VI Foundry Conclave1-2 March 2013

Customer Expectations

Ashok RaoAutomotive Axles Ltd

Mysore

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• Established: April 21, 1981

• Equity Share: Meritor 35%

Kalyani 35%Public: 29%

• Land Size: 202,343.5 Sqm• Current Location: Mysore, India

• Total Employees: 2000+

Automotive Axles Limited

BSE / NSE Ticker Symbol: AUTOAXLES

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N

Current

Future

FootprintPANTNAGAR & BHUJ• Final Axle assembly plant for AL & AMW• Brake component manufacturing and assy

JAMSHEDPUR & LUCKNOW• Brake component mfg and assembly

PITHAMPUR• Axle manufacturing unit• Brake component manufacturing & assy

MYSORE• Export component manuf• Axle manufacturing • Drum & Disc Brake Assembly

NOIDA• Trailer & Tag Axle manufacturing

PUNE• Warehouse for aftermarket

BANGALORE & CHENNAI• Technical center

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Major Customers - Domestic

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India Product Portfolio – CurrentMHCV Drive

AxlesMHCV Drive

AxlesOff-Highway &

MilitaryOff-Highway &

MilitaryNon-Drive

AxlesNon-Drive

AxlesBrakesBrakes

Single Reduction Solo & Tandem Axles

Twin-Speed Reduction

Hub-Reduction

ExportsExports

Drum brake for M&HCV application

Disc Brake for Truck & Coach application

Axle for Truck mounted cranes

6x6 & 8x8 Military Axles

Front Axle

Tag Axle

Trailer Axle

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India Product Portfolio – Future AdditionsLCV AxlesLCV Axles MilitaryMilitary SuspensionsSuspensionsOff-HighwayOff-Highway

MS02 for sub 2T vehicles

MS04 for 6T vehicles

MS06 for 8-10T vehicles

High Mobility Independent

Suspension (HMIS)

Motor Grader Axle

Compactor Axle

Loader Axle

Bogie Suspension

Slipper Suspension

Lift Device for Tag / Trailer Axle

ExportsExports

Front Drive Steer Axle

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India Economic Overview

Source: RBI / MOSPI / SIAM

GDP Growth

9.0

6.98.3 8.4

6.55.5

2008 2009 2010 2011 2012 2013Industrial Production Growth

15.6

5.38.2

2.92.5 3.4

2008 2009 2010 2011 2012 2013Inflation

4.83.6

9.98.9

7.58.0

2008 2009 2010 2011 2012 2013M&HCV Vehicle Production ('000)

293 317360 352

159

271

2008 2009 2010 2011 2012 2013

GDP• Robust growth for 10-12 years till 2008• 2012 affected by global headwinds, de-growth in exports• 2013 appears to be bottoming-out

Industrial Production• Robust growth till 2008 post economic liberalization in ‘91• Recovery phase between 2010-12 after global recession• 2013 will see minor improvement over 2012

Inflation• Traditionally have been at 7-8 percent levels• High inflation recorded in 2011 & 12• 2013 levels to stablize at 7 – 7.5 per cent levels

M&HCV Industry• Growth levels closely mirrors IIP growth• Weak demand in 2013 – negative sentiments in market• Should grow at 7-8 per cent levels from 2014 onwards

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Commercial Vehicle SalesMHCV Sales Trend LCV Domestic Sales Trend (‘000)

Competition Proliferation Vehicle Model Proliferation

0

200

400

600

800

1000

1200

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

LCV Sales expected to cross 1 Mn mark by 2017

0

100

200

300

400

500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

MHCV Total Sales expected to cross 500K by 2017

2006 2011 2017

MHCV 5 8 ~ 13-15

LCV 7 9 ~16-17

Approximately 25-30 new vehicle models are released every year in MHCV segment

Approximately 8-10 new models are released every year in LCV segment

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CV Market Key Changes …

• Volume comes with Variety

• Uncertainty is certain – Forecast passé?

• Competition at Customer & within Suppliers will drive

• Quality

• Product Performance

• Time to Market

• Price

• Product Liability

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Part Quality

•Consistency

Metallurgy / Dimension

•Reduced Fettling

•Consistency

Fettling

•Improved Finish / Consistency

•Eliminate Sec. Oprns - Spot facing

Surface Finish

•Salt Spray : 500 Hrs

Surface Protection

Raw Casting ppm Domestic : 20000 vs Global : < 5000

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Part Delivered Quality

One Quality : Export = Domestic

Typical Delivery Condition Better Delivery Condition

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Axle Performance

• Product Abuse – No Change• Domestic CV Performance expectation ~ Global Standards

• Good Engineering & Manufacturing to closer tolerances Key to success

Metric Earlier Current Expectation

Global

Warranty 1 yr or 100,000 Kms

3 yrs or 300,000 Kms

500,000 Kms

Reliability B10 Life

100,000 Kms 400,000 Kms 1 Million Kms

Oil Change Interval

40,000 Kms 200,000 Kms 250,000 Kms

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Time to Market

• Concept to Customer continuously shrinking from couple of years to ~1 to 1.5 years

• End to End Design / Validation (Product & Process) on Digital Platforms

• Early involvement of Supply Chain thru these Platforms – requiring good Engineering capability – Product / Process for upfront participation

• Program Management within the Foundry Organization to ensure on-time – FTR delivery of new programs

• Follow & strictly adhere APQP

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Recent Experiences of Complex Castings

• Landed Casting cost of Imported << Domestic• Quality Level of Imported >> Domestic• Imported Casting Wt ~ Design Wt• Local Casting Wt ~ 1.2x of Design Wt.

Why ?• Future Domestic products will use complex Castings

Are we Ready ?

Casting Imported from France Equivalent Domestic Casting

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Pricing

• Converted from Castings to Forgings because of poor Delivery & Quality

• Apart from per pc savings addn savings from avoidance of COPQ

Challenge : Make Castings always a compelling, competitive & preferred Option

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• Focus on Fundamentals … • Invest in Advanced Technologies ….• Support Innovations ….• Support Skill Upgradation / Continuous Trg …• Transform Foundries into a preferred destination

for work at all levels

Other Expectations

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To Conclude

Use Lean period to prepare to be in better shape for future

We need each other to be successful.

Together we can do it !

All the Best !