217 1,341 1,479 1,630 1,79

Karnataka 3,537 3,636 3,738 3,977 4,338 4,717 5,036 5,36

7/28/2019 Auto 000

35/75

Kerala 2,112 2,315 2,552 2,792 3,180 3,612 4,034 4,56

Madhya Pradesh 3,095 3,173 3,459 3,804 4,119 4,442 4,710 4,96

Maharashtra 6,760 7,414 8,134 8,969 10,055 11,281 12,477 13,81

Manipur 77 90 97 106 114 123 134 14

Meghalaya 62 67 73 73 78 84 89 9

Mizoram 31 34 37 42 48 54 61 7

Nagaland 160 177 162 172 186 201 215 23

Orissa 1,096 1,215 1,359 1,525 1,717 1,936 2,159 2,41

Punjab 2,910 3,103 3,308 3,529 3,859 4,225 4,571 4,99

Rajasthan 2,943 3,197 3,487 3,834 4,285 4,791 5,281 5,81

Sikkim 12 13 15 17 19 21 23 2

Tamil Nadu 5,162 5,658 8,005 8,575 10,085 11,901 13,860 16,20

Tripura 50 57 66 76 85 95 105 11

Uttarakhand 364 406 457 516 580 651 732 82

Uttar Pradesh 4,921 5,171 5,928 6,460 7,271 8,144 8,970 9,91

West Bengal 1,690 1,690 2,366 2,548 2,816 3,138 3,464 3,83

Union Territories

7/28/2019 Auto 000

36/75

Year 2001 2002 2003 2004 2005 2006 2007 2008

Andaman & Nicobar

Islands25 28 28 28 31 34 38 4

Chandigarh 386 386 562 586 629 677 732 79

Dadra & Nagar Haveli 13 13 31 35 43 54 67 8

Daman & Diu 37 41 44 48 55 63 71 7

Delhi 3,635 3,699 3971 4,237 4,544 4,868 5,166 5,46

Lakshadweep 4 5 5 5 6 7 7

Pondicherry 252 270 293 313 359 418 495 55

Geographical Segmentation: Category-wise number of registrations in States of India

Type of VehicleAndhra

Pradesh

Arunachal

PradeshAssam Bihar Chhattisgarh Goa Gu

Multiaxled/Articulated

Vehicles/Trucks & Lorries143,147 2,323 83,189 30,516 40,413 28,326

Light Motor Vehicles

(goods)66,891 555 14,317 32,296 16,686 -

Buses 15,498 665 10,286 10,961 2,043 4,868

Taxis 81,627 299 10,368 14,000 22,005 8,273


(passenger)263,325 1,430 29,806 9,507 7,474 9,375

7/28/2019 Auto 000

37/75

Total Commercial 570,488 5,272 147,966 97,280 88,621 50,842

Two Wheelers 4,543,283 10,605 418,780 469,751 991,022 309,488 5,

Cars 397,738 2,340 106,063 27,508 43,572 71,516

Jeeps 58,114 2,260 14,266 21,726 7,302 -

Omni Buses 36,549 - - 3,259 - -

Tractors 62,363 333 10,280 77,848 44,321 470

Trailors 46,885 155 8,740 50,403 38,804

Others 4,500 179 20,724 2,928 2,103 3,804

Total non-commercial 5,149,432 15,872 578,853 653,423 1,127,124 385,278 6,

Type of Vehicle HaryanaHimachal

Pradesh

Jammu &

KashmirJharkhand Karnataka Kerala

Ma

Pra




(goods)58,325 2,340 12,272 - 91,755 136,181

Buses 9,369 4,872 20,139 9,539 29,710 67,206

Taxis 14,990 14,970 10,325 21,814 40,839 114,245


(passenger)37,841 2,783 14,255 36,257 190,362 294,244

7/28/2019 Auto 000

38/75


Two Wheelers 1,526,404 152,286 253,611 937,745 2,732,674 1,595,808 2,

Cars 272,895 51,918 74,187 92,171 418,181 378,912

Jeeps 87,203 12,331 10,693 23,419 41,024 71,656

Omni Buses 2,765 44 - - 36,513 30,488

Tractors 373,373 3,898 10,969 15,136 119,340 9,004

Trailors - 62 561 12,512 120,185 1,913

Others 17,078 1,665 1,626 5,799 55,405 19,102

Total non-commercial 2,279,718 222,204 351,647 1,086,782 3,523,322 2,106,883 3,

Type of Vehicle Maharashtra Manipur Meghalaya Mizoram Nagaland Orissa Pu




(goods)256,082 1,206 - 1,255 9,243 35,543

Buses 49,092 2,403 2,827 840 3,505 13,966

Taxis 102,475 363 5,030 3,864 4,448 24,614

Light Motor Vehicles493,142 2,521 2,934 1,145 8,291 21,893

7/28/2019 Auto 000

39/75

(passenger)

Total Commercial 1,143,904 12,456 24,819 10,319 66,506 146,512

Two Wheelers 6,216,794 75,333 21,050 19,501 36,741 1,223,573 2,

Cars 924,006 8,030 14,595 4,850 33,273 62,553

Jeeps 262,741 7,872 9,401 6,765 21,649 26,527

Omni Buses 12,609 570 - - 207 2,238

Tractors 201,940 1,263 441 209 1,827 30,592

Trailors 190,628 580 2,304 254 696 24,181

Others 16,111 221 772 247 11,018 8,806

Total non-commercial 7,824,829 93,869 48,563 31,826 105,411 1,378,470 3,

Type of Vehicle Rajasthan Sikkim Tamil Nadu Tripura Uttarakhand Uttar Pradesh West




(goods) 13,601 353 204,314 595 5,662 57,681

Buses 55,936 406 76,907 1,596 4,626 26,437

Taxis 32,868 4,947 116,373 257 13,385 30,193

7/28/2019 Auto 000

40/75


(passenger)64,580 - 154,192 12,162 6,799 78,067


Two Wheelers 2,692,175 4,682 6,734,205 44,241 391,251 4,922,047 1,

Cars 203,991 1,870 731,380 8,672 42,220 391,443

Jeeps 128,056 2,863 53,987 - 6,452 97,821

Omni Buses - 487 19,957 - 787 14,736

Tractors 407,523 9 90,886 147 31,981 718,082

Trailors 57,013 - 39,910 1,015 898 10,021

Others 4,511 - 76,895 541 2,122 19,188

Total non-commercial 3,493,269 9,911 7,747,220 54,616 475,711 6,173,338 2,

Source: Department of Road Transport & Highways, - Not indicated, data related to 1997-1998, data

related to 2002-2003, Figures related to 2001-2002, *ImaginMor estimates

Geographical Segmentation: Category-wise registration in Union Territories of India

Type of VehicleAndaman &

Nicobar IslandsChandigarh

Dadra &

Nagar Haveli

Daman &

DiuDelhi Lakshadweep Pon


Vehicles/Trucks & Lorries 1,519 1,671 5,487 1,896 75,601 -


(goods)- 7,459 1,190 1,829 75,947 270

7/28/2019 Auto 000

41/75

Buses 459 1,239 154 361 36,059 -

Taxis 436 1,173 108 43 24,712 -


(passenger)784 - 500 890 20,893 408

Total Commercial 3,198 11,542 7,439 5,019 233,212 678

Two Wheelers 21,743 416,917 17,881 30,351 2,665,750 3,978

Cars 1,693 157,612 9,270 12,278 1,192,389 78

Jeeps 1,033 - 429 295 122,283 85

Omni Buses - - 6 38 8,386 5

Tractors 261 36 44 165 4,851 44

Trailors 67 - 46 124 99 -

Others 461 - - 30 9,705 503

Total non-commercial 25,258 574,565 27,676 43,281 4,003,463 4,693

Source: Department of Road Transport & Highways, - Not indicated

Appendix 2: Detailed Central VAT (CENVAT) and Customs Tax for Automobiles

Detailed Central VAT (CENVAT) or Excise Tax for Automobiles for year 2007

Description of goods Unit Rate of duty

1. TRACTORS

7/28/2019 Auto 000

42/75

Pedestrian controlled tractors U 16%

Road tractors for semi -trailers :

Of engine capacity not exceeding 1,800 cc U 16%

Other U 16%

Track-laying tractors :

Garden tractors of engine capacity not exceeding 1,800 cc U 16%

Other Garden tractors U 16%

Other Track-layingtractors of engine capacity not exceeding 1,800cc U 16%

Other Track-layingtractors of engine capacity more than 1,800cc U 16%

Other tractors of engine capacity not exceeding 1,800 cc U 16%

Other tractors of engine capacity more than 1,800 cc U 16%

2.MOTOR VEHICLES FOR THE TRANSPORT OF TEN OR MORE PERSONS, INCLUDING THE

DRIVER

Vehicles for transport of not more than thi rteen persons, including the

driver, wi th compression-i gniti on i nternal combustion piston engine (diesel

or semi -diesel) :

Integrated monocoque vehicle U 24%

Air-conditioned vehicle U 24%

7/28/2019 Auto 000

43/75

Other vehicles with compression-ignition internal combustion piston engine

(diesel or semi-diesel)U 24%

Other vehicl es for tr ansport of not more than thi rteen persons, including the

driver:

Integrated monocoque vehicle U 24%

Air-conditioned vehicle U 24%

Electrically operated U 24%

Other U 24%

3.

MOTOR CARS AND OTHER MOTOR VEHICLES PRINCIPALLY DESIGNED FOR THE

TRANSPORT OF PERSONS (OTHER THAN THOSE OF HEADING 2), INCLUDING STATION

WAGONS AND RACING CARS

Vehicl es special ly designed for tr avell ing on snow; gol f cars and simil ar

vehicles:


Other U 24%

Other vehicl es, with spark-i gniti on internal combustion r eciprocating piston

engine, Of a cyli nder capacity not exceeding1,000 cc :

Vehicles principally designed for the transport of more than seven persons,

including the driver U 24%

Three-wheeled vehicles U 24%

Other Motor cars U 24%

7/28/2019 Auto 000

44/75

Specialised transport vehicles such as ambulances, prison vans and the like U 24%

Other vehicle Of a cylinder capacity not exceeding 1,000 cc (excluding which

are already mentioned)U 24%


engine, of a cyli nder capacity exceeding1,000 cc but not exceeding1,500 cc

:


including the driverU 24%




Other vehicle of a cylinder capacity exceeding 1,000 cc but not exceeding

1,500 cc (excluding which are already mentioned above)U 24%


engine, of a cyli nder capacity exceeding1,500 cc but not exceeding3,000 cc:








7/28/2019 Auto 000

45/75


engine, of a cylinder capacity exceeding 3,000 cc :






Other vehicle of a cylinder capacity exceeding 3,000 cc (excluding which are

already mentioned above) U 24%

Other vehicles, with compression igni tion in ternal combustion piston engine

(diesel or semi -diesel) , of a cylinder capacity not exceeding1,500 cc:








Other vehicles, with compression igni tion in ternal combustion piston engine

(diesel or semi -diesel) , Of a cylinder capacity exceeding 1,500 cc but not

exceeding 2,500 cc :



7/28/2019 Auto 000

46/75




Other vehicle Of a cylinder exceeding 1,500 cc but not exceeding 2,500 cc

(excluding which are already mentioned)U 24%

Other vehicles, with compression igni tion internal combustion piston engine

(diesel or semi -diesel) , Of a cylinder capacity exceeding2,500 cc :






Other vehicle of a cylinder capacity exceeding 2,500 cc (excluding which arealready mentioned above)

U 24%


4. MOTOR VEHICLES FOR THE TRANSPORT OF GOODS

Dumpers designed for of f -hi ghway use:

With net weight (excluding pay-load) exceeding 8 tonnes and maximum pay-

load capacity not less than 10 tonnesU 16%

7/28/2019 Auto 000

47/75

Other Dumpers designed for off-highway use U 24%

Other, wi th compression-i gniti on i nternal combustion piston engine (diesel

or semi -diesel) , gross vehi cle weight not exceeding 5 tonnes:

Refrigerated U 16%

Three-wheeled motor vehicles U 16%

Other vehicles with gross vehicle weight not exceeding 5 tonnes U 16%


or semi -di esel), gross vehicl e weight exceeding5 tonnes but not

exceeding20 tonnes:

Lorries and trucks refrigerated U 16%

Other lorries and trucks U 16%

Other vehicles with gross vehicle weight exceeding5 tonnes but not

exceeding20 tonnesU 16%


or semi -di esel), gross vehicl e weight exceeding 20 tonnes:



Other vehicles with gross vehicle weight exceeding20 tonnes U 16%

Other, with spark-i gniti on internal combustion piston engine, gross vehicle

weight not exceeding 5 tonnes

Refrigerated U 24%

7/28/2019 Auto 000

48/75

Three-wheeled motor vehicles U 16%

Other vehicles with gross vehicle weight not exceeding 5 tonnes U 24%

Other, with spark-i gniti on internal combustion piston engine, gross vehicle

weight exceeding 5 tonnes



Other vehicles with gross vehicle weight exceeding5 tonnes U 24%


5.SPECIAL PURPOSE MOTOR VEHICLES, OTHER THAN THOSE PRINCIPALLY DESIGNED

FOR THE TRANSPORT OF PERSONS OR GOODS

Crane lorries U 16%

Mobile drilling derricks U 16%

Fire fighting vehicles U 16%

Concrete-mixer lorries U 16%

Other Special Purpose motor Vehicles U 16%

6.MOTORCYCLES (INCLUDING MOPEDS) AND CYCLES FITTED WITH AN AUXILIARY

MOTOR, WITH OR WITHOUT SIDE-CARS

7/28/2019 Auto 000

49/75

With reciprocating internal combustion pi ston engine of a cylinder capacity

not exceeding50cc:

Mopeds U 16%

Motorised cycles U 16%

Other motorcycles with cylinder capacity not exceeding 50cc U 16%

With reciprocating internal combustion piston engine of a cylinder

capacity exceeding 50 cc but not exceeding 250 cc :

Scooters U 16%

Motorcycles U 16%

Mopeds U 16%

Other U 16%


exceeding250 cc but not exceeding500 cc :

Scooters U 16%

Motorcycles U 16%

Other U 16%

With reciprocating internal combustion pi ston engine of a cylinder capacityexceeding500 cc but not exceeding800 cc :

Motorcycles U 16%

Other U 16%

7/28/2019 Auto 000

50/75


exceeding 800 cc:

Motorcycles U 16%

Other U 16%

Other Motorcycles:

Side-cars U 16%


7.CARRIAGES FOR DISABLED PERSONS, WHETHER OR NOT MOTORISED OR OTHERWISE

MECHANICALLY PROPELLED

Not mechanically propell ed :

Wheel chairs for invalid U Nil

Other Not mechanically propelled U Nil

Other Car r iages for disabled persons

Wheel chairs for invalid U Nil

Other U Nil

Source: Central Board of Excise and Customers Government of India

Detailed Customs Tax for Automobiles for year 2007

Description of goods Unit Rate of duty

1. TRACTORS

7/28/2019 Auto 000

51/75

Pedestrian controlled tractors U 12.5%

Road tractors for semi- trai lers :

Of engine capacity not exceeding 1,800 cc U 12.5%

Other U 12.5%

Track-laying tractors :

Garden tractors of engine capacity not exceeding 1,800 cc U 12.5%

Other Garden tractors U 12.5%

Other Track-layingtractors of engine capacity not exceeding 1,800 cc U 12.5%

Other Track-layingtractors of engine capacity more than 1,800 cc U 12.5%

Other tractors of engine capacity not exceeding 1,800 cc U 12.5%

Other tractors of engine capacity more than 1,800 cc U 12.5%

2.MOTOR VEHICLES FOR THE TRANSPORT OF TEN OR MORE PERSONS, INCLUDING THE

DRIVER

Vehicles for transport of not more than thi rteen persons, including the

dri ver, with compression-i gniti on i nternal combustion piston engine (diesel

or semi-diesel) :

Integrated monocoque vehicle U 12.5%

Air-conditioned vehicle U 12.5%

7/28/2019 Auto 000

52/75

Other vehicles with compression-ignition internal combustion piston engine

(diesel or semi-diesel)U 12.5%

Other vehicl es for tr ansport of not more than th ir teen persons, including the

driver:

Integrated monocoque vehicle U 12.5%

Air-conditioned vehicle U 12.5%

Electrically operated U 12.5%

Other U 12.5%

3.

MOTOR CARS AND OTHER MOTOR VEHICLES PRINCIPALLY DESIGNED FOR THE

TRANSPORT OF PERSONS (OTHER THAN THOSE OF HEADING 2), INCLUDING STATION

WAGONS AND RACING CARS

Vehicl es special ly designed for tr avell ing on snow; gol f cars and simil ar

vehicles:


Other U 100%

Other vehicl es, with spark-i gniti on in ternal combustion reciprocating piston

engine, Of a cylinder capacity not exceeding1,000 cc :





7/28/2019 Auto 000

53/75





engine, of a cyli nder capacity exceeding1,000 cc but not exceeding1,500 cc

:









engine, of a cyli nder capacity exceeding1,500 cc but not exceeding3,000 cc:








7/28/2019 Auto 000

54/75


engine, of a cyl inder capacity exceeding 3,000 cc :






Other vehicle of a cylinder capacity exceeding 3,000 cc (excluding which are

already mentioned above) U 100%


(diesel or semi -diesel) , of a cylinder capacity not exceeding1,500 cc:









(diesel or semi -diesel) , Of a cylinder capacity exceeding 1,500 cc but not

exceeding 2,500 cc :



7/28/2019 Auto 000

55/75




Other vehicle Of a cylinder exceeding 1,500 cc but not exceeding 2,500 cc

(excluding which are already mentioned)U 100%


(diesel or semi -diesel) , Of a cylinder capacity exceeding2,500 cc :






Other vehicle of a cylinder capacity exceeding 2,500 cc (excluding which arealready mentioned above)

U 100%


4. MOTOR VEHICLES FOR THE TRANSPORT OF GOODS

Dumpers designed for of f-highway use:

With net weight (excluding pay-load) exceeding 8 tonnes and maximum pay-

load capacity not less than 10 tonnesU 12.5%

Other Dumpers designed for off-highway use U 12.5%

7/28/2019 Auto 000

56/75


or semi-diesel) , gross vehi cle weight not exceeding 5 tonnes:

Refrigerated U 12.5%

Three-wheeled motor vehicles U 12.5%

Other vehicles with gross vehicle weight not exceeding 5 tonnes U 12.5%


or semi -di esel), gross vehicl e weight exceeding5 tonnes but not

exceeding20 tonnes:

Auto 000

Documents

Transcript of Auto 000