AUTO & AUTO COMPONENTS

Sector Profile

Foreword

Shri. R.V. Deshpande

Hon’ble minister for Large and Medium industries and tourism

Automotive industry in Karnataka is at the cusp of high growth. Workforce in Karnataka has the right set of skillset required for an industry like automotive. With large number of engineering colleges, R&D institutes and ITIs, Karnataka has the potential to become the automotive manufacturing and research hub of the country. Automobile manufacturing has been identified as a focus sector in the new Industrial Policy 2014-19 allowing the investors in the sector to reap extra set of incentives, showcasing the state’s commitment to emerge as a leader in the sector.

I heartily invite the investors to come and invest in the potential offered by the state.

Content1 Highlights

2 Sector Snapshot

3 Karnataka’s Unique Advantage

4 Government Initiatives and Policy Support

5 Investment Opportunities

Highlights 1

HighlightsKarnataka – Home to a vibrant automobile industry

• Karnataka is the 4th largest automobile producing state in the country contributing 8.5% to national output.

• Karnataka has three auto clusters, one industrial valve cluster and one auto component cluster.

• Wide ecosystem including OEMs, component manufacturers and R&D Centers.

• Large local market and connectivity to top national and international markets.

• The state has highly skilled workforce across the value chain owing to 1400+ ITIs, 200+ engineering colleges and 400+ R&D institutes.

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HighlightsGovernment Initiatives and Policy Support

6

Government of Karnataka has identified Automotive as one of the focus sectors in the Industrial Policy 2014 - 19

Karnataka Automobile Research &Innovation Centre is proposed to be developed. The centre would also be an incubation centre.

The government has prioritized improvement of Mangalore port and improve its connectivity to major industrial clusters in the state.

OEMs are given opportunity to partner with ITIs to provide sector specific training and skill upgradation. Sectoral Training Institute for auto proposed to be set up in Bidadi/Narsapura.

To encourage manufacturers of Hybrid and Electrical Vehicles it is proposed to reduce road tax,registration tax as indirect incentives.

Single Window Clearance MechanismTo facilitate new investments in obtaining in principle approvals and other approvals from other departments & organisations, through a software e-udyami.Export Related Incentives

Exporters with good track record issued Green Card to enable smooth movement of goods without any delay at check posts/verification of documents.

Sector Snapshot 2

Asia-Pacific countries are contributing 62% to global growth of automobile sector led by booming local demand in India and China and worldwide exports

Source: Automobiles: The economic outlook and employment situation, PwC

Expected to reach 101 mn units in 2017 with CAGR of 5%

India is expected to become 4th largest automobile producer by 2016

4

Source: ACEA

Greater China27%

Europe23%North

America19%

South Asia9%

South America

4%

Japan, South Korea19%

Middle East 2%

The share of World Motor production (2014)

5

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1st in tractor and 3 wheeler production

2nd in two wheeler production

5th in commercial vehicle production

6th in passenger car production

USD 3 bn investment planned in 2012 – 17

Source: ACMA

7.1%

contribution to GDP

13% of excise

revenues

8% of the country’s

R&D expenditur

e

USD 13.48 bn FDI

(Apr ’00 – Jun ‘15)

Output of USD 63 bn

Total investment in excess of USD 35

bn

4.3% of overall exports

Growth in Automobile Industry is a major success story for manufacturing sector in India

More than 45% of the manufacturing GDP

of India (FY14)

Direct and indirect employment in

excess of 19 million

5% of cumulative FDI inflow

(2000-2015)

27% of India’s industrial GDP(Industrial GDP includes manufacturing, mining and

utilities)

Source: REVIEW OF AUTOMOTIVE MISSION PLAN 2006 - 2016

Automobile Production Trend (in million units)

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

14.06

17.920.4 20.6 21.5 23.4

Passenger Vehicles Commercial VehiclesThree Wheelers Two WheelersGrand TotalSource: SIAM

CAGR : 11%

Domestic sales constitute more than 80% of the automobile produced in India

• Indian Automobile Manufacturing is dominated by two wheelers (81%) followed by passenger cars (13%)

• Automobile production has more than doubled from 11.17 million in 2009 to 23.4 million in 2015

Category Major Players in India

Passenger Cars Maruti, Hyundai, Tata, Toyota, Honda, Mahindra, Renault-Nissan, Volkswagen, Skoda

Two Wheelers Bajaj, Hero, Honda, TVS

Commercial Vehicles Tata, Mahindra, Ashok Leyland, Eicher, Volvo, Diamler Benz, Scania

Three Wheelers Piaggio, Mahindra, Bajaj

81%

13%

3%3%

Market Share of Different Categories (2014-15)

Two Wheelers Passenger CarsCommercial Vehicles Three Wheelers

Source: SIAM

Two Wheelers is the biggest segment of the Indian automobile industry

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

10.5

13.315.4 15.7

16.818.4

Two Wheelers Production Trend (in million units)

CAGR : 12%

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

1.1

1.5

1.97 1.952.1

2.5Two Wheelers Export Trend (in million units)

CAGR : 18%

CAGR of two wheelers exports over last 6 years

18%

Market Share for Two-wheelers in

the domestic market

80%

Share in Automobile

Exports of Two wheelers in FY15

70%

Two-wheeler production is projected to rise from 18.4 million in FY15 to 32 million by FY20

Domestic passenger car market growth is driven by booming economy and burgeoning disposable income in the middle class

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

2.3

3 3.1 3.2 3.1 3.2

Passenger Cars Production Trend (in million units)

Passenger Cars Market Segment Distribution (2012)

64%

25%

11%

CompactMultipurpose and Util-ityMidsizeEzecutive and luxuary

Source: Building World-class Automotive Supply, 2013

CAGR : 7%

Passenger Cars comprised of 17% of automobile export in FY15

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

4.5 4.45.1 5.6 6 6.2

Passenger Cars Export Trend (in lakh units)

CAGR : 6.6%

Passenger car production is expected to increase to 10 million in FY20

from 3.2 million in FY15

Economic and fuel efficient compact cars constitutes the biggest segment in the Indian car market

India (in 2013)

GDP/Capita $ 1,499

Car/1000 People 15

Two Wheeler/1000 People

96

Total Motor Vehicle/1000 People 

132

The Indian automobile market is highly under-penetrated as compared to other countries in the exhibit, showing potential for the domestic market to grow.GDP per capita has grown from USD 1432.25 in 2010 to USD 1498.87 in 2013 and is expected to reach USD 1869.34 by 2018

FDI in automobile sector has grown at a high rate of 38% CAGR between 2011–15

69.4%

16.7%

11.1%

2.8%

Export Share FY15

2 WheelersPassenger Vehicles3 WheelersCommercial Vehicles

Source: IBEF

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

1.82.3

2.93 2.893.1

3.5

Passenger Vehicles Commercial VehiclesThree Wheelers Two WheelersGrand Total

Source: SIAM

Export Trend (million units)

CAGR : 14%

India is emerging as export oriented manufacturing destination for global OEMs

Jan 2000 - Dec 2012 Jan 2013 - Jun 2015

5.5

1.4

2.1

2.2

FDI in Automobile Industry (in bn USD)Total – 5.7

2013

2014

2015

Source: DIPP

India is an emerging global hub for sourcing auto components

Engine Parts; 31%

Drive Trans-mission &

Steering Parts; 19%

Body & Chassis; 12%

Suspension & Breaking Parts;

12%

Equipments; 10%

Electrical Parts; 9%

Others; 7%

Segment wise production of auto components

Indian auto component industry turnover is expected to cross USD 100 billion mark by 2020

Source: ACMA

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

21.3

29.031.5 33.2 32.6

36.1

Turnover of Auto Components Industry (in bn USD)

CAGR : 11%

There are more than 6000 players in the market generating a turnover of USD 36.1 bn in FY15

The auto component industry caters three broad categories of the market

Original Equipment Manufacturers (OEM) Replacement Market Exports market comprising primarily of

international Tier I suppliers

CAGR : 18%

CAGR : 29%

Source: ACMA

Africa7%

Latin America and the

Caribbean7%

North America

23%

Asia25%

Europe36%

Oceania1%

Export Destination

Africa1%

Latin America and the Caribbean

1% North America7%

Asia58%

Europe32%

Oceania0%

Import Origin

Export ImportUSA China

Germany Germany

UK Japan

Top export destinations & import origins

Top 3 countries account for 36% of exports and 50% of importsIndian auto components industry is expanding it’s footprint in

the global market, evident by sharp growth in exports

Export & Import trend (in bn USD)

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

5.5

7.6

10.311.4 11.9

12.8

2.94.7

6.68.1

9.410.5

Imports Exports

Karnataka is home to top global and national automobile and auto component manufacturers

• Honda Motorcycles & Scooters set up an plant in Narasapura which began operation in 2013.

• HMSI has witnessed a fast growth from 2012-13 to 2013-14. Domestic sales increased at 34% and exports increased at 20.9%.

• HMSI will additionally invest approximately INR 5.8 billion and build a new production line within the existing plant site.

• Toyota Kirloskar is a joint venture between Kirloskar group and Toyota Motor Corporation.

• The company has manufacturing facilities at Bidadi.• The company has a market share of more than 5% in passenger vehicle

segment.

• Volvo India has a state-of-the-art bus manufacturing unit near Bengaluru.• The company has increased its capacity to around 1,500-1,700 buses per annum

in 2013-14 from 1,100 buses per annum earlier.• Volvo India plans to invest US$ 115.6 billion to set up a truck and bus

manufacturing facility in Malur, Kolar.

• TVS Motor Company is one of the largest two-wheeler manufacturers in India. The company is the flagship company of the TVS Group. TVS Motor has four manufacturing plants across India including Mysore.

• The company achieved a turnover of USD 1.6 billion in 2014-15.

• Delphi India was incorporated in 1995 as a wholly owned subsidiary of Delphi. The company is a leading global supplier of electronics and technologies for automotive, commercial vehicles and other market segments.

• Delphi India has a technical centre in Bengaluru, which is the largest technical centre outside the US.

Karnataka’s automobile output has doubled in 4 years, registering a 36.5% CAGR

4th largest state in automotive production with output of USD

2.8 bn, contributing 8.5% to national automobile industry

outputInvestments of around 700 mn USD generating annual

revenues of 600 mn USD

The automotive industry provides employment to more than 55,000

workers

2009 -10 2012 - 13

1.1

2.8

Karnataka Automobile Output (in bn USD)

CAGR : 36.5 %

1

249

34

5

6

7

8

910

12

5 3

6

7

8

1012

Bangalore

13

1 Tata Motors2 TVS Motors

3 Honda Motorcycles and Scooters India

4 Volvo Buses India Pvt Ltd

5 TAFE Tractors

6 Toyota Kirloskar Motor Pvt Ltd

7 Mahindra Reva

8 Scania

9 General Motors Technical Center*

10 Mercedes Benz*

1 Denso

2 Bill Forge Pvt Ltd3 Autoliv4 Falken5 Bosch6 Exedy7 Aisin8 Continental9 JK Tyres10 Delphi11 Denso12 Indo Schöttle13 Aequs

OEMs

Auto Component Manufacturers

Karnataka’s auto component industry has the potential for growth in local, national and international markets

• Over 50 automobile component manufacturers in the state with a turnover of more than USD 1.5 billion in 2014 – 2015.

• Karnataka accounts for more than 6% of country’s auto component output

• Tier I & Tier II manufacturers form about 80% of output and employment of the industry

2009 -10 2010 - 11 2011 - 12 2012 - 13

1.07

1.551.77 1.83

Karnataka Auto Component Industry Output (in bn USD)

CAGR : 18%

Presence of robust domestic customer base with more than 14 million registered vehicles in the state.

Proximity to the west (Maharashtra & Gujarat) and south (Karnataka, Tamil Nadu and Andhra Pradesh) auto clusters in the country.

Growth enablers in Karnataka:

Major Manufacturers

Localization of the OEMs in the state

Manufacturer LocalisationHonda Motorcycles & Scooters India 70%

Toyota Kirloskar Motor Private Limited 48%

Tata Motors ~70%

Volvo Buses India Pvt Ltd. (Awaiting data)

Scania Trucks 18%

Buses 100% localised bodies

• The OEMs in Karnataka are fairly localised, showcasing the availability of technical skillset in the state.

• OEMs are likely to increase localisation to reduce manufacturing cost and stay competitive, which in turn shall create potential for component manufacturers to grow.

Karnataka’s Unique Advantage 3

Karnataka has the right ecosystem for the automotive sector to grow in the state

Presence of the leading automotive players• The leading OEM, Tier I & II companies located in Karnataka, forming the entire

value chain. • Auto clusters are located at Hoskote in Bengaluru Rural, Bidadi in Ramanagar and

at Dharwad.• Industrial valve cluster is located at Hubballi – Dharwad. • Auto components clusters in Shivamogga and Belagavi

Connectivity to both eastern and western ports• Connectivity to 6 ports via NH and SH to facilitate growing exports in the sector.• Planned Dedicated Freight Corridor between Chennai and Bangalore will further

improve connectivity to Chennai and Ennore ports.• ICD is easily accessible in Bangalore.

Skilled Workforce

• Highly skilled workforce available in the state owing to more that 1400 ITIs.• More than 350 R&D centres and 200 engineering colleges driving innovation in the

state.

Locational Advantage

Bangalore has 2nd highest number of cars among all cities in India with more than 4.1 million registered cars

Karnataka has connectivity to 4 out of top 5 automobile markets in the country.Maharashtra, Tamil Nadu, Gujarat & Andhra Pradesh

Karnataka has 2 identified high priority nodes in Chennai –Bangalore Industrial Corridor and Bangalore – Mumbai Economic Corridor. Development of these nodes shall increase industry ready land near the existing clusters

• CBIC – Tumakuru• BMEC – Dharwad

3

12 Chennai

EnnoreNewMangalore

JNPTMumbai

~350 km

~350 km

~250 km

~550 km

~40

0 km

Krishnapatnam~400 km

Approximate distance between automobile clusters in Karnataka and major ports nearby

Legend

1 Bangalore (Urban & Rural)

2 Mysuru

3 Dharwad & Belagavi

Government policy enablers4

Automotive has been identified as a focus sector in Industry Policy 2014 – 2019 of Karnataka

• To incentivize and institutionalize the R&D environment for auto sector in the State

• Fostering and supporting linkages between industry and academia for research.

• Propose to commission the 'Karnataka Automobile Research & Innovation Centre' in Karnataka which would also be an incubation centre. The centre is proposed to be established on a PPP model with State support.

• To set up an industry group to study and recommend measures for growth of the auto component sector in the State.

• With a view to reduce air pollution and encourage manufacture of green Hybrid and Electrical Vehicles it is proposed to reduce road tax, registration tax as indirect incentives.

• Automotive Sector industries declared as public utilities under Industrial disputes Act 1947 during the policy period.

Initiatives for Automotive sector proposed in Karnataka Industry Policy 2014-2019

Wide range of incentives are provided for large scale projects as well as MSMEs

MSME

• Infrastructure Support• Financial• Technology Upgradation & Technical

Support• Marketing Support• Procedural Reforms• Value Chain Cluster Development• Various Incentives and Concessions

with extent based on size & location of the investment

• Investment promotion subsidy• Exemption from stamp duty• Reimbursement of Land

Conversion Fee, etc.

Large, Mega, Ultra & Super Mega

Enterprises

• The quantum of investment based on the location of the proposed investment

• Exemption from Stamp Duty• Concessional Registration Charges• Reimbursement of Land Conversion

Fee• Exemption from Entry Tax• Subsidy for setting up ETPs• Interest free loans on Net VAT and

CST

GoI also provides policy support and it has envisioned India to be a manufacturing and R&D hub for automobile sector

FDI Policy

• Automatic approval for foreign equity investment up to 100% with no minimum investment criteria

AUTOMOTIVE MISSION PLAN, 2006-16• The AMP targets exports worth USD 40–45 bn in 2016, including component

exports worth USD 20–25 bn and outsourced engineering services worth USD 2–2.5 bn.

• The AMP targets a total turnover of USD 145 bn by 2016.• Automotive Mission Plan, 2016-2026 has been revealed with new projections and

targets.National Automotive Testing and R&D Infrastructure Project (NATRiP)• A unique initiative between the Government of India, a number of State

Governments and Indian Automotive Industry to create a state of the art Testing, Validation and R&D infrastructure in the country.

• Aims at setting up of seven state-of-the-art automotive testing and R&D centres across the country

Investment opportunities 5

Investment Opportunities

Passenger Vehicles, Passenger Cars, Utility Vehicles, Multi Purpose

Vehicles

Two wheelers – Scooters, Mopeds and Motorcycles

Three wheelers – Passenger and Goods

Carriers

Commercial Vehicles – Light, Medium and Heavy Commercial

Vehicles

The state is keen to develop Free Trade Warehousing Zone (FTWZ) through PPP

mode

Auto Components and Accessories Manufacturing

R&D and Testing Facilities for

automobile industry

'Karnataka Automobile Research & Innovation Centre’ on PPP mode

Karnataka is home to sector related clusters creating an congenial ecosystem for investors

Automobile

Industrial Valve

Auto Components

Bangalore

Location Available Industrial Area (in acres)

NIMZ, Vasanthanarasapura 9,000

BMEC Dharwad Node 5,000

CBIC Tumkur Node 10,000

Bengaluru Rural

Belagavi

Shivamogga

Existing clusters in the state