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For updated information please visit February 2018 AUTOMOBILES

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Table of Content Executive Summary……………………3 Advantage India………………………..4 Market Overview ………..……………..5 Recent Trends Strategies....……..11 Growth Drivers and Opportunities……15 Investment Scenario...…….……….....18 Policies and Initiatives……….…….….19 Key Players……….……….......……...20 Case Studies……….………...........…21 Key Industry Organizations…………..26 Useful Information……….……….......28

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For updated information please visit Automobiles 3 EXECUTIVE SUMMARY Sources: SIAM OICA Aranca research Business Standard  Presence of established domestic and international original equipment manufacturers OEMs.  Strong market in terms of both the domestic demand and exports.  7th largest manufacturer of commercial vehicles  Growth of 8.85 per cent in sales of cars utility vehicles and vans during calendar year 2017.  Automobile exports to grow at a CAGR of 3.05 per cent during 2016-2026.  Indian automotive industry including component manufacturing is expected to reach Rs 16.16-18.18 trillion US 251.4-282.8 billion by 2026. 4th largest automobile market  Automobile sector split into four segments each having few market leaders.  Two-wheelers and passenger vehicles dominate the domestic demand.  Two-wheelers account for 80 per cent of domestic demand.  Commercial vehicle segment expected to grow at 11.07 per cent between 2016-26. Segmented Market  Exports grew at 4.3 per cent CAGR between FY12-17.  Two-wheeler production estimated to grow at 16 per cent CAGR between FY17-20.  Domestic sales of passenger vehicles expected to increase at a CAGR of 12.87 per cent between 2017-26  Strong policy support from government. Positive growth prospects

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For updated information please visit Automobiles 4 ADVANTAGE INDIA Sources: Automotive Mission Plan 2016 –2026 Make in India SIAM  Strong growth in demand due to rising income middle class and a young population.  Domestics ales of passenger vehicles expected to increase at a CAGR of 12.87 per cent between 2016-26.  Utility vehicle sales increased 19.43 per cent year-on-year in April-December 2017.  Focus shifting on electric cars to reduce emissions.  Innovation is likely to intensify among engine technology alternative fuels.  Government aims to build India into an RD hub.  India has significant cost advantages auto firms save 10-25 per cent on operations vis-à-vis Europe Latin America.  Cumulative FDI inflow of around US 17.91 billion in the sector between April 2000 – September 2017.  Automotive Mission Plan : 2016-26 shows clear vision of government.  The government aims to develop India as a global manufacturing centre.  Reforms like GST to help boost the sector’s growth. ADVANTAGE INDIA

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For updated information please visit Automobiles 6 MARKET OVERVIEW Sources: Tata Motors Society of Indian Automobile Manufacturers SIAM Aranca Research  Indian government Suzuki formed Maruti Udyog and commenced production in 1983  Component manufacturers entered the market via JV  Buyer’s market  More than 35 market players  GST to support lower raw material cost  Launch of Automotive Mission Plan 2016-26 in 2015  Sector de-licensed in 1993  Major Original Equipment Manufacturers OEMs started assembly operations in India  Imports permitted from April 2001  Introduction of value- added tax in 2005  Closed market  5 players  Long waiting periods outdated models  Seller’s market Before 1982 2008 onwards 1992-2007 1983-1992

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For updated information please visit Automobiles 7 MARKET OVERVIEW Automobile Sector Commercial Vehicles Three-wheelers Two-wheelers Passenger vehicles Source: Aranca Research Annual Report Mopeds and electric scooters Scooters Motorcycles Utility Vehicles Passenger cars Multi-purpose vehicles Light commercial vehicles Medium heavy commercial vehicles Passenger carriers Goods carriers

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For updated information please visit Automobiles 8 MARKET OVERVIEW Number of automobiles produced in India in millions Number of automobiles sold in India in millions  The automotive manufacturing industry comprises the production of commercial vehicles passenger cars three two-wheelers.  Two-wheelers are by far the most popular form of vehicle in India taking an 80 per cent share in 2015-16. India became the largest two-wheeler market in the world after selling 17.7 million two-wheelers in 2016.  25 million automobiles produced in FY17.  Total production volume grew at a CAGR of 5.56 per cent between FY12-17 and increased 11.27 per cent year-on-year in April-December 2017.  Automobile exports from India increased 13.01 per cent year-on-year in April-December 2017. During the same period two and three-wheelers exports increased 17.75 per cent and 30.27 per cent respectively. 17 18 18 20 20 22 0 5 10 15 20 25 FY12 FY13 FY14 FY15 FY16 FY17 Source: Society of Indian Automobile Manufacturers SIAM 20 21 22 23 24 25 21 0 5 10 15 20 25 30 FY12 FY13 FY14 FY15 FY16 FY17 FY18 CAGR 5.5 CAGR 5.9 Note: FY18 - up to December 2017

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For updated information please visit Automobiles 9 15 3 3 79 0 20 40 60 80 100 Passenger Vehicle Commercial Vehicle Three Wheelers Two Wheelers MARKET OVERVIEW Share of each segment in total production volume in FY17 Number of automobiles exported in millions  Two-wheelers and passenger vehicles dominate Indian auto market . Sales of two-wheelers are expected to grow 8-10 per cent in FY18  Overall automobile sales increased 36.39 per cent year-on-year to 1666646 units in December 2017.  Two-wheelers and passenger cars accounted for 79 per cent and 15 per cent of production volume in FY17 respectively.  Domestic passenger car sales are dominated by small and mid-size cars.  Over 67 per cent of export volumes comprised of two-wheelers followed by 22 per cent for passenger cars. Source: Society of Indian Automobile Manufacturers SIAM 2.9 2.9 3.1 3.6 3.6 3.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 FY12 FY13 FY14 FY15 FY16 FY17 CAGR 4.3

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For updated information please visit Automobiles 10 Porter’s Five Force Framework Analysis Source: Aranca Research  Low – Bargaining power of suppliers is low as most of the auto component manufacturers are specialised in some segments related to only one client. Bargaining Power of Suppliers  Low – The threat from substitute products continues to be low with public transportation being under developed even in cities. Threat of Substitutes  High – The competition has turned more intense after the entry of foreign players like Volkswagen and Ford with their changed designs to cater to Indian market. Competitive Rivalry  Moderate – The threat of new entrants is generally medium because of the brand equity and capital intensive nature of the business. Threat of New Entrants  High – In a market like India there is lot of bargaining power available to the customers as there are variety of products available in the same range by different manufacturers. Bargaining Power of Buyers Positive Impact Neutral Impact Negative Impact

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For updated information please visit Automobiles 12 RECENT TRENDS Sources: World Wealth Report 2011 of Merrill Lynch Wealth Management and Capgemini Aranca Research media sources  With sales of around 40000 luxury cars in 2017 India became the 27th most attractive luxury market in the world. Sale of luxury cars stood at 33279 units in 2016. The luxury car market in India is expected to grow at 25 per cent CAGR till 2020. Mercedes-Benz India and BMW Group India recorded their highest ever annual sales in 2017 at 15330 units and 9800 units respectively.  With 12th largest population of high net worth individuals HNIs India still has huge room for this segment. Luxury Cars  Carmakers such as BMW Audi Toyota Skoda Volkswagen Mercedes-Benz have started providing customised finance to customers through NBFCs  Major MNC Indian corporate houses are moving towards taking cars on operating lease instead of buying them New Financing Options  The Indian government has shifted its focus on electric cars in order to meet the emission reduction targets. It has aims to sell only electric cars by 2030 under the National Electric Mobility Mission Plan which was launched in 2013.  Mahindra has launched its new electric car and Tesla motors is also set to enter the Indian market. Suzuki Motors is setting up a battery plant in Gujarat. Electric buses from Tata Motors are in testing phase.  Suzuki Motors is setting up a new plant in Gujarat to manufacture lithium ion batteries. Electric Cars  Ashok Leyland is planning to launch couple of light commercial vehicle variants in every quarter of FY18.  In March 2017 Maruti Suzuki launched Baleno RS a high performance hatchback car in the hatchback. In September 2017 it brought Suzuki’s lubricant and car care brand Ecstar to India.  SAIC motors is planning to enter the Indian market the first Chinese automotive company to do so.  Auto Expo 2018 to be held in February 2018 is expected to see more than 20 model launches. New Product Launches

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For updated information please visit Automobiles 13 RECENT TRENDS Delhi – Gurgaon – Faridabad Kolkata – Jamshedpur Chennai – Bengaluru – Hosur Mumbai – Pune –Nashik – Aurangabad  Ashok Leyland  Force Motors  Piaggio  Swaraj Mazda  Amtek Auto  Eicher  Honda SIEL  Maruti Suzuki  Tata Motors  Bajaj Auto  Hero Group  Escorts  ICML  JCB  Yamaha  Mahindra  Suzuki Motorcycles North List of companies  Ashok Leyland  Bajaj Auto  FIAT  GM  MM  Eicher  Skoda  Bharat Forge  Tata Motors  Volkswagen  Renault- Nissan  John Deere  Mercedes Benz  Tata Hitachi  Volvo Eicher West  TataMotors  Hindustan Motors  Simpson Co  International Auto Forgings  JMT  Exide East  Ashok Leyland  Ford  MM  Toyota Kirloskar  Volvo  Sundaram Fasteners  Enfield  Hyundai  BMW  Bosch  TVS Motor Company  Renault- Nissan  TAFE  Daimler  Caterpillar  Hindustan Motors South Sources: ACMA Aranca Research Over the past few years four specific regions in the country have become large auto manufacturing clusters each present with a different set of players.

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For updated information please visit Automobiles 14 RECENT STRATEGIES ADOPTED BY COMPANIES IN INDIAN AUTOMOBILES SECTOR  Considering low cost of production prominent auto companies are increasing their production capacity in order to capture a dominant share in Indian automobile industry.  Most of the automobile companies are eyeing India as an outsourcing hub.  With the total investment of around US 163.7 million Honda Motorcycle Scooter India expanded its production of Activa in three variants at Ahmedabad plant.  Volvo has started local assembly of its cars in India from October 2017.  A new engine assembly line is being set up by the Volkswagen group in Aurangabad. Capacity Addition  Most of the firms including Ford Volkswagen have adapted themselves to cater to the large Indian middle class by dropping their traditional structure and designs.  This allows them to compete directly with domestic firms making the sector highly competitive. Catering Indian needs  Honda is planning to launch three new car models in India by 2020 and will localise the engines to keep the prices low.  Fiat Chrysler Automobiles India launched its new Jeep brand Compass in February 2017 which is going to be produced indigenously in Ranjangaon Maharashtra. India will be the 4th manufacturing hub globally for the brand.  In March 2017 Tata Motors’ new sports car was unveiled under its new sub brand – TAMO at the Geneva International Motor Show. The show will displayed niche segment models with advanced technologies  In January 2018 Ola announced plans to develop electric vehicles including cars and auto-rickshaws for the Indian market. Launch of new models Source: Media sources Autocar India Business Today

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For updated information please visit Automobiles 16 GROWTH DRIVERS  Rising income and a large young population .  Greater availability of credit and financing options.  Demand for commercial vehicles increasing due to high level of activity in infrastructure sector. Growing demand  Clear vision of Indian government to make India an auto manufacturing hub.  Initiatives like ‘Make in India’ ‘Automotive Mission Plan 2026’ and NEMMP 2020 to give a huge boost to the sector. Policy Support  Improving road infrastructure.  Established auto ancillary industry giving the required support to boost growth.  5 per cent of total FDI inflows to India went into the automobiles sector. Support infrastructure and high investments Gross turnover of automobile manufacturers in India in US billion 31 37 33 43 59 66 68 55 59 64 69 0 10 20 30 40 50 60 70 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 E 2017 E Source: Society of Indian Automobile Manufacturers SIAM Aranca Research Note: NEMMP – National Electric Mobility Mission Plan E - estimate

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For updated information please visit Automobiles 17 OPPORTUNITIES  Strong support from the government setting up of NATRIP centres.  Private players such as Hyundai Suzuki GM keen to set up RD base in India.  Strong education base large skilled English-speaking manpower.  Comparative advantage in terms of cost.  Firms both national and foreign are increasing their footprints with over 1165 RD centres. India is fast emerging as a global RD hub  Mahindra Mahindra targeting on implementing digital technology in the business.  Bajaj Auto Hero Honda MM plan to jointly develop a technology for 2-wheelers to run on natural gas.  Tata Motors to launch MiniCAT a car running on compressed air  By 2018 Hyundai is planning to enter the hybrid vehicles segment to explore alternative fuel technology to avail the government incentives. Opportunities for creating sizeable market segments through innovations  General Motors Nissan Toyota announced plans to make India their global hub for small cars.  Passenger vehicle market is expected to touch 10 million units by 2020. Sales crossed the three million milestone in FY17.  Strong export potential in ultra low-cost cars segment to developing emerging markets.  Maruti Suzuki launched facelift version of Alto 800 after the success of earlier model Small-car manufacturing hub Sources: Automotive Mission Plan 20216-2026 media sources Aranca Research Note: NATRIP – National Automotive Testing and RD Infrastructure Project

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For updated information please visit Automobiles 18 INVESTMENT SCENARIO Sources: Company websites media sources Aranca Research Autocar India  Planning to double its current investment level of about US 2.5 billion over the next five years  Aims to raise its market share to 10 per cent by FY19  To increase the Chennai Plant capacity to 400000 units a year in a few years time  The company plans to launch 8 new car models in India by 2021 Nissan  Increased the plant capacity of 20000 units per year in Chakan Plant which is the largest for any luxury car manufacturer in India.  Expansion of MIDC and MoU and to invest US 244 million for capacity expansion in Chakan Pune. Mercedes-Benz  Toyota is planning to invest US 165 million on its new engine plants and projects. Toyota  Plans to invest US 1 billion in India by 2020. Hyundai Indian automobile sector has seen huge investments from both domestic and foreign manufacturers. FDI inflows to the sector were US 17.91 billion between April 2000 and September 2017.  Chinese state owned auto major SAIC Motor has announced investment of over US 310 million in India. It is expected to start operations in 2019. SAIC Note: MIDC – Maharashtra Industrial Development Corporation MoU – Memorandum of Understanding

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For updated information please visit Automobiles 19 POLICIES AND INITIATIVES Support from the Indian government in the form of new policies and initiatives has been crucial in development and growth of Indian automobile sector. Source: Aranca Research  Setting up of RD centres at a total cost of US 388.5 million to enable the industry to be on par with global standards.  Nine RD centres of excellence with focus on low-cost manufacturing product development solutions. NATRiP  Planning to implement Faster Adoption Manufacturing Of Electric Hybrid Vehicles FAME till 2020 which would cover all vehicle segments all forms of hybrid pure electric vehicles. Under the scheme the Government of India is planning to provide grants of up to Rs 105 crore US 16.33 million to each of the selected city with population of more than a million for buying electric buses cars and three-wheelers in FY18. Additional funds will be provided for charging infrastructure.  The Government of India has shortlisted 11 cities in December 2017 to have electric vehicle based public transportation systems under this scheme. FAME  Worked towards reduction of excise duty on small cars and increase budgetary allocation for RD  Weighted increase in RD expenditure to 200 per cent from 150 per cent in-house 175 per cent from 125 per cent outsourced. Department of Heavy Industries Public Enterprises  AMP 2026 targets a 4-fold growth in the automobiles sector in India which includes the manufacturers of automobiles auto components tractor industry over the next 10 years. The Automotive Mission Plan 2016-26 AMP 2026

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For updated information please visit Automobiles 20 KEY PLAYERS Each segment in the Indian automobiles sector has few established key players which hold major portion of the market.  Market leader in the passenger vehicles segment and held over 47 per cent market share in the segment in FY17.  The company sold 151351 units in January 2018 an increase of 4.8 per cent year-on-year.  Market leader in the commercial vehicles segment held 42 per cent market share in FY17.  Hero MotoCorp and Honda are the top two players in the two-wheelers segment with market share of 37.67 per cent and 28.95 per cent in December 2017.  Bajaj auto is a leader in passenger carrier segment with a 59.9 per cent market share and Piaggio Vehicles is the leader in goods carrier segment with 49.7 per cent market share in FY17. Source: Aranca Research Autocar India

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Automobiles CASE STUDIES

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For updated information please visit Automobiles 22 TATA MOTORS Tata Motors revenue US billion 26.5 30.0 36.7 41.3 43.39 41.30 2.09 1.53 2.16 2.16 1.7 1.16 0.0 10.0 20.0 30.0 40.0 50.0 60.0 FY 12 FY13 FY14 FY15 FY16 FY17 Revenue PAT Linear Revenue  Tata Motors is part of the Tata group of companies established in 1868.  Sales operations in over 175 countries.  The company employs over 60000 people in India and other locations.  Tata Motors has sold over 9 million vehicles in its operational history.  It is a market leader in the commercial vehicle segment in India with a 42 per cent market share in FY17 and also a key player in the passenger vehicle segment.  The company has been at the forefront of technology and innovation and launched the cheapest car in the world .  Tata Motors posted consolidated revenues of US 9.10 billion in Q1 FY18 and US 10.91 billion in Q2 FY18.  The company posted 43 per cent year-on-year growth for domestic sales in January 2018 and sold a total of 59441 units. Source: Company website Annual Report

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For updated information please visit Automobiles 23 TATA MOTORS: MILESTONES Sources: Company Website Annual Report Note: CV – Commercial Vehicle Launch of the 1st indigenous CV Launched Tata Nano the cheapest car in the world Consolidated revenue for FY17 is US 41.3 billion Acquisition of Jaguar Land Rover Establishment of Tata Engineering Locomotives 1945 2017 2009 2008 1982

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For updated information please visit Automobiles 24 MARUTI SUZUKI Maruti Suzuki consolidated revenue US billion  Maruti Suzuki is a majority owned subsidiary of Japanese conglomerate Suzuki.  The company started in Gurgaon Haryana as a partnership between the Indian government and was known as Maruti Udyog Limited..  It is now the undisputed market leader in the passenger vehicles segment in India with a market share of 47 per cent in FY17.  The company had a consolidated revenue of US 10.30 billion in FY17.  The company has made the most affordable cars for the Indian middle class for more than three decades.  New models are being launched each year to hold the position of the leader in its home market.  The company posted total income of US 3.17 billion in Q1 2017-18 and US 3.5 billion in Q2.  The company sold 151351 units in January 2018 an increase of 4.8 per cent year-on-year. Source: Company website Annual Report 5.36 6.58 6.58 7.50 8.70 10.30 0.25 0.37 0.43 0.57 0.71 1.13 0.00 2.00 4.00 6.00 8.00 10.00 12.00 FY 12 FY13 FY14 FY15 FY16 FY17 Revenue PAT Linear Revenue

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For updated information please visit Automobiles 25 MARUTI SUZUKI: MILESTONES Source: Company website Annual Report Indias first luxury sedan Maruti 1000 launched Renamed Maruti Suzuki India Limited Consolidated revenue for FY17 is US 10.3 billion Expansion with launch of 3rd manufacturing plant. The first lot of Maruti cars assembled 2016 1983 1990 1999 2007

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For updated information please visit Automobiles 27 INDUSTRY ORGANISATIONS Core 4-B 5th Floor India Habitat Centre Lodhi Road New Delhi – 110 003 India Phone: 91 11 24647810–2 Fax: 91 11 24648222 E-mail: Society of Indian Automobile Manufacturers SIAM Indian Merchants Chamber Bldg. 76 Veer Nariman Road – Churchgate Mumbai - 400020 Phone 91 22 2204 1085 Fax: 91 22 2204 1382 FEDERATION OF INDIAN AUTOMOBILE ASSOCIATIONS

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For updated information please visit Automobiles 29 GLOSSARY  CAGR: Compound Annual Growth Rate  CV: Commercial Vehicle  FDI: Foreign Direct Investment  FY: Indian Financial Year April to March • So FY17 implies April 2016 to March 2017  GOI: Government of India  HCV: Heavy Commercial Vehicle  INR: Indian Rupee  LCV: Light Commercial Vehicle  OEM: Original Equipment Manufacturers  SIAM: Society of Indian Automobile Manufacturers

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For updated information please visit Automobiles 30 EXCHANGE RATES Exchange Rates Fiscal Year Exchange Rates Calendar Year Year INR INR Equivalent of one US 2004–05 44.81 2005–06 44.14 2006–07 45.14 2007–08 40.27 2008–09 46.14 2009–10 47.42 2010–11 45.62 2011–12 46.88 2012–13 54.31 2013–14 60.28 2014-15 61.06 2015-16 65.46 2016-17 67.09 Q1 2017-18 64.46 Q2 2017-18 64.29 Q3 2017-18 64.74 Year INR Equivalent of one US 2005 43.98 2006 45.18 2007 41.34 2008 43.62 2009 48.42 2010 45.72 2011 46.85 2012 53.46 2013 58.44 2014 61.03 2015 64.15 2016 67.21 2017 65.12 Source: Reserve Bank of India

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For updated information please visit Automobiles 31 DISCLAIMER India Brand Equity Foundation IBEF engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation with IBEF. All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced wholly or in part in any material form including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of Aranca and IBEF’s knowledge and belief the content is not to be construed in any manner whatsoever as a substitute for professional advice. Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation. Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.

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