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8/3/2019 Auto & Auto Ancillaries
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Auto & Auto Ancillaries
Ashwini Prasad - JSABalram Ramesh - JSA
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Auto Sector IntroductionSize - $40Bn a year and contributes to5% of Indias GDP
Scale - 1.5 millionvehicles produced
and employs inexcess of 13
million people
Domestic Sales 10 Million(2008-
09) approx with aCAGR of 9.79%(2002-03)
9th largest in theworld
Indian two wheeler segment being 2 nd
largest in theworld
Industry isseasonal in nature
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Market Segmentation
2 Wheelers Bikes, Mopeds
3 Wheelers Auto Rickshaws
Passenger Cars Cars, UVs and
JeepsCommercial Vehicles LCV,HCVlike Buses, Trucks and Tractors
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Domestic Market Share for
2008-09
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Major Players2 Wheelers HHML, BAL, TVS, HMSI, Yamaha, Royal
Enfield (Eicher)3 Wheelers Piaggio, BAL, M & M
Passenger Vehicles - Maruti Suzuki, Tata Motors, M &M, Hindustan MotorsPassenger Cars GM, Ford, Fiat, BMW, Mercedes-
Benz, Skoda, Hyundai
Commercial Vehicles Tata Motors, M & M, Eicher,Swaraj Mazda, Piaggio, Force MotorsCV- Tractors M & M, Punjab Tractors, Escorts
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Major Automobile ClustersMumbai-Pune-Nasik-AurangabadChennai-Bangalore-Hosur Delhi-Gurgaon-Faridabad
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Value Chain
Procurement Production Quality/TestingMarketing &
Sales Services
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Inputs
Steel, Rubber, Aluminium, Plastics
Broadly prices aligned to global markets
Cost advantage depending on proximity to source
Mix of local as well as imports
Safety components imported
CKDs imported for assembly
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Cost
Distribution
RawMat
cost 79%
Manu.Cost
4%
Labour Cost
3%
S & DCosts
7%
Other Costs
7%
Drivers
Commodities Forex
SalesDiscou
nts
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G rowth Drivers
Increasingconsumer demand
CostCompetitiveness
New ProductLaunches
GovernmentPolicies
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Government Regulations
Excise, VAT, Import DutiesTaxation
Simulated collision of a vehicle or vehicles - Design strengths &weaknesses and Crash compatibility
Crash TestNorms
BS IV norms to be introduced in 11cities by 2010 & BS III to beintroduced across India
EmissionNorms
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Sector Characteristics
100% FDI allowed
Increased competition with new entrants
Capital intensive with high entry and exit barriers
Greater emphasis on exports
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Key Financial Ratios
Debt to Equity Ratio
Price to Earnings Ratio
Price to Book Value Ratio
Operating profit marginOPM
Inventory
Dividend Yield
Cash Conversion Cycle
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Positives
Proactive Government
Receding InflationSoftening of Int. rates and lending by PSU banks
Stabilizing commodity prices
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Challenges
Interest
RatesCrude
Consumer Sentiment Credit Availability
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Global News
Cyclical recovery is underway in the global auto industry
Sales in June posted their best performance since last July led by
China in the developing markets and Germany in mature markets
Car sales in China accelerated by 48% yoy in June
Government stimulus and tax incentives are spurring the revival inChina.
In Brazil, a combination of tax breaks, lower prices and improvedconfidence lifted sales to a record annual rate of 3.1 million units inJune 21% above a year earlier
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Global News
Sales in North America bottomed in the opening months of 2009
Sales will increase in coming months by the recentlyimplemented cash-for-clunkers program in the United States
In Germany, government scrappage programs have led tostronger-than-expected car sales in the first half of 2009
The program is scheduled to expire at the end of 2009
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Outlook
Strong sales figures for August onthe back of healthy July numbers
Raw material prices are expected toremain stable
Deficient Monsoons remain aConcern
Cautious with a positive bias
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Auto Ancillaries
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Auto Ancillaries - Introduction
Industry Size is about $18.7Bn (2008-09)
550 organized & 6000 unorganized players
Domestic Revenues have shown a CAGR (2002-07) of 27.2%
Exports grew at the rate of 35% during 2002-07
Investments in the industry are estimated at $7.2 Bn in 2007-08
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S ector Characteristics
Runs in parallel with automobile sector
High Bargaining by the OEMs: Low Margins
High Competition: Global Players Presence
Competitive Pricing: Low cost & focus on cost cutting
Exports on the riseHigh Barriers to entry: Technology & Relationship with OEMs
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S trengths of the S ector
Low Cost of Components
Availability of Labour
More than 550 ISO9000 companies
Low Cost Automation
Flexibility in SmallBatch Production
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S egments of IndustryEngine Parts
Drive Transmission & Steering parts
Suspension & Braking parts
Body & Chassis
Equipments
Electrical PartsTyres
Others
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S hare of each segment
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M ajor Players : S egmentsEngine Parts Bosch, Federal-Mogul Goetze, Samkrg Pistons, Ucal FuelSystems
Electrical Parts Exide, Amara Raja, Denso, Minda, Motherson Sumi
Drive Transmission & Steering Parts Sona Koyo, ZF Steering, Automotive Axles, Steel Strips Wheels, Clutch Auto, Ceekay Daikin
Suspension & Braking Parts Amtek Auto, ANG Auto, Sundaram Clayton,Brakes Auto
Equipment Fiem Inds, Phoenix Lamps, Lumax.
Tyres Apollo Tyres, MRF Tyres
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S ector Characteristics
Runs in parallel with automobile sector
High Bargaining by the OEMs: Low Margins
High Competition: Global Players Presence
Competitive Pricing: Low cost & focus on cost cutting
Exports on the riseHigh Barriers to entry: Technology & Relationship with OEMs
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Revenue & ExpenditureThe S ources of revenue for auto-ancillary industry :
1. OEMs purchases (50%)2. Replacement Parts (35%)3. Exports (15%)
The Demand depends on the Domestic (85%) & Global Auto Industry Demand (15%)
Expenditure for the industry :1. Raw Material costs- Steel & Aluminum prices2. Plant, Machinery & Maintenance, Wages
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F uture Prospects
Aided by a 7% growth in OEM segmentand 8.5% increase in exports and after market segment, ancillary production isexpected to grow by 8.2% in 09-10
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Why we are hopeful?
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Thank You