Upload
adityakhanna83
View
221
Download
0
Embed Size (px)
Citation preview
8/10/2019 CRISIL Research Cust Bulletin Sept12
1/24
CRISIL CRBCustomised Research Bulletin
Sector Focus: Automobile
KINGA MM ARKETS
FUNCTIONBETTE
R
YEARS
September2012
8/10/2019 CRISIL Research Cust Bulletin Sept12
2/24
About CRISIL Limited
About CRISIL Research
CRISIL Privacy
Last updated: 31 March, 2011
Disclaimer
CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading
ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.
CRISIL Research is India's largest independent and integrated research house. We provide insights, opinions, and analysis on the
Indian economy, industries, capital markets and companies. We are India's most credible provider of economy and industry
research. Our industry research covers 70 sectors and is known for its rich insights and perspectives. Our analysis is supported by
inputs from our network of more than 4,500 primary sources, including industry experts, industry associations, and trade channels.
We play a key role in India's fixed income markets. We are India's largest provider of valuations of fixed income securities, serving the
mutual fund, insurance, and banking industries. We are the sole provider of debt and hybrid indices to India's mutual fund and life
insurance industries. We pioneered independent equity research in India, and are today India's largest independent equity research
house. Our defining trait is the ability to convert information and data into expert judgements and forecasts with complete objectivity.
We leverage our deep understanding of the macroeconomy and our extensive sector coverage to provide unique insights on micro-
macro and cross-sectoral linkages. We deliver our research through an innovative web-based research platform. Our talent pool
comprises economists, sector experts, company analysts, and information management specialists.
CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfill your request and service your
account and to provide you with additional information from CRISIL and other parts of The McGraw-Hill Companies, Inc. you may find of interest. Forfurther information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy. You can view
McGraw-Hill's Customer Privacy Policy at http://www.mcgrawhill.com/site/tools/privacy/privacy_english.
CRISIL Research, a division of CRISIL Limited (CRISIL), has taken due care and caution in preparing this Report based on the information obtained
by CRISIL from sources which i t considers reliable (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data
/ Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. This Report is not a
recommendation to invest / disinvest in any company covered in the Report. CRISIL especially states that it has no financial liability whatsoever to the
subscribers / users / transmitters / distributors of this Report. CRISIL Research operates independently of, and does not have access to information
obtained by CRISILs Ratings Division / CRISIL Risk and Infrastructure Solutions Limited (CRIS), which may, in their regular operations, obtain
information of a confidential nature. The views expressed in this Report are that of CRISIL Research and not of CRISILs Ratings Division / CRIS. No
part of this Report may be published / reproduced in any form without CRISILs prior written approval.
CRISIL Customised Research BulletinCRB
8/10/2019 CRISIL Research Cust Bulletin Sept12
3/24
CRISIL Industry Research covers 70 industries
Key Offerings
Automotive
Commodities
Hotels & Hospitals
Infrastructure
Logistics
Oil & Gas
Power
Real Estate
& Others
Key Verticals
Industry
Company
Project
Feasibility/Pre-feasibilityStudies
Techno-economicviability studies (TEV)
Project Vetting
Locationidentification/assessment
Sensitivity Analysis
CompetitiveBenchmarking
Valuation studies
Evaluation of variousbusiness models
Customised CreditReports
Vendor Assessment
Market Sizing
Demand/Supply GapAnalysis
Input/Commodity PriceForecasting
Impact Analysis ofEconomic/RegulatoryVariables
8/10/2019 CRISIL Research Cust Bulletin Sept12
4/24
CRISIL Customised Research
CRISIL Research provides research inputs and conclusions to supportyour decisions while
CRISIL Research provides you the following inputs to help youidentify/assess business opportunities or review business risks
CRISIL Research, the leading independent and credible provider of economic, sectoral andcompany research in India, utilises its proprietary information networks, database andmethodologies to provide you customised research inputs and conclusions for businessplanning, monitoring and decision-making.
Lending to an entity
Taking a stake in an entity
Transacting/partnering with an entity
Feasibility of entry into a new business segment
Feasibility of capacity expansion
Choice of location, fuel, other inputs
Choice of markets, targeted market share
Product mix choices
Production/sales planning
Identification/assessment of new business themes/areas
Building futuristic scenarios and discontinuity analysis over the long term
Assessing the impact of changes in economic variables, commodity prices onyour business
Field-based information on variables and tracking indicators for ongoingreview of opportunities/risks in your sectors of interest
Assessment of credit/investment quality of your portfolio
CRISIL Customised Research BulletinCRB
8/10/2019 CRISIL Research Cust Bulletin Sept12
5/24
Foreword
In this edition of Customised Research Bulletin, we present our viewson the
The Opinion section presents our analysis on whether additional taxes
on diesel Cars & UVs will help reduce petroleum subsidies. Given the
sensitivity to significant hikes in diesel and LPG prices, the government
is evaluating other options to manage the subsidy bill. However, CRISIL
Research believes that this will not reduce the subsidy burden
significantly or will be difficult to implement.
This edition also features an interview with our sector expert, Manoj
Mohta, DirectorCustomised Research.
We are confident that you will find this report highly informative and
useful.
Prasad KoparkarSenior Director
Industry & Customised Research
CRISIL Research
8/10/2019 CRISIL Research Cust Bulletin Sept12
6/24
Opinion
Will additional taxes on diesel cars & UVs help reduce 01
petroleum subsidies?
Interview
Mr. Manoj MohtaDirector, Customised Research 03
Economic Overview October 2012 05
Industry OverviewCars and UV 06
Commercial Vehicle 08
Two-wheeler 10
Auto components 11
Independent Equity Research Report
Hero Moto Corp Ltd 13
Customised Research Services
Automobiles 14
Media Coverage 15
Contents
CRISILCRB Customised Research Bulletin
8/10/2019 CRISIL Research Cust Bulletin Sept12
7/24
1
In the 2012-13 Union Budget, the government has set
stringent targets to contain its subsidy bill, of which
petroleum subsidies form a third. The options being
considered include imposition of a one-time tax on new
diesel cars & UVs sold or an annual usage-based levy
on existing diesel cars and UVs, which are aimed at
reducing the preference for these vehicles and thereby
bringing down diesel consumption. CRISIL Research,
however, believes these options will not bring down the
subsidy significantly or will be difficult to implement.Furthermore, diesel cars & UVs account for just over a
tenth of the diesel consumption. To bring about a
sustainable reduction in the subsidy burden, the
government had to hike diesel prices, and in future too
it needs to ensure that diesel prices move in
accordance with crude oil prices.
Rs 5 hike in diesel price: A small step towardscontaining subsidy burden
The recent Rs 5-plus hike in diesel prices has again
turned the spotlight on petroleum subsidies, which
account for nearly a third of the Rs 2,163 billion subsidy
bill in 2011-12. In the Union Budget 2012-13, the
government has targeted to contain its petroleum
subsidy bill at Rs 436 billion, about 40 per cent lower
than in 2011-12.
In 2011-12, petroleum subsidies shot up by almost 80
per cent to Rs 685 billion as crude oil prices rose and
the rupee weakened. Within petroleum subsidies, diesel
alone takes up about 60 per cent. Under-recoveries on
diesel are at an all-time high of Rs 11-12 (as of
September 2012) per litre at current diesel prices. With
the 5-rupee hike in diesel prices, the government has
taken a small step towards reducing the subsidy
burden.
Rising share of petroleum subsidies in total
subsidies
Note: Other major components of the subsidy bill include
food and fertilisers
Source: CRISIL Research
Imposing additional taxes on cars and UVsoffer limited benefits
Given the political compulsions that prevent major hikes
in diesel and LPG prices, the government is evaluatingother options to discourage diesel consumption and
reduce subsidies. The options being discussed include
the levy of a one-time tax on all new diesel cars and
utility vehicles (UVs) sold and collecting an annual tax
from all diesel cars and UVs based on usage. However,
CRISIL Research believes that these moves will not
bring down the subsidy burden significantly or will be
difficult to implement.
Moreover, other vehicles like trucks and buses, which
consume more diesel, remain untaxed. Of the total
diesel consumed in 2011-12, cars & UVs used up only
12 per cent, a third of what trucks and buses
consumed. (CRISIL Research has derived the share of
diesel use by cars & UVs, based on an estimated
population of 3.6 million diesel cars in India as of March
2012. This formed about 23 per cent of the total
population of cars and utility vehicles. Of this, we have
6%
22%
32%
23%
0%
5%
10%
15%
20%
25%
30%
35%
-
500
1,000
1,500
2,000
2,500
2005-06 2010-11 2011-12 2012-13B
Other govt subsidy
Petroleum subsidy
Proportion of petroleum subsidy to total subsidy (%) (RHS)
(Rs billion)
OpinionWill additional taxes on diesel cars &
UVs help reduce petroleum subsidies?
8/10/2019 CRISIL Research Cust Bulletin Sept12
8/24
2
CRISILCRB Customised Research Bulletin
estimated that 47 per cent of the cars are for personal
use, and the remainder, for commercial use.)
Diesel consumption mix (2011-12E)
Source: CRISIL Research
In the following two paragraphs, we have presented our
analysis of the options being discussed by the
government:
Collections from a one-time tax (estimated at Rs
90,000-Rs 140,000 per car depending on fuel and
vehicle use) on all new diesel cars and UVs sold would
almost equal the subsidy borne by the government over
the life of the vehicle. This tax would form 16-20 per
a one-time tax would be levied on only new vehicle
sales, the government will be able to collect only Rs 58-
60 billion annually, which forms only 12-15 per cent of
the total diesel subsidy bill (estimated for 2011-12).
Secondly, as the life, mileage and distance travelled
would be different for personal-use and commercial-use
cars and utility vehicles; levying a common tax would be
difficult.
An annual usage-based taxon all diesel cars and UVs
would, as per our estimates, amount to an additional 2
per cent of the vehicle price annually for personal-use
cars and 5 per cent for commercial-use cars. However,
for collecting an annual tax, the government would have
to rely on RTOs, which are fragmented and not so well-
equipped. Thus, it would be difficult to collect taxes
regularly and monitor non-payments, which renders this
option unviable too. Moreover, Indian car and utility
vehicle buyers already pay 26-30 per cent of the
-20 per
cent tax in Korea and Germany and an 8-12 per cent
tax in Japan (excluding scrappage and carbon tax,
which are annual in nature). Additional taxes on cars &
UVs would, therefore, only burden consumers further.
Deregulating diesel prices - the only long-term
solution to cut subsidy burdenEarlier, the government has hiked diesel prices
sparingly due to fears of high inflation, lower GDP
growth and political compulsions; despite the logic of
keeping diesel prices regulated, even as subsides kept
mounting being questioned. Globally too, petrol and
diesel prices do not vary much. In most countries within
the EU and in the US, diesel and petrol prices are
similar the difference between the two is not more
than 15 per cent. By contrast, in India today, petrolprices are close to 1.4 times (as of September 2012)
higher than diesel, reflecting both higher subsidies on
diesel and higher taxes on petrol. (Taxes on petrol in
India are at about 45 per cent of the selling price as
compared to less than 20 per cent on diesel).
CRISIL Research believes that deregulation and
ensuring that diesel prices move in line with crude oil
prices would be the only way to bring about a
sustainable reduction in the subsidy burden, which will
also provide the government funds for other
development activities. Discouraging diesel
consumption by imposing additional taxes on private
and luxury diesel vehicles would only help in reduction
of petroleum subsidies marginally.
(Please note that the views expressed here are those of CRISIL
operates independently of and does not have access to information
obtained by CRISIL's Ratings Division.)
Agriculture,
18
Industry,5
Railways,3
Others,26
Cars & Uvs(Personal),
7
Cars & UVs(Commercial)
19
Trucksand buses,
74
Roads,48
(per cent)
8/10/2019 CRISIL Research Cust Bulletin Sept12
9/24
3
Mr. Manoj Mohta, Director Customised Research,
currently oversees a team of analysts, who cover theauto, metals, commodities, logistics sectors and nearly
17 micro-sectors.
Manoj played a key role in setting up the customised
research vertical of CRISIL Research. This business
offers focused solutions, aimed at addressing specific
client needs, which would help them in making better
decisions in areas of investments, planning and market
expansion. Since its inception, the customised research
business has grown rapidly, both in size and stature.
Manoj has been actively involved in conceptualisation
of three major reports of CRISIL Research -- on the
logistics sector, the capex investment cycle of Indian
corporates and the financial services market. He joined
CRISIL Research in 2006, as Head- Industry Research.
In his earlier role, Manoj was responsible for
researching and providing opinion on various sectors
including telecom, banking, pharma and information
the research domain.
Indian Institute of Technology (IIT), Roorkee and has
done
from the Northeastern University, Boston in the United
States.
How is the automobile industry expected to
perform in the near term?
The economic environment is weak and most
automobile segments are seeing moderation in demand
growth.
In 2012-13, overall passenger vehicles would see only
a marginal growth of 8-10 per cent due to low income
levels, weak sentiments coupled with higher fuel and
interest costs. However, diesel dominant segments like
sedans and Utility vehicles will grow rapidly as they are
gaining preference among customers due to the huge
price difference between the petrol and diesel variants
along with new model options.
Also, as there is slowdown in investments, stagnancy in
industrial production and weak agricultural production,
we expect growth in medium and heavy goods CVs to
decline by 1214 per cent. However, the
underpenetrated Light CVs segment would continue its
growth trajectory albeit at a slower pace of 14-16 per
cent in 2012-13.
What is the relationship between economic
cycles and various vehicle segments of the
Indian automobile industry?The growth in the Indian automobile industry is strongly
linked with the growth in the economy. Hence, vehicle
growth reacts sharply to economic cycles.
The growth in passenger vehicles and two-wheelers is
largely driven by factors linked to consumption factors
of the domestic economy, while global factors have a
relatively lesser role to play. Passenger vehicles sales
in India is driven by income growth, cost of ownership,
InterviewMr. Manoj Mohta
Director, Customised Research
8/10/2019 CRISIL Research Cust Bulletin Sept12
10/24
4
CRISILCRB Customised Research Bulletin
rising affordability and favourable income
demographics. While rising income levels is directly
includes cost of fuel, EMIs paid, and vehicle price is
linked to global commodity prices (crude, metals, rubber
etc.) and domestic policy rates.
In contrast, the growth in commercial vehicles is driven
by factors intrinsic to the Indian economy. The sale of
heavy commercial vehicles is linked to increasing
industrial and agricultural activity, while that of smaller
vehicles is largely linked to consumption demand.
Further, in view of the uncertainty in economic
conditions and risk to industrial growth, we are
witnessing volatility in the commercial vehicle sector.
What is the position of the Indian automobile
Industry in global markets at present?
India is emerging as one of the fastest growing
automobile markets globally; leading to rising
importance of India in the growth plans of all global
manufacturers, who are seeing stagnation in developedeconomies. While the last decade belonged to the
global passenger vehicle entering India, this decade
would belong to commercial vehicles.
Although India contributes only ~4 per cent to the
annual global passenger vehicle sales, all major global
players, who entered the Indian market over the last
decade, are looking at healthy volumes growth due to
the large population base and high economic growth.
While a decade ago, global manufacturers used to
launch old generation products in India, with the
increasing acceptance of international models, now
most of the launches in the country are concurrent with
launches world-wide.
In contrast, global commercial vehicle manufacturers
have either kept away or limited their presence in India
till date. This is mainly due to the huge difference in the
products offered by global manufacturers and the needs
of the Indian market. The Indian truck segment focuses
more on price rather than on safety, leading to low cost
products with lower power, limited safety and comfort
features. Whereas, products offered by global
manufacturers are expensive with high end safety
features. Going forward, we would see these gaps
being bridged with Indian customers upgrading their
requirements. Further, global manufacturers will
develop products to suit the Indian markets. Over the
next decade, we will see competition intensifying as
international manufacturers will increase their presence
in India.
What challenges/concerns do you foresee for
Indian automobile manufacturers over the next
decade?
The Indian automobile industry will continue to grapple
with uncertainties on economic growth; policy actions
on emission norms, fuel subsidy, vehicle age and fuel
efficiency norms for some time to come. Moreover,
Indian manufacturers would also face the heat ofcompetition. With rising competition, manufacturers
would be forced to increase product launches which in
turn will increase the development and marketing costs
and consequently exert pressure on profitability.
Further, it would become imperative to tap newer
growth avenues such as rural India. This would mean
developing products suitable to the needs of rural India
with features that provide value to them. It is also a
must to offer them at attractive prices. This would entail
significant commitment and investment in product
innovation and development. This is the only way to
grow over the next decade.
8/10/2019 CRISIL Research Cust Bulletin Sept12
11/24
5
Indian EconomyEconomic Overview October 2012
Macroeconomic Indicators - Forecast
Inflation Industrial production growth Currency
Sectoral inflation Trade Growth
Interes t rates
Foreign inflow (US$ bn) Credit growth
Medium ThreatHigh Threat
-8
-4
0
4
8
Jul-11 Oct-11 Jan-12 Apr-12 Jul-12
Mfg
40
45
50
55
60
Sep-11 Jan-12 May-12 Sep-12
Avg Rs per US$
-40
0
40
80
Aug-11 Dec-11 Apr-12 Aug-12
Exports Imports
6
7
8
9
10
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
1 Yr 10 Yr
-2
2
6
10
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
FDI+ECBs Net FII flows
0
10
20
30
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
0
10
20
Aug-10
Dec-10
Apr-11
Aug-11
Dec-11
Apr-12
Aug-12
PrimayFuelManufacturing
-2
8
18
Aug-11 Dec-11 Apr-12 Aug-12
WPI CPI-IW
2012-13 Rationale
Grow th Agriculture 0.0
Industry 3.6
Services 7.6
Total 5.5
Inflation WPI - Average 8.0
WPI inflation forecast reflects (i) higher-than-anticipated increase in food inflation due to weak
and delayed monsoons aff ecting food supply (ii) the impact of a weak rupee which w ill keep the
imported component of inf lation high. Though lower GDP grow th could reduce demand-side
pressures on inflation, other pressure points like recent revisions in prices of electricity , diesel
and LPG w ill keep overall inflation high.
Fiscal deficit as a % of GDP 6.2A lower GDP growth would also low er the government revenue and push the fiscal deficit to6.2 per cent of GDP. Our fiscal deficit forecast does not take into account any substantial
stimulus that may be given to the economy to boost grow th.
Interest rate10- year G-Sec
(year end)8.0-8.2
Given the high fiscal deficit, government borrow ing in 2012-13 w ill remain high. As a result, the
pressure on the 10-year G-sec yield would continue and we expect the yield to settle around
8.0-8.2 per cent by March-end 2013. This assumes a further repo rate cut of around 50 bps by
the RBI during the rest of the fiscal year.
Exchange
rate
Re/US $
(year end)53.0
Despite the recent appreciation, the rupee is expected to settle around 53 per US$ by March-
2013 due to a weak global and domestic grow th outlook. How ever, recent policy measures
such as relaxation of FDI limits has increased capital inflow s and creates an upside bias to our
currency forecast.
The grow th forecast takes into account tw o key risks: (i) delayed monsoons affecting
agricultural growth (ii) recession in Euro zone. Though monsoons recovered significantly inAugust, the sowing of kharif foodgrain is still down by around 10 per cent compared to the last
year. A deepening recession in the Eurozone w ill impact India's manufacturing as w ell service
sector such as IT/ITES via export-linkages. Our forecasts do not account for any substantial
fiscal stimulus given the limited legroom available to do so. There could be some upside to the
grow th forecast if the government speeds up project clearances and restores expansion of
mining output.
8/10/2019 CRISIL Research Cust Bulletin Sept12
12/24
6
CRISILCRB Customised Research Bulletin
Industry Overview Cars and UV
Car sales to witness another year of lowgrowth
Domestic Cars and UV sales grew by 4.7 per cent in
2011-12, of which, car sales grew by a mere 2.2 per
cent, weighed down by the increase in fuel prices and
interest rates. Production troubles at Maruti Suzuki
India Ltd (MSIL), caused by labour strikes, hampered
sales further. MSIL accounted for 36 per cent of the
total production in 2011-12 as against 43 per cent in
2010-11. The UV segment grew by a healthy 14 percent in 2011-12 even as domestic car sales registered a
modest growth due to higher sales of new models and
models with higher diesel engine capacities.
Of the existing demand, there was a huge shift towards
diesel cars, as the gap between the prices of petrol and
diesel widened. However, carmakers were unable to
address this sudden spurt in demand as availability of
diesel engines was limited. This, in turn, impactedgrowth in sales. OEMs also had to deal with a rising
inventory of petrol models despite offering huge
discounts on them.
Domestic sales: Utility vehicles (including vans)
Source: SIAM, CRISIL Research
Domestic cars, UV sales to record slow growthin 2012-13
CRISIL Research expects 8-10 per cent growth in the
passenger vehicles segment, with utility vehicles
growing by 19-21 per cent versus a 5-7 per cent growth
in cars. Within cars, we expect lower sensitivity to
interest rates coupled with higher availability of diesel
models to lead to a double-digit growth in sedan sales.
However, small car sales are likely to grow by a modest
2-4 per cent. Going ahead, production woes at Maruti's
Manesar plant and fuel prices remain key monitorables.
Production troubles to impact growth
Domestic car sales grew by a mere 2 per cent in 2011-
12 due to production troubles at MSIL in addition to a
sharp increase in petrol prices and auto lending rates.
Hence, in 2012-13, we had projected growth to revive
on account of last year's low base. However, a lockout
at MSIL's Manesar plant in July 2012 is expected tolead to lower growth. MSIL's Manesar plant produces
the new Swift, Dzire, Ritz, A-Star and SX4, which
constituted nearly 25 per cent of total domestic sales in
Q1 2012-13. These models recorded a growth of more
than 50 per cent in the first quarter of 2012-13, while
the industry grew by 5 per cent during the period.
Hence, unavailability of these models will have a
significant impact on demand.
Exports to grow by 12-14 per cent in 2012-13
Exports of cars & utility vehicles (UVs) are expected to
grow by 12-14 per cent in 2012-13 after rising by 14 per
cent in 2011-12. Last year, new entrants like Nissan
and Ford led the growth, as exports of their small-car
models surged. On the contrary, exports by Maruti
Suzuki India Limited (MSIL), the country's second-
largest exporter, declined by 7.9 per cent, as production
suffered in line with strikes at its key plants. This pulled
344 332 423 530 602
13.6%
-3.7%
27.4%25.3%
13.6%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
0
100
200
300
400
500
600
700
2007-08 2008-09 2009-10 2010-11 2011-12
Thous
ands
Utility vehicles Growth (%)
8/10/2019 CRISIL Research Cust Bulletin Sept12
13/24
7
down the carmaker's share in total exports to 25 per
cent in 2011-12 from 33 per cent in 2009-10. Others like
Hyundai Motors India Limited (HMIL) also increased
focus on export markets to compensate for slow
domestic demand.
OEMs other than current leading exporters will rapidly
gain share in total exports from the country. In the long
term, forays into markets other than Europe will drive
exports. Additionally, export-focused capacity additions
by players such as Renault-Nissan, Ford and Maruti
Suzuki will also aid growth, over the long term.
Cars & UV Exports
Source: SIAM, CRISIL Research
6%
9%
55%
33%
0%
14%
-10%
0%
10%
20%
30%
40%
50%
60%
0
100
200
300
400
500
600
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
Thousands
Export volumes Growth (%)
8/10/2019 CRISIL Research Cust Bulletin Sept12
14/24
8/10/2019 CRISIL Research Cust Bulletin Sept12
15/24
9
replacement demand and substitution of small-three-
wheelers to an extent. We expect replacement demand
for sub-one tonne vehicles, which were sold since
2005-06, to set in over this period. Similarly, though the
substitution effect from large three-wheelers will fade,
aggressive marketing of 0.5-tonne payload SCVs will
substitute small-three wheelers to an extent, aiding LCV
sales.
CRISIL Research thus expects LCV sales to post a 14-
16 per cent CAGR during 2011-12 to 2016-17, led by a
15-17 per cent CAGR in SCV sales. The growth
potential of the Indian LCV market remains huge ascompared to global peers such as China. Our study
reveals that as of 2011-
significant scope for volume growth in the Indian LCV
market over the next 5-
ratio is expected to improve to 1.25 times by 2016-17.
Further, a comparison of LCV penetration across Indian
states in our study - - -
revealed that there is a huge volume growth potential.
CRISIL Research also found that factors like: size of
state GDP, private consumption expenditure, urban
population and MHCV population are the key factors
determining the potential for SCVs in a state.
Southern states account for a third of LCV sales
Source: Industry, CRISIL Research
Volume growth potential makes Indian LCVmarket attractive, even as competitionintensifies
As the potential is immense, more players are expected
to enter the Indian LCV market in the coming years,
intensifying competition further. For instance, Mahindra
-11,
is already estimated to have over 10 per cent market
share. The Maxximo addressed the need for higher-
powered SCVs. Ashok-
combines features of both mini-trucks and pick-ups, has
also gained over 5 per cent share. For example,
Chinese truck makers Beiqi Foton and GM-SAIC are
expected to launch models from their famous Forland
and Wuling ranges. As a result, players will have to
constantly innovate and offer value-for-money to stay
competitive. Nevertheless, the volume growth potential
of the Indian LCV market will ensure that most players
will stay in for the long haul.
33-37% 31-35%
28-32% 30-34%
18-22% 18-22%
13-17% 13-17%
2008-09 2011-12
South Zone West Zone North Zone East Zone
8/10/2019 CRISIL Research Cust Bulletin Sept12
16/24
10
CRISILCRB Customised Research Bulletin
Industry Overview Two-wheeler
Weakening macro-economic cues to weigh
down growth during 2012-13
The domestic two-wheeler industry grew by 27 per cent
in 2010-11 y-o-y, with domestic volumes rising by 26
per cent and exports by 35 per cent. In 2011-12, while
rural demand remained buoyant, urban motorcycle
demand decelerated. Consequently, domestic two-
wheeler sales growth moderated to 14.1 per cent during
the year. Exports growth remained significantly higher
during 2011-12 at 27 per cent.
In 2012-13, domestic sales are forecast to grow by just
5-7 per cent. Deficient and delayed rainfall in major
Indian states is likely to hit rural incomes, and, in turn,
affect demand for motorcycles and mopeds, categories
that account for over 80 per cent of two-wheeler sales.
Exports remained strong in 2011-12 despiteDEPB withdrawal
Two-wheeler exports grew at a robust pace of 27.1 per
cent in 2011-12 (after a strong 35 per cent growth in
2010-11) due to healthy growth in target markets, better
products and the increasing distribution reach of Indian
players. During the year, Bajaj Auto Ltd was the
growing by 30.4 per cent y-o-y. TVS Motors Ltd, the
second largest exporter, posted a 14.6 per cent y-o-y
exports growth. Amongst newer players, the exports of
India Yamaha Motors grew by over 45 per cent y-o-y
This sharp increase in two-wheeler exports is despite
the withdrawal of the Duty Entitlement Passbook
(DEPB) Scheme in September 2011, under which
around 9 per cent of free-on-board (FoB) value of
exported two-wheelers was reimbursed to exporters as
duty credit in the form of tradable scrips. The DEPB
scheme has been replaced with a Duty Drawback
Scheme (effective since October 2011), offering 5.5 per
cent incentive on FoB value with an additional 1 per
cent special incentive for exports in 2011-12. Moreover,
a Special Focus Market scheme (wherein 3.5 per cent
benefit is made available to exports destined for certain
distant markets) was expanded to include 41 new
countries. Important existing and emerging markets
such as Angola and several other African countries,
Colombia, Mexico and Peru are covered under the
scheme.
Thus, for most major export markets, the level of
incentives available remains largely unchanged in the
post-DEPB era with the major exceptions of Nigeria, Sri
Lanka and Bangladesh. However, exporters were also
able to pass-through 2.0-2.5 per cent price hikes post-
September 2011 in all major export markets and thus
make up for reduced incentives without a significantdent on volumes. For the period April-September 2011,
exports grew by 32 per cent y-o-y whereas growth for
October-December 2011 was at 22 per cent y-o-y,
clearly showing continued healthy growth.
Two-wheeler exports
Source: SIAM, CRISIL Research
21%
32%
22%
14%
34%
27%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
500
1000
1500
2000
2500
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
Thousands
Export Volumes Growth (%)
8/10/2019 CRISIL Research Cust Bulletin Sept12
17/24
11
Industry Overview Auto components
Weak demand from OEMs drags domestic autocomponent growth in 2011-12
In 2011-12, domestic auto component production
growth slowed to 15 per cent y-o-y after posting a
strong growth the year before, reflecting a slower
demand from the OEM segment (70 per cent of
component demand), as cars & utility vehicle (UV) sales
grew in single digits. Growth in other end-user
segments, such as commercial vehicles also
moderated. Slowing car production also restricted the
growth in realisations for component manufacturers.
In 2010-11, growth was better, with auto component
production estimated to have risen to 28 per cent y-o-y,
driven by a sharp recovery in domestic automobile
production after slowing in 2007-08 and 2008-09.
Slowing OEM demand to weigh downcomponent production growth
CRISIL Research expects the Indian auto components
industry to grow at 12-14 per cent y-o-y to reach Rs 2.4
trillion in 2012-13. Growth would however be lower than
in the past years, as commercial vehicle (CV)
manufacturers, who contribute to a fifth of the total
domestic component demand, report a slow growth.
The long-term picture remains bright, with the industry
expected to record a 15-17 per cent CAGR to reach Rs
4.5 trillion by 2016-17.
Component exports continued to gainmomentum in 2011-12
In sharp contrast to the domestic scene, auto
component exports is estimated to have continued to
remain robust in 2011-12, growing by 25-27 per cent in
value terms, after having grown by 28 per cent in 2010-
11. A recovery in key markets, growing penetration of
Indian auto component manufacturers and the trend of
increased sourcing by global OEMs from low-cost
countries boosted exports.
The EU and the US accounted for about 65 per cent of
auto component exports in 2011-12. Sales of cars and
light trucks, which are the major target segments for
Indian auto component players, continued to grow at 13
per cent during the year, after growing by 11 per cent in
2011 in US. However, in the EU, car registrations
continued to slide by 2 per cent in 2011, as
governments in the region withdrew incentives like
scrappage benefits on small cars. The EU commercial
vehicles market (a major target segment for Indian auto
component exporters), however, continued to be strong,
growing by 13 per cent in 2011.
Trend in yearly export growth of auto components
Source: CRISIL Research, ACMA
Increased penetration, expected recovery inkey markets to lead to strong growth inexports
Auto component exports have grown rapidly over the
last decade. The share of exports in total auto
component production increased to 14 per cent in 2010-
11 from 8 per cent in 1999-2000. This is because,
globally, there has been a shift in auto component
sourcing towards low-cost countries (LCCs). Also, while
34
16
19
20
34
44
-3
33
59
30
44
19
9
19
7
28
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
(per cent)
8/10/2019 CRISIL Research Cust Bulletin Sept12
18/24
12
CRISILCRB Customised Research Bulletin
India exported around 35 per cent of its total auto
component exports to OEMs or Tier-I suppliers in 2000,
supplies to original equipment manufacturers (OEMs)
and Tier I vendors was pegged at 80 per cent as of
2010. This indicates that there is increasing
dependence of global players on Indian component
manufacturers. Hence, auto component export volumes
from India will continue to grow.
Exports are expected to post a CAGR of 22-24 per cent
till 2016-17 as exports to target markets increase,
supported by a growth in outsourcing requirements of
global automobile manufacturers.
8/10/2019 CRISIL Research Cust Bulletin Sept12
19/24
8/10/2019 CRISIL Research Cust Bulletin Sept12
20/24
14
CRISILCRB Customised Research Bulletin
Customised Research Services Automobiles
Coverage
Key Offerings
Forecasting
Automobile forecasting/statistical tool development services
Short term demand and supply forecasts based on econometric models
Medium-to-long term demand and supply forecasts model for strategic planning activities
Market entry strategy and business planning support
Market assessment and outlook of auto components and tyre business in India
Demand potential for alternative fuel vehicles
Commodity prices for key raw materials like metals, rubber and polymer
Market dynamics
Market size, characteristics, structure, dynamics and profitability of the used vehicle segments
Competitive benchmarking studies based on:
Product portfolio, distribution network and marketing strategies for new and existing products
Supply chain and sourcing strategy of OEMs
Financial parameters, growth trends, export potential etc of industries/companies
Cost-structure and operational efficiency of an OEM vis--vis other OEMs
Impact analysis of developments concerning auto fuels, economic indicators and raw material prices
Financing options
Benchmarking of independent auto financiers with their competitors
Financial assessment of vendors
8/10/2019 CRISIL Research Cust Bulletin Sept12
21/24
15
Media Coverage
8/10/2019 CRISIL Research Cust Bulletin Sept12
22/24
8/10/2019 CRISIL Research Cust Bulletin Sept12
23/24
Our Capabilities
Economy and Industry Research
Funds and Fixed Income Research
Largest and most comprehensive database on Indias debt market, covering more than 14,000securities
Largest provider of fixed income valuations in India
Value more than Rs.33 trillion (USD 650 billion) of Indian debt securities, comprising 85 per cent ofoutstanding securities
Sole provider of fixed income and hybrid indices to mutual funds and insurance companies; we maintain12 standard indices and over 80 customised indices
Ranking of Indian mutual fund schemes covering 73 per cent of assets under management andRs.5 trillion (USD100 billion) by value
Retained by Indias Employees Provident Fund Organisation, the worlds largest retirement schemecovering over 50 million individuals, for selecting fund managers and monitoring their performance
Equity and Company Research
Largest independent equity research house in India, focusing on small and mid-cap companies;
coverage exceeds 100 companies Released company reports on all 1,401 companies listed and traded on the National Stock Exchange; a
global first for any stock exchange
First research house to release exchange-commissioned equity research reports in India
Assigned the first IPO grade in India
Largest team of economy and industry research analysts in India
Coverage on 70 industries and 139 sub-sectors; provide growth forecasts, profitability analysis,emerging trends, expected investments, industry structure and regulatory frameworks
90 per cent of Indias commercial banks use our industry research for credit decisions
Special coverage on key growth sectors including real estate, infrastructure, logistics, and financialservices
Inputs to Indias leading corporates in market sizing, demand forecasting, and project feasibility
Published the first India-focused report on Ultra High Net-worth Individuals All opinions and forecasts reviewed by a highly qualified panel with over 200 years of cumulative
experience
Making Markets Function Better
8/10/2019 CRISIL Research Cust Bulletin Sept12
24/24
CRISIL Ltd is a Standard & Poor's company
CRISIL LimitedCRISIL House, Central AvenueHiranandani Business Park, Powai, Mumbai - 400 076. IndiaPhone: +91 22 3342 3000 | Fax: +91 22 3342 8088www.crisil.com
Our Offices
Ahmedabad
706, VenusAtlantisNr. Reliance Petrol Pump
Prahladnagar, Ahmedabad, India
Phone: +91 79 4024 4500
Fax: +91 79 2755 9863
Bengaluru
W-101, Sunrise Chambers
22, Ulsoor Road
Bengaluru - 560 042, India
Phone: +91 80 2558 0899
+91 80 2559 4802
Fax: +91 80 2559 4801
ChennaiThapar House,
43/44, Montieth Road, Egmore
Chennai - 600 008, India
Phone: +91 44 2854 6205/06
+91 44 2854 6093
91 44 2854 7531Fax: +
Hyderabad
3rd Floor, Uma Chambers
Plot No. 9&10, Nagarjuna Hills
(Near Punjagutta Cross Road)
Hyderabad - 500 482, India
Phone: +91 40 2335 8103/05Fax: +91 40 2335 7507
Kolkata
Horizon, Block 'B', 4th Floor
57 Chowringhee Road
Kolkata - 700 071, India
Phone: +91 33 2289 1949/50
Fax: +91 33 2283 0597
New Delhi
The Mira, G-1
1st Floor, Plot No. 1 & 2
Ishwar Nagar, Mathura Road
New Delhi - 110 065, India
Phone: +91 11 4250 5100
+91 11 2693 0117/121
Fax: +91 11 2684 2212
Pune
1187/17, Ghole Road
Shivaji Nagar
Pune - 411 005, India
Phone: +91 20 2553 9064/67
Fax: +91 20 4018 1930
Contact us
Siddharth AroraPhone: +91 22 3342 4133 | Mobile: +91 993 08 85274E-mail: [email protected]
Prosenjit GhoshPhone: +91 22 3342 8008 | Mobile: +91 992 06 56299E-mail: [email protected]