Automobile CommercialVehicles

8/12/2019 Automobile CommercialVehicles

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Industrial Awareness ReportCommercial Vehicles

Submitted by:Group 7

Section D

George Joseph Nellissery-2013PGP145Jain Anish Paras- 2013PGP163Mohd Zeeshan Khan-2012PGP206

Priya Dipak Mehta-2013PGP289R. Rahul- 2013PGP299

Shailja Singh-2013PGP362Sneh AnumeshTirkey-2013PGP393

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Overview Indian automotive industry is the sixth largest industry in the world

in terms of production

Commercial vehicles consist of 4.66% of the automotive industry

Industry is oligopolistic in nature with three players accounting 88%market share

Industry is divided into three product segments, namely, goodsvehicles (trucks), passenger vehicles (buses) and tractors

On the basis of gross vehicle weight, segmented into lightcommercial vehicles (LCV) and medium and heavy commercialvehicles (MHCV).

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Growth trends The growth of the Commercial Vehicle industry is closely related to the

general economic conditions prevailing in a country Another important factor impacting growth in this sector is the

replacement rate of the vehicle.

Source: ICRA Management Consulting Services Limited - The Indian CommercialVehicles Industry July 2010

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Growth by segmentDomestic Sales Growth FY 2005 2006 2007 2008 2009 2010 2009 2010 2008-10

MHCVs 198.5 207.5 275.6 274.6 183.5 245.1 -33.2% 33.6% -3.8%

Passenger 25.6 28.1 28.7 38.6 34.9 43.1 -9.7% 23.5% Goods 172.9 179.3 246.9 235.9 148.6 202.0 -37.0% 35.9%LCVs 119.9 143.6 192.2 215.9 200.7 286.3 -7.0% 42.7% 14.2%

Passenger 20.0 22.4 23.7 27.8 27.0 34.4 -3.2% 27.7% Goods 99.9 121.2 168.5 188.1 173.7 251.9 -7.6% 45.0% Total 318.4 351.0 467.8 490.5 384.2 531.4 -21.7% 38.3% 4.3%

Passenger 45.6 50.5 52.4 66.5 61.8 77.5 -7.0% 25.3% Goods 272.8 300.6 415.3 424.0 322.4 453.9 -24.0% 40.8%Source: ICRA Management Consulting Services Limited - The Indian Commer2010

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Importance to the Economy

The fortunes of the Indian CV industry are closely linked to the prospectsfor road transportation in the country

The two major modes of land transport in the country are roads andrailways. CVs are an important source of transportation of both goods and

passengers

The size of the Indian road transport sector was estimated at Rs. 2,500billion during FY2009 accounting for around 4.8% of Indias gross domesticproduct. Also, GDP from railways was estimated at Rs. 481 billion during

FY2009. During FY2009, the share of transport sector in GDP was 6.40%

In 2010, the automotive industry employed an estimated 0.15 millionpeople and offers employment to an additional 10 million peopleindirectly. Of this 4.66% can be accounted for the Commercial vehicle

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Technological trends and majorinnovations

Success in the CV industry largely depends on technologicalinnovations, which is why, leading CV manufacturers havesignificantly enhanced their focus on that front

They are engaged in actively developing the next generation oftrucks and buses which will have superior technology, conform tointernational standards and emission norms and will compete withproducts from leading international CV manufacturers (therebyboosting exports)

Many companies have come up with trucks with air conditionedcabins. This may also lead to faster replacement of vehicles, therebyboosting sales volumes

This may also lead to faster replacement of vehicles, therebyboosting sales volumes.

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MERGERS AND ACQUISITIONS

Foreign players entered the market in 2008-09 through joint ventures Volvo-Eicher(2008-09)

50:50 venture

Sale of Eicher and Volvo to be handled through the JVCommon platform sharing for manufacturingHandling of international operations

MAN AG-Force Motors(2008-09)Manufacture a full range of heavy commercial vehicles from 16-tonne GVW to 49-tonneGVWCurrently manufactures a 25-tonne GVW truck, 25-tonne and 31- tonne mining tipper,

25-tonne and 16-tonne construction tippersMAN Force trucks are exported overseas to countries such as Sri Lanka, Indonesia, andcertain African nations

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Mahindra-Navistar(2010) 51:49 JV between M&M and Navistar Inc

Started manufacturing 25-tonne and 31-tonne trucks, whichwere later followed by 49-tonne and 40-tonne trucksIn December 2012, Navistar announced that they were sellingtheir stake to Mahindra and exiting both joint ventures

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Major Players The domestic CV industry is relatively concentrated with the

top three players accounting for 88 per cent (in volume terms)as of 2011-12.

Tata Motors continues to dominate the CV industry withnearly 60 per cent share, followed by Mahindra & Mahindra(M&M) with 18 per cent, and Ashok Leyland with 10 per cent.

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Company 07-08 08-09 09-10 10-11 11-12

Tata Motors 64.8 61.5 59.1 59.0 59.8

Mahindra &

Mahindra

26.7 29.2 32.2 32.4 31.5

Piaggiovehicles

2.3 4.7 4.0 2.6 2.3

Force Motors 3.1 2.0 2.1 2.3 1.6

EicherMotors

1.9 1.6 1.6 1.8 1.7

Others 1.3 1.0 0.9 1.9 3.2

TOTAL 100 100 100 100 100

Light commercial vehicles (Goods): Market share

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In 2000-01, Tata Motors and M&M were the maincompanies operating in the LCV (goods) segment.

Tata Motors was the market leader with a share of 46 percent, while M&M had a market share of 30 per cent. Tata Motors saw a substantial increase in market share in the

LCV (goods) segment after it launched Tata Ace in 2005,which also ate into the sales of Tata's goods three-wheelers.

In 2005-06, Tata Motors's share jumped to 61 per cent from51 per cent in 2004-05. As of 2011-12, Tata Motors and M&M held 60 per cent and

31 per cent of the total market share, respectively. The LCV (goods) segment also includes players like Piaggio

Vehicles, Force Motors and Swaraj Mazda, who altogetheraccounted for 5.6 per cent of the total sales as of 2011-12.

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Company 07-08 08-09 09-10 10-11 11-12

Tata Motors 63.7 66 65.6 62.3 62.0

Ashok leyland 24.3 21.0 20.6 23.2 21.2

Eicher Motors 8.6 8.2 9.6 9.9 10.8

Swaraj Mazda 1.6 1.6 1.9 1.6 1.6

Asian motorworks

1.3 2.3 1.8 2.3 3.1

Others 0.5 0.9 0.6 0.7 1.3

TOTAL 100 100 100 100 100

Medium and heavy commercial vehicles (Goods): Market share

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Despite the longstanding presence of players like EicherMotors and Swaraj Mazda and the entry of new players likeAsia Motor Works in the MHCV segment, Tata Motorscontinues to be the market leader, followed by AshokLeyland.

Between 2002-03 and 2007-08, both Tata Motors and AshokLeyland together held a market share of 90 per cent, withthe former accounting for 66 per cent.

During the same period, Eicher increased its market sharefrom 6.5 per cent to 9 per cent.

Asia Motor Works, which entered the market in 2007-08,garnered a market share of around 1.3 per cent. Its sharerose further to 3.1 per cent in 2011-12.

On the contrary, between 2007-08 and 2011-12, Tata Motorsmaintained its market share, while Ashok Leyland lost someshare to Eicher Motors and new entrants such as Asia MotorWorks.

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Government regulation & policychanges

Government adopted a new economic policy in July 1991compassing deregulation of industrial sector All the vehicles segment (except passenger cars) were delicensed inJuly 1991

FDI upto 51% allowed on an automatic basis To improve the countrys balance -of-payments situation,government imposed a heavy excise duty on selling price of all theautomobiles

Negative annual growth rate of 10.1% in the vehicles segment inthe year 1991-92

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Auto Policy 2002 Spelt out the direction of growth for the auto sector in India & addresses

most concerns of the automobile sector, including: Allowing automatic approval for foreign equity investment up to 100

per cent, with no minimum investment criteria Investment incentives to be provided by the state governments,

especially for large investments Laying emphasis on R&D activities carried out by companies in India

by giving a weighted tax deduction of up to 150 per cent for in-houseresearch and R&D activities Formulation of an auto fuel policy to ensure availability of adequate

amount of appropriate fuel to meet emission norms Impetus to alternative fuel vehicles through appropriate long term

fiscal structure Plan to have a terminal life policy for CV along with incentives for

replacement for such vehicles Promoting multi-modal transportation and the implementation of

mass rapid transport systems

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Budget 2013-14The proposal to allocate INR148730m towards Jawaharlal NehruNational Urban Renewal Mission (JNNURM) (a part which is meantto acquire 10,000 buses in largely hilly areas) would help prop salesvolumes of Medium and Heavy Commercial Vehicles (MHCV)passenger carriers to some extent

-Will benefit large players like Ashok Leyland, Tata Motors and

Eicher MotorsAdditional investment allowance @ 15% is available to a companyinvesting Rs 100Crores or more in new assets (plant and machinery)between 1st April 2013 to 31 March 2015Lower freight availability and a rise in fuel cost impactedtransporters profitability in 2012-13. Therefore MHCV truck sales isbound to decline by about 25 per cent in 2012-13

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2013-14, expect GDP growth to accelerate to 6.4 per cent. However,MHCV sales growth is expected to lag GDP growth and remain weakat 5-7 per cent (despite a low base), until transporters utilizationlevels improve. LCV sales will however continue to grow by 14-16per centOperating margins of CV players are estimated to decline sharply in2012-13 due to lower capacity utilization and firm input cost

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Advantage India-Foreign directinvestment

The Indian government encourages foreign investment in the automobilesector and allows 100% FDI under the automatic route. It is a fullydelicensed industry and free imports of automotive components areallowed. Moreover, the government has not laid down any minimuminvestment criteria for the automobile industry

India has significant cost advantages; auto firms save 10-25 per cent onoperations in India compared to Europe, Latin America

Large pool of skilled manpower and a growing technology base will inducegreater investments

Indian Commercial Vehicle Industry poised for major growth phase.Despite challenges, the Industry catching up fast with global trends &standards - both on technology and quality processes

Indian Auto Industry likely to retain Low cost advantage for a sizeableperiod

Attractive collaboration opportunities between Indian CV industry / Autocomponent manufacturing with global OEMs and the Supply Chain majors

Great opportunity to partner & use Indias competitive advantages forsourcing and setting up collaborative operations

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INDIAN CO. COUNTRY FOREIGN CO. AMOUNT IN RSCRORE

VE COMMERCIALVEHICLES

SWEDEN AKITEBOLAGETVOLVO

1,082.13

EICHERMOTORS LTD

Sweden AKTIEBOLA GETVOLVO(PUBL)

157.40

DIAMLER HEROCOMMERCIALVEHICLES LTD

Germany DAILMER AG 78.48

NISSAN MOTORINDIA PVT. LTD

Netherlands NISSAN INTLHOLDING

140.00

MAHINDRAINTL. LTD

Mauritius INTERNATIONALTRUCK &ENGINEMAURITIUS H

96.80

RENAULTNISSAN

AUTOMOTIVE I

Netherlands andJapan

RENAULTGROUP B V

And NISSAN

69.20

Major FDI inflows

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