Auto and Auto Components - 4x growth expected in the next 10 years

Auto and Auto Components - 4x growth expected in the next 10 years

2© Confederation of Indian Industry

Content

Sectoral Overview The Potential Current Growth Drivers Major Challenges faced


Sectoral Snapshot

6th Largest Globallyby production (~23.3

Million)

7% Sector’s

Contribution to GDP

100% FDI allowed under

automatic route

~45% Sector’s

Contribution to Manufacturing GDP

~9%of total FDI captured by

Auto Sector (Jan 14 – Jun 15)

~19 Millionemployment generated

by sector

Source: SIAM, ACMA, FDI MarketsFDI – Foreign Direct Investment


Evolution of Sector – Automobiles

1897 – First Car on Indian Roads

Early-mid 20th Century – Market dominated by Premier and Hindustan Motors

1981 – Inception of Maruti Udyog Limited

1991 – Post Liberalization foreign players like Toyota, Hyundai, Honda etc. entered the Indian market

2016 - Indian Automobile industry soon to be third largest Automotive market in the world by Volume


Evolution of Sector – Automotive Components

1980 - 2000 – Proliferation of SME’s as demand for passenger cars and motorcycles increases

In 2000s – new entries decelerated due to necessity of high technology which raised the initial investment amount, but exports of Auto Replacements increased as a result.

2009- 2015 sector consistent growth of ~ 11% and is poised to be a USD 115 Billion industry by 2020-21


Advantage India

Strong Demand- All major sub-segments are likely to

grow ~ 5-10% yoy for next 5 years owing to domestic demand and strong export potential

High Competitiveness- Both OEMs and Component

manufacturers have developed strong core capabilities and are globally competitive

Conducive Regulatory environment

- Industry and Government are broadly aligned on the importance of the sector and support its growth

Potential

- As per the Automotive Mission Plan II 2016-2016 the Auto and Auto Component industry is likely to grow 3-4 times from ~USD 70 Billion to USD 280 Billion in the next 10 years

OEMs – Original Equipment manufacturers


Segment-wise Snapshot

Industry CAGR (2015-2025)

Heavy Commercial Vehicles (HCV) 8.4%

Two & Three Wheelers 8.1%

Passenger Vehicles 11.3%

Automotive Batteries 6.0%

Auto-Electricals & Electronics 12.3%

Sector CAGR (2007-2015)

Automobiles 11.72%

Automotive Components 12.08%1

Source: SIAM, ACMA, TechSci Research, Frost and Sullivan1 Figure is for period of 2008-2016 (expected)


Current Growth Drivers

Policy and Eco-system

1. The Automotive Mission Plan 2006-16 (AMP I 2016) and AMP II – 2016-2016 outline the growth aspiration and roadmap for the sector to help align goals of government and industry

2. DHI’s FAME scheme aims at promoting faster adoption of electric vehicles.

3. Support for development of Auto Electronics through the NEMP scheme

4. NATRIP helps industry to adopt and implement global performance standards

Industry Evolution and Capabilities

1. Capabilities across value chain from vehicle to component manufacturing

2. Several world class Tier 1,2,3 suppliers, with significant number of Deming Awardees.

3. Four large auto manufacturing hubs across the country

4. India is the leading hatchback and sub 4 metre passenger vehicle manufacturer

5. One of the largest tractor manufacturers in the world

Market Dynamics

1. 2wheeler and 3 wheeler - The top 5 players hold 87.3% of the market share. 2. HCV industry – Competition has increased with entrance of new OEMs. Overall market is highly

concentrated, where top 5 companies form up to 85% of market share3. Auto Electricals – Market concentration is low in this sector compare to other Automotive sectors. Top

5 players hold 60% market share.4. Auto Batteries - The market is highly concentrated, where 70% is held by top 5 companies.

Source: Frost and Sullivan


Major Challenges faced by sector

Environment and Sustainability

Global Eco-system

Regulatory

• Creation and adoption of eco-system and technologies for implementing BS VI fuel norms

• Organized mechanism for scrapping of old vehicles • Eco-system challenges for adoption of Green

technologies

• Component manufacturers face severe threat from Chinese manufactures for the global market

• Volatility in fuel prices• Sluggish global economy

• Customs duty on high-end vehicles and transfer pricing issues

• Significant excise duty• Ban on high capacity Diesel cars

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