Why and How are Indian automobile companies capitalizing on Indian
advantages for expanding internationally
Group 6
Alok|Anirban|Gautam|Sanjay|Shifaz|Sudeep|Suruchi
August 16, 2002
M&M to export Scorpio to Russia, Indonesia
Feb 03, 2011Bajaj Exports touch magical 1
million mark
June 08, 2011
Tata Motors begins export of its new
range of Prima World Trucks to South
Africa and Middle East
Jan 02, 2010
Ashok Leyland forms JV with Nissan to
manufacture LCVs
Feb 28, 2008Maruti Suzuki becomes the first Indian
car company to export half a million cars
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Export Orientation of the Indian Automobile Sector
CAGR growth of 31% between 2001-02 and 2007-08
66%
05%
11%
18%
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Production, Domestic Sales and Export of CV’s in India
Production, Domestic Sales and Export of PV’s in India
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Exploit Indian competitiveness as a Global Automotive production hub
Low production cost & efficient supply chain management
Technological capabilities in a particular class of vehicles
Automotive hub
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Growing demand
Rising incomes, young population
Greater availability of credit and
financing options
Strong growth in exports as well
Policy sops, FDI encouragement
R&D Focus; GOI has set up technology modernization fund
Goal of establishing India as an Auto-manufacturing hub
Strong projected demand making returns attractive
Greater innovation in products; market segmentation
Rising investments from domestic and foreign players
Policy Support Increasing investments
Inviting Resulting inGrowing demand
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o Automatic approval for foreign equity investment up to 100 per cent; no minimum investment criteria
o Encourages R&D by offering rebates on the R&D expenditure spent by the companies
Auto Policy 2002
Automotive Mission Plan 2006–2016
Dept of Heavy Industries & Public
o Setting up of a technology modernization fund focused on SMEs o Automotives training institutes
oWorked towards reduction of excise duty on small cars and the increase of budgetary allocation for R&D
oWeighted increase in R&D expenditure to: 200 per cent from 150 per cent (in-house); 175 per cent from 125 per cent (outsourced)
Favourable government policies
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Union Budget FY11
o Surcharge on domestic companies reduced to 5 per cent from 7.5 per cent o Reduce excise duty on development & manufacturing of hybrid vehicle kits to 5 per cent from the existing 10 per cent
o Set up at total cost of USD 388.5 million to enable the industry to implement global standards
o R&D centers of excellence with focus on low-cost manufacturing and product development solutions
NATRiPs
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Competitive advantage of India over its peers
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With most global players targeting the most competitive, small car segment, increasing localization remains critical for OEMs to establish profitable business given the competitive intensity in the small car segment .
Global demand shifting to smaller cars
India has built up the scale and significant competencies and cost advantages in the production of small cars.
It benefits from lower development and labour costs, and improving auto component manufacturing base.
General Motors, Nissan, Toyota have announced plans to make India their hub for new global small car platforms
Light vehicle sales in India are estimated to cross the 3 million mark by 2012
Strong export potential in ultra low cost cars segment (to developing and emerging markets)
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Emergence of large automotive clusters
Jamshedpur, Hooghly
Pithampur, Nagpur
Gurgaon, Manesar, Uttarkhand, Faridabad
Pune, Nasik, Sanand, Satara, Ahmednagar
Hosur, Mysore
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Witnessed a considerable drop in exports of 6.3% in FY11 because of the European market remaining challenging on account of withdrawal of scrappage incentives
42% of the sales came from the European markets.
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• Exported entry-level models across the globe to over 120 countries.
• The A-Star (sold in Europe as the ‘Alto’, in some as ‘Celerio’) has been the star performer abroad and has been named as the 5th World Strategic model by Suzuki. Other successful exported cars are the Alto K10 (fuel efficient), Estillo, Ritz and Zen. The company also entered into an agreement with Nissan, under which the latter sells the same car in Europe as the ‘Pixo'.
• To handle the higher volumes, the company tied up with the Adani group for a dedicated car terminal at Mundra port, Gujarat where they invested Rs 100 crores.
• Invested heavily in R & D activities in Japan to come up with technological innovations like K-Series of engines and i-GPI technology.
It then started exploring alternate markets such as :Thailand, Hungary, Malaysia, Laos, Lebanon, Algeria, Chile, Netherlands, Indonesia and Sri Lanka.
Reasons for expansion:
o Intensifying domestic expansiono Decrease dependency on the static domestic market
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Exports accounted for 28.5% of the company’s total net salesDistribution network covers 50 countries
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Presence abroad:
Bajaj Auto International Holdings BV (BAIH BV)- a 100% Netherlands based subsidiary of Bajaj Auto - formed to focus on international ventures, including possible acquisitions
PT Bajaj Indonesia (PT BAI)- Majority owned subsidiary of BAL- focuses on network development, sales and after sales services and brand building
The company is currently on the look out for sites for assembly plants as it cuts the import duties (Import duty is higher on a CBU compared to a SKD and CKD.
AIM to export 2 million units in the coming 2 to 3 years
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DOMESTIC TOTAL 35488 29944 286713 358021 M&M EXPORTS 2034 1754 10567 17138Logan Exports 1000 1904SECTOR TOTAL 37522 31698 298280 377063
March 2011 March 2010 YTD March F10 YTD March F11
Apr/11 May/11 Jun/11 Jul/11 Aug/11 Sep/11 Oct/11 Nov/11 Dec/11 Jan/12 Feb/120
500
1000
1500
2000
2500
3000
3500
4000
EXPORTS VOLUME
EXPORTS VOLUME
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M&M is has entered several markets in developing economies such as South America, South East Asia and Africa.
M&M leverages its Indian cost advantage to grow in the international market.
Cheap Labor and Cost of Production allows M&M to export CKDs to international markets and sell them at much lower price tag.
M&M is manufacturing world-class products at a competitive prices which allows the firm to fulfill its global ambitions and compete in overseas markets.
Basically M&M is entering those markets where the requirements, both in terms of Quality and Price, are similar to those in India.
M&M Ties-up with local manufacturers to leverage their capabilities in local markets.
M&M has recently acquired Ssangyong Motor Company[SYMC] in Korea M&M has collaborated with Eljuri Group in Ecuador in November 2011XUV 500 [SUV] and Genio [Pick-up trucks] were launched recently for Indian as well as International markets in September 2011Earlier M&M had entered the Nigerian market with its 3-wheelers Alfa Passenger and Alfa Load
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In 2010-11, exports contributed to 6.51% of total revenue
Total export 58089 vehicles, a growth of 70%
CV’s 50,244, a growth of 80.2% PV’s 7,845, a growth of 25.9%
Extended presence in the European market
o 21% stake in Hispano Corrocerao MoU with Fiat in 2005o Acquired a 94.3% stake in INCAT International for R&D support and IT capabilities
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Joint Venture with Marcopolo o 51:49 joint venture company with Brazil's Marcopolo to manufacture and assemble fully-built buses and coaches in India
o To be marketed not only in India but also in all Tata Motors focused markets
Acquisition worth $ 2.3billion from Ford Motors in 2008TML felt that acquiring JLR would help them acquire a global footprintIt would help them enter high-end premier segment of the global automobile marketProvide access to the latest technology which would also help them improve their core Indian productsExpected decrease in dependence on Indian market
Tata Motors and MG Rover inked this deal in December,2002City Rovers manufactured in Tata Motors Pune plant were marketed by MG Rover in the UK and US marketsWhy did Tata Motors go for this deal:
- to enhance the volume throughput of the Indica’s Pune plant - was seen as an endorsement by a major international company of Tata Engineering’s capabilities in general, and the world-class acceptability of the Indica in particular
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Exports to Over 115 countries
Fastest to the 1 million mark
66% of total passenger car
exportSantro, i10, i20
and Accent
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Hyundai’s 50:50 rule
The company usually relies on export markets for 50% of its sales and on the domestic market for the balance 50%. For instance, in calendar 2008, HMIL's total sales was 4.89 lakh units. Of this, 2.43 lakh units were exported. In 2009 calendar year, the company targeted a sale of 5.52 lakh vehicles, of which 2.75 lakh units are for export markets.
"We are in the process of changing this 50:50 business mix. In 2010, we plan to sell 55% of our total vehicles in the domestic market and export the balance.”
- Arvind Saxena, director (marketing and sales), HMIL
Europe accounts for nearly 60-70 % of HMIL's total exports.
Most recent destination to be added: Australia with offering of i20
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Pursue aggressive volume growth to be among the top 10 global players in trucks and top 5 in buses
The CIS countries and particularly, Ukraine value highly the hallmarks of Ashok Leyland vehicles, reliability and ruggedness.
The Asian, African and LatAm countries have grown at the rate of 8% even as the global economy grew at only 5%.
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Last years’ results boosted by a buoyant Sri Lankan economy and improved performance in SAARC countries
Participants in the Bus Rapid Transport(BRT) system in Laos, Nigeria
Has set up manufacturing facilities in Letnany Czech Republic for producing its Avia Line of trucks with the latest technology and
compliant with stringent emission norms
Has a 28% equity stake in the Lanka Ashok Leyland company, a venture with the Sri Lankan Govt. to supply CBU and CKD units
Acquired a 26% stake in Optare Plc., UK , a reputed bus manufacturer with experience in Hybrid and Electric Vehicles
State of the art bus manufacturing facility at UAE, a JV between Ras Al Khaimah Investent Authority and Ashok Leyland
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Tata Motors in June 2011 exported its new range of Prima World Trucks to South Africa and Middle East on a trial basis. The company expects to increase its export sales in the segment in the current fiscal.
Initiatives by Indian CV manufacturers to increase exports
M&M in its joint venture with Navistar plans to exports busses (7.5-25 GVW) which will built at the company's Chakan plant and trucks to right-hand drive markets such as South Africa.
M&M is likely to launched the electric version of its mini truck Maxximo in October 2011. The two-cylinder diesel mini truck Maxximo has a payload capacity of 850 kilograms, although its electric variant has lesser capacity of around 600 kilograms. M&M is looking to export its Maxximo electric to Europe and the US.
Ashok Leyland has formed a JV with Nissan to manufacture LCVs and plans to start production from the second half of 2011. The JV will launch a LCV which has a payload capacity of 1.5 tonne and a gross vehicle weight of 3 tonnes. The JV plans to export around 30 per cent of its production to Asian markets.
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Challenges to India’s export competitiveness
Growth in input costs
Slowdown in external demand in Europe and USA
Production cuts in lieu of slowdown
Growing competition from Chinese manufacturers
Changing consumer preferences
Infrastructure constraints
Human resource challenges
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