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Indian Automotive Aftermarket Study Book 2011&

White Paper on Legislative Improvements to combat counterfeiting

Press ConferencePress ConferenceFebruary 11, 2011; New DelhiFebruary 11, 2011; New Delhi

Automotive Component Manufacturers Association of India 2 2Page 2

About the Report

• Vehicle parc estimation from 50 RTOs in India (first ever)

• 3000 auto component dealers, retailers, mechanics & workshop managers interviewed.

• Primary Research findings till 31st March, 2010

• Insights on distribution structure of auto components, rural automotive aftermarket and key trends in the aftermarket.


Contents of the Report• Automotive Industry & Auto Component Industry

• Vehicle parc data- State wise- City wise- Segment wise (2 wheelers, 3Ws, PVs, CVs, Tractors)

• Size of the Indian Auto Aftermarket- Segment wise- Age wise- Geographical distribution

• Taxation, Legal & Regulatory Environments & its impact

• Rural aftermarket & Industry Trends


The Indian Vehicle Industry• Production of ‘on road’ vehicles

2008 : 11.1 mln

2010 : 17 mln• 2 Wheelers & PVs : High potential domestic market segments

• Largest 3 Wheeler & 2nd Largest Two Wheeler Market, only behind China

• 4th Largest Car Market in Asia

• 4th Largest Tractor Market in the World

• 5th Largest Commercial Vehicle Market in the World

• 5th Largest Bus & Truck Market in the World


Indian Auto Component Industry

• Current Market share- OEM: 76%- Exports: 11%- Aftermarket: 13%

• Organized sector in India contributes to more than 85% of country’s total production of auto components

4.3 8.4 12.83.8

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60.6

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40

80

120

2009 2015(E) 2020(E)

Domestic Aftermarket Export Domestic OE

(In $

bill

ion)

Automotive Component Manufacturers Association of India 6

On-road Vehicles Parc – All India

All India Vehicle Parc as on March 31, 20102Ws 72,092,421 3Ws 3,475,351 PVs 14,530,412 CVs 4,630,170 Total 94,728,354

Total vehicle parc – 94.7 mln2W share – 76%

On Road Vehicle Market share (%) : 2020

PVs – 21%2Ws – 73.5%

Base: 94.7 mln

PV15%

CV5%

2Ws76%

3Ws4%

Automotive Component Manufacturers Association of India 7

Vehicle Parc - Age Profile

Age of Vehicle 2Ws 3Ws PVs CVs

0 & <= 2 years 28.22% 22.05% 33.00% 25.29%

>2 years & <= 13 years 66.36% 70.63% 63.02% 68.06%

> 13 years 5.42% 7.32% 3.98% 6.65%

• 33% of PVs on road are <= 2 years of age (3.3 million cars were sold in the last 2 years)

• More than 20 million 2Ws have been sold in the last 2 years. 28% of 2 Wheeler vehicle parc < 2 years.


Vehicle Distribution Across States

2Ws 3Ws PVs CVsGujarat Maharashtra Maharashtra Maharashtra

Maharashtra Gujarat Delhi Gujarat

Tamil Nadu Kerala Gujarat AP

UP AP Karnataka Rajasthan

AP UP Tamil Nadu Karnataka

Contribution 51% Contribution 66% Contribution 49% Contribution 44%

• Maharashtra – Largest Vehicle parc across categories

• Delhi - PV parc - 1.7 mln

• Rajasthan - 4th spot in the CVs category

Note: Contribution figure is with respect to All India Parc


Vehicle Distribution Across 44 Cities

• 34.8% of total 2W parc (80 by the slide line)

• Robust 2 Wheeler sales in Rural areas accounting for uniform 2 Wheeler distribution across country

• PVs concentration in metropolitan and urban areas

• Delhi share of overall PVs population in India – 12%

• Uniform parc. Of 3 Wheelers across India is an important part of last mile distribution

• 34.4% of CVs on Indian roads are present in 44 cities

• CV hubs are generally present just outside major industrial hubs

PVs, 50.7%

CVs, 34.4%

3Ws, 32.8%

2Ws, 34.8%

0.0% 20.0% 40.0% 60.0%

PVs

CVs

3Ws

2Ws

% Contribution of 44 cities to all India vehicle parc.


Off-road Vehicles - Tractor Parc

• Largest market share in the world

• Total Tractor parc. In India – 3.5 mln.

• 11 states comprising 92% of the overall

Note – UP includes Uttarakhand

604

345312 309 302 275 260

227 222 208 203

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Tractor parc.

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Less than 10% of Indian farmers owning tractors indicates huge market potential


Automotive Aftermarket

•Total Size – INR 330 bln.; 2Ws – 46%; 3Ws – 3%

•PVs and CVs have similar shares with 26% and 25% respectively

PVs26%

CVs25%2Ws

3%

3Ws46%


Aftermarket – Vehicle Segment Distribution

• Labor Cost – INR 82 blnComponent replacement - INR 248 bln

• Labour cost disproportionately low for 2Ws

• 2Ws contribute around 50% to the total vehicle components’ aftermarket and around 33% to total labor aftermarket

Base : INR 248 bln

Base : INR 82 bln


Automotive Aftermarket – State DistributionTop States:

2Ws:Gujarat - INR 14 blnMaharastra - INR 13.9 blnTamil Nadu - INR 13 bln

3Ws:Maharastra – INR 1.2 blnGujarat – INR 0.9 blnKerala – INR 0.85 bln

Combined market share – 47% of the total 3Ws market

PVs:Maharastra – INR 8.9 blnDelhi – INR 7.2 blnGujarat – INR 5.7 bln

Combined market share – 36% of the PV segment

CVs:Maharastra – INR 7.3 blnGujarat – INR 6.1 blnAP – INR 4.3 bln

Combined market share – 31% of total CV segment


Automotive Aftermarket – Top Cities• Amongst cities Delhi has the highest potential market size for

2Ws components with an aftermarket size of INR 5.5 bln. The other major cities are Chennai, Bangalore and Hyderabad in the same order

• Mumbai with the highest 3W parc carries the most potential for 3W components’ aftermarket. Hyderabad and Chennai follow

• Delhi is way ahead of million plus cities in PV segment with an aftermarket potential of INR 7.2 bln. The next city is Mumbai with an aftermarket potential of INR 2.9 bln

• In CVs segment Delhi at INR 1.8 bln, Chennai at INR 1.7 blnfollowed by Bangalore at INR 1.5 bln are the leading contributors among surveyed cities


Future Trends• India will emerge as a small car manufacturing hub with

more sales of vehicles likely across categories.

• Used vehicle market expected to grow in India with many OEMs launching their used car ventures

• High fuel prices will force vehicle manufacturers to offer alternate fuel vehicles

• Emission and Safety standards will force component and car manufacturers to invest in technology.

• With increased use of electronics in vehicles the importance of diagnostics to go up

• Changing distribution and servicing structures will also add to dynamism in the Indian automotive aftermarket


Counterfeits and Fakes in Automotive Aftermarket


Counterfeits and Fakes in Automotive Aftermarket

• In India fake auto parts command a significant market share of the total aftermarket

• Latest estimates put contribution of fake components at 36% of total value

• Auto components most susceptible to counterfeiting are filters, bearings, steering arms, tie rods, brakes, brake linings, bumpers, alternators, wipers and lamps

Counterfeits36%

OEMs22%

OE suppliers19%

Independents Manufacturers

15%

Imports8%


Impact of Counterfeiting

• It is estimated that government loses INR 22 bln per annum due to sales of counterfeit automotive components

• The loss to the exchequer occurs because firms involved in manufacturing of fake parts do not pay taxes

• In most cases the consumer is not aware that he is buying fake parts as the finishing & packaging closely imitates original products

• Also cases where consumers buy counterfeit components to save oncosts

• Study indicates, around 20% of total road accidents either directly or indirectly attributed to use of counterfeit components


ACMA initiative to Tackle Counterfeit• Common Raids under the umbrella of ACMA – During the years

2009-10, 439 raids were conducted and a number of infringers were arrested

• The raids have served the purpose of:– Creating awareness– Enhancing cost efficiency – Intensifying activities in highly infected markets– Eliminating the possibility of isolation of individual companies by

retailers– Leveraging better support from govt. and aftermarket associations

• Asli-Naqli Stall Campaigns in the Exhibitions –Member companies educate customers on how to differentiate genuine from their fake parts


ACMA initiative to Tackle Counterfeit

• Road Shows for the benefit of traders and mechanics in interiors who cannot travel to exhibitions in urban areas

• Educational Program for member companies – awareness programs for it’s member companies on IPR, copyright, trademark, design and patent

• SMS Campaign – started an SMS campaign which educates traders, mechanics and end users on the importance of using genuine parts


• Lack of product specific Laws to combat spurious auto components

• Current laws do not provide for ‘suo moto’ action by Government or Government agencies

• Contract Act, Sale of Goods Act, Consumer Protection Act and Intellectual Property laws have different focus, intent and purpose

• Motor Vehicles Act and the Certifying agencies are ideally positioned to address the problem

Limitations of existing laws


Key Recommendations• Re-orient Motor Vehicles Act also as Automotive Components anti counterfeit and

Product Safety Law by changes to preamble to the act .• Define counterfeit or spurious auto components in a comprehensive way .• Provide the Motor Vehicles Act that offences in connection with manufacture,

packaging, sale, stocking, distribution etc., of spurious auto components will be considered as cognizable and non-bailable. Also for summary trial of such offences.

• Accord to the state a proactive role and a ‘suo motu’ authority to monitor, initiate prosecution for offences in connection with the manufacture, packaging, sale, stocking, distribution etc., of spurious auto components and for this purpose establish machinery within the Motor Vehicles Act.

• Bring clarity that Motor Vehicles Act is intended not only to regulate completely assembled vehicles and parts fitted to completely assembled vehicles but also to components used or intended for use in vehicles supplied or procured from the automotive aftermarket.

• Notify that Section 109 to Section 111 of Chapter VII shall equally apply to automotive components manufactured or sold or serviced in the aftermarket.


• Create state level enforcement agency with adequate supervisory powers to deal with persons engaged in the manufacture, storage, packaging, distribution and sale of counterfeit or non standard automotive Component. Similar to the Weights and Measures Act, inspectors and other officers be empowered to search, seize any non complying auto component and also punish the offenders.

• Motor Vehicles Act should lay down standards for more and more safety, pollution and emission related automotive components.

• Facility of toll free call number in each district or state which can be contacted by any whistle blower if he comes across any one in the chain of spurious or fake automotive component.

Need for State Level Enforcing Agency


Suo motu action by Government Improvement to current legislations

ACMA Members’ Survey Findings


Thank You !

Business

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