Automobile Industry Report
Content
Industry Report
Automotive
India
March 2013
Economist Intelligence Unit 20 Cabot Square London E14 4QW United Kingdom
Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London Economist Intelligence Unit 20 Cabot Square London E14 4QW United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8500 E-mail: [email protected] Hong Kong Economist Intelligence Unit 60/F, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: [email protected] New York Economist Intelligence Unit The Economist Group 750 Third Avenue 5th Floor New York, NY 10017, US Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: [email protected] Geneva Economist Intelligence Unit Rue de l’Athénée 32 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: [email protected]
This report can be accessed electronically as soon as it is published by visiting store.eiu.com or by contacting a local sales representative. The whole report may be viewed in PDF format, or can be navigated section-by-section by using the HTML links. In addition, the full archive of previous reports can be accessed in HTML or PDF format, and our search engine can be used to find content of interest quickly. Our automatic alerting service will send a notification via email when new reports become available.
Copyright
© 2013 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, by photocopy, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it.
Symbols for tables
“0 or 0.0” means nil or negligible; “n/a” means not available; “–” means not applicable
India
1
Contents
2 3 13 Market data at a glance Automotive report Industry publishing schedule
Industry Reports from the Economist Intelligence Unit
Industry Reports provide the Economist Intelligence Unit's forecasts for six key industries along with relevant market analysis. They focus on sectoral and subsectoral demand in the world's major economies, and are updated quarterly, semi-annually, or annually depending on the country (see schedule at the end of this report). The Industry Reports are driven by the country-based macroeconomic forecasts for which the Economist Intelligence Unit is renowned. An Economist Intelligence Unit country expert examines our forecasts for the key indicators in each industry, taking into account economic and political developments, global and regional trends, and market- or competitor-specific factors that are likely to have an impact on the sector over the next five years. The analyst then provides commentary to outline the implications of these trends for companies in the industry. The Economist Intelligence Unit's country and industry analysis draws on the expertise of 100 in-house editors and economists, including industry specialists, and a global network of more than 600 contributors. The historical industry data on which our forecasts are based come from a variety of sources. As with all the Economist Intelligence Unit's analysis, we select the most dependable and up-to-date sources available.
Editors: Editorial closing date: All queries: Next report:
Sujatha Santhanakrishnan (editor); Ana Nicholls (consulting editor) March 15th 2013 Tel: (44.20) 7576 8000 E-mail: [email protected] To request the latest schedule, e-mail [email protected]
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
2
India
Market data at a glance
Automotive at a glance
2008 a 2009 a 2010 a 2011 a 2012 a 2013 b 2014 b 2015 b 2016 b 2017 b New passenger car registrations ('000)c 1,552.7 d 1,951.3 d 2,520.4 d 2,638.8 2,749.8 2,906.2 3,313.1 3,805.0 4,318.4 4,868.2 Stock of passenger cars (per 1,000 people) 10.9 11.8 13.2 14.6 16.0 17.3 18.9 20.7 22.7 25.0 New commercial vehicle registrations ('000)c 287.2 332.8 391.4 419.6 413.8 450.3 498.6 532.4 572.1 633.9 Medium & heavy truck registrations ('000)c 143.5 151.1 179.7 192.9 157.3 165.5 184.2 195.9 209.9 232.5 Retail sales of petrol (m tonnes) 11.4 d 13.1 d 14.5 d 15.8 17.3 19.0 21.0 23.2 25.6 28.3
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Fiscal years beginning April 1st. d Actual.
Source: The Economist Intelligence Unit.
Market opportunities
2008 a 2009 a 2010 b 2011 b 2012 b 2013 c Population (m) 1,148.0 b 1,166.1 b 1,184.1 1,202.1 1,220.0 1,237.9 GDP (US$ bn at market exchange rates) 1,272.6 1,345.2 1,673.1 a 1,857.1 a 1,875.5 2,183.5 GDP per head (US$ at market exchange rates) 1,109 b 1,154 b 1,413 1,545 1,537 1,764 GDP (US$ bn at PPP) 3,407.7 3,720.6 4,130.4 4,507.7 4,837.2 5,256.9 GDP per head (US$ at PPP) 2,968 b 3,191 b 3,488 3,750 3,965 4,247 Personal disposable income (US$ bn) 956.3 b 979.0 b 1,195.4 1,344.3 1,347.7 1,549.1 Median household income (US$) 2,886 b 2,914 b 3,510 3,893 3,850 4,365 Household consumption (US$ bn) 734.5 772.5 945.9 a 1,040.5 a 1,070.1 1,231.9 Household consumption per head (US$) 640 660 800 a 870 a 880 1,000 Exports of goods & services (% change) 14.9 -5.4 22.2 a 15.4 a 6.6 14.6 Imports of goods & services (% change) 22.6 -2.2 15.6 a 18.4 a 5.1 10.2
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
Source: The Economist Intelligence Unit.
2014 c 1,255.8 2,603.7 2,073 5,749.6 4,578 1,799.0 5,001 1,436.5 1,140 14.1 11.1
2015 c 1,274.1 3,043.6 2,389 6,290.4 4,937 2,066.9 5,668 1,649.9 1,290 13.0 9.9
2016 c 1,291.7 3,560.9 2,757 6,893.1 5,336 2,376.3 6,428 1,896.9 1,470 11.8 9.0
2017 c 1,294.7 4,132.1 3,192 7,558.8 5,838 2,738.2 7,307 2,187.4 1,690 12.6 11.8
Key indicators
Real GDP growth (%) Consumer price inflation (av; %)d Budget balance (% of GDP)e Current-account balance (% of GDP)f Lending rate (av; %) Exchange rate Rs:US$ (av)
2008 a 3.9 8.3 -6.0 -2.5 13.3 43.5
2009 a 8.2 10.8 -6.5 -2.0 12.2 48.4
2010 a 9.6 12.0 -4.9 -3.1 10.2 45.7
2011 a 6.9 8.9 -5.8 -3.2 10.2 46.7
2012 b 5.3 9.3 -5.6 -4.4 10.6 53.4 a
2013 c 6.4 8.6 -5.2 -3.8 9.7 52.7
2014 c 7.2 7.8 -4.6 -3.1 9.1 50.8
2015 c 7.3 7.2 -4.4 -2.7 9.0 49.7
2016 c 7.5 6.6 -4.2 -2.7 8.8 48.3
2017 c 7.6 7.1 -4.0 -2.4 8.8 48.0
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Seasonally adjusted. e Fiscal years (beginning April 1st of year indicated). f Based on average exchange rate in fiscal year beginning April 1st.
Source: The Economist Intelligence Unit.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
3
Automotive report
(Forecast closing date: March 15th 2013)
New passenger car registrations, international comparison
('000) Indiad US Japan China Germany
Source: The Economist Intelligence Unit.
2008 a 2009 a 2010 a 2011 b 2012 b 2013 c 2014 c 2015 c 2016 c 2017 c 1,553 1,951 2,520 2,639 2,750 2,906 3,313 3,805 4,318 4,868 13,195 10,402 11,555 12,735 14,440 15,462 16,744 17,666 18,205 18,923 4,228 3,924 4,212 3,525 4,546 4,441 4,406 4,332 4,254 4,184 6,636 10,321 13,747 14,497 15,579 16,802 17,972 19,202 20,373 21,490 3,090 3,807 2,916 3,174 3,083 3,037 3,088 3,173 3,160 3,251
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years beginning April 1st.
Overview
• India's automotive industry, once a showpiece of the country's manufacturing sector, has seen a sharp deceleration in its rate expansion in recent years amid a slowdown in overall domestic economic growth. High interest rates, differences between petrol and diesel prices, and labour disputes have also taken their toll on the industry’s prospects. • In the five years to fiscal year 2010/11 (April-March) total domestic vehicle sales nearly doubled. In 2011/12-2012/13, however, growth has slumped, with growth in new passenger-car registrations slowing to under 5% a year. • The short-term slowdown notwithstanding, the Indian automotive industry's medium-term prospects remain bright, and will be boosted by growth in private consumption as well as by demographic trends. Global carmakers are still expected to step up investment in India in the medium term. The country is already the world's sixth-largest producer of vehicles in unit terms.
Income and demographics
Nominal GDP (US$ bn) Population (m) GDP per head (US$ at PPP) Private consumption per head (US$) No. of households (m) No. of households with annual earnings above US$5,000 (m) No. of households with annual earnings above US$10,000 ('000) No. of households with annual earnings above US$50,000 ('000) No. of households with net wealth over US$1m ('000)
Source: Economist Intelligence Unit.
2008 a 2009 a 2010 a 2011 a 2012 a 2013 b 2014 b 2015 b 2016 b 2017 b 1,272.6 c 1,345.2 c 1,673.1 c 1,857.1 c 1,875.5 2,183.5 2,603.7 3,043.6 3,560.9 4,132.1 1,148.0 1,166.1 1,184.1 1,202.1 1,220.0 1,237.9 1,255.8 1,274.1 1,291.7 1,294.7 2,968 3,191 3,488 3,750 3,965 4,247 4,578 4,937 5,336 5,838 640 662 799 866 877 995 1,144 1,295 1,469 1,690 218 c 221 224 227 230 233 236 239 243 246 46 11,260 0 0 48 11,658 0 0 67 17,614 89 0 80 22,186 245 0 80 21,979 230 0 97 28,821 473 0 118 38,252 823 0 138 49,180 1,257 0 159 62,524 1,833 0 180 78,592 2,612 0
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
4
India
Passenger cars
International comparison • As a result of strong growth in vehicle sales in recent years, India is now one of the largest automotive markets in the world and is the third-largest in Asia, behind Japan and China. • Cars remain luxury items for most of the Indian population, although they are becoming increasingly affordable for a substantial number of consumers. Fewer than 20 Indians in every 1,000 own cars, meaning that the country still has one of the lowest car-ownership rates in the world. Indian car buyers focus chiefly on price and fuel economy, and small, cheap cars therefore account for the majority of sales.
Passenger car registrations
('000)
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2007 08 09 10 11 12 13 14 15 16
Source: The Economist Intelligence Unit.
Five-year forecast • In 2012/13 sales have been battered by high inflation, tight credit markets and the gap between petrol and diesel prices. According to the Society of Indian Automobile Manufacturers (SIAM), registrations of passenger vehicles (cars, utility vehicles and non-commercial vans) rose by just over 4% year on year between April 2012 and February 2013, but they were down by nearly 17% year on year in the latter month. The Economist Intelligence Unit therefore estimates that passenger-vehicle sales rose by less than 4% in 2012/13 as whole. The slump in February 2013 was led by the car segment. • The Reserve Bank of India (the central bank) has begun loosening monetary policy since the start of 2013 and is expected to keep policy accommodative in the near term. As a result, the cost of borrowing should fall slightly in 2013/14, and we expect growth in passenger-vehicle registrations to rebound to 6.6% in that year. However, sales growth in 2014/15-2017/18 will still be below the rates recorded in the previous decade. • Personal disposable income per head in India is estimated at around US$1,100 in 2012, making vehicle ownership unaffordable for the vast majority of the population, around 60% of whom still live in rural areas. However, incomes are expected to rise rapidly in the forecast period, and this will support growth in car sales.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
5
• Demographic factors will support car demand, as the Indian population is expected to grow quickly compared with those of many other countries. The working-age population will also increase as a percentage of the total number of people in the country in 2013-17. In addition, more households are purchasing a second car, and the replacement cycle for cars has become faster.
Passenger car registrations
Passenger cars (stock per 1,000 people) Passenger car registrations ('000)d Passenger car registration growth (%)d
Source: Economist Intelligence Unit.
2008 a 2009 a 2010 a 2011 b 2012 b 2013 c 2014 c 2015 c 2016 c 2017 c 10.9 b 11.8 b 13.2 b 14.6 16.0 17.3 18.9 20.7 22.7 25.0 1,552.7 1,951.3 2,520.4 2,638.8 2,749.8 2,906.2 3,313.1 3,805.0 4,318.4 4,868.2 0.3 25.7 29.2 4.7 4.2 5.7 14.0 14.8 13.5 12.7
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years beginning April 1st.
Market share • The passenger-car sector is dominated by three firms: Maruti Suzuki India (a subsidiary of Suzuki of Japan), Hyundai Motor India (a wholly owned subsidiary of Hyundai of South Korea) and Tata Motors (a unit of a local conglomerate, the Tata Group). The three manufacturers have a combined share of the passenger-car market of almost 90%. • The best-selling car in India for many years was the ubiquitous Maruti 800, made by Maruti Suzuki, which has an engine capacity of under 1000cc. The manufacturer has announced that the Maruti 800 will be phased out slowly across India as newer emissions standards come into effect. However, other small and fuel-efficient cars from Maruti Suzuki, such as the Maruti Alto, are likely to remain the highest sellers in the market for some years to come. • Several foreign manufacturers have entered India's small-car market in recent years, including Fiat (Italy), Ford (US), Toyota (Japan) and Germany's Volkswagen (VW). In November 2012 the US-based General Motors (GM) introduced a 1200cc-engined car, Sail, while a French carmaker, Renault, is said to be developing an 800cc car for the Indian market. • The market for two-wheelers (comprising scooters, motorcycles and mopeds) and three-wheelers is highly concentrated, with the three biggest producers— local firms Hero MotorCorp, Bajaj and TVS—dominating the market. Segmentation • New-car sales continue to be dominated by small, fuel-efficient cars with small engines. The small-car market, which already accounts for two-thirds of domestic sales, offers the most promising prospects for sales growth as increasing affluence enables more Indians to trade up from motorcycles. • Until 2011/12 cars running on petrol outsold diesel-fuelled vehicles, and manufacturers invested heavily in the former. However, for much of the past year petrol prices—which are notionally deregulated and are politically less sensitive—have remained more than 40% higher than administered diesel prices. As a result, sales of petrol-engined vehicles have fallen sharply.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
6
India
• In recent months the government has attempted to lower its diesel subsidy bill by allowing administered prices to rise, and this could swing the balance back in favour of petrol-engined vehicles in the medium term. • Despite rising sales of new cars, motorcycles still outnumber cars on India's roads, and this preference shows little sign of changing. Fully 77% of the 17.4m vehicles sold in 2011/12 were two-wheelers (scooters and motorcycles), according to SIAM, compared with just 15% for cars. • The used-car market in India has traditionally been unorganised, and brokers account for most purchases. The entrance of Maruti Suzuki, Mahindra (a local industrial conglomerate) and Ford should bring greater structure to the usedcar market and generate an increase in sales. Importing used cars is currently uneconomical because of high duties, although these are gradually being lowered. • Sales of luxury cars, such as those made by two German companies, Audi and BMW, have been growing at a rate of around 50% a year, from a tiny base. Sales will continue to grow rapidly, especially given that they are better insulated from the effects of periodic economic downturns and are less sensitive to interest-rate movements than sales of small cars. However, luxury-car purchases will still account for less than 5% of the market in the forecast period. Super-luxury carmakers are expanding their presence in India, catering to demand from India's handful of very rich individuals. Pricing • The car market in India is highly competitive, and consumers are very pricesensitive. Prices range from US$3,000-6,000 for cars with engine capacities under 1000cc to US$100,000 for imported luxury vehicles. • Car prices are likely to rise in the early part of the forecast period, reflecting higher input costs. Most carmakers, including Tata, Maruti Suzuki and GM, have raised retail prices in India during 2012, partly in response to an increase in excise duties (which were raised from 2% to 10% in February 2012). • Most car purchases in India are financed by loans, and the current tight credit conditions have played an important part in ending the boom in car sales. Interest rates were raised steadily from March 2010 until March 2012, and tight monetary policy played a large role in constraining car sales in 2011/12. We expect interest rates to moderate in 2013, but they will do so only gradually, so that growth in car sales is unlikely to return to the rates seen in the boom years of the 2000s.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
7
Item Low-priced car, 900-1299cc (low) Low-priced car, 900-1299cc (high) Compact car, 1300-1799cc (low) Compact car, 1300-1799cc (high) Family car, 1800-2499cc (low) Family car, 1800-2499cc (high) Deluxe car, 2500cc upwards (low) Deluxe car, 2500cc upwards (high) Yearly road tax or registration fee (low) Yearly road tax or registration fee (high) Cost of a tune-up but no major repairs (low) Cost of a tune-up but no major repairs (high) Annual premium for car insurance (low) Annual premium for car insurance (high)
Price (US$) 14,481 14,972 20,454 30,027 65,883 72,469 204,541 245,081 150 329 61.36 102 450 1,087
% of monthly personal disposable income 20,666 21,366 29,189 42,849 94,018 103,417 291,890 349,743 214.2 470.1 87.57 145.9 642.7 1,551
Affordability rank 55 out of 58 53 out of 58 55 out of 58 55 out of 58 57 out of 58 56 out of 58 57 out of 58 56 out of 58 46 out of 52 46 out of 52 48 out of 58 45 out of 58 43 out of 58 46 out of 58
Note. Affordability rank: for each country the price of an item as a percentage of monthly personal disposable income is calculated. Countries are ranked according to these percentages. The most affordable country will have the lowest percentage and be ranked first.
Commercial and other vehicles
Five-year forecast • Demand for commercial vehicles in India will remain cyclical, in line with the country's overall economic performance. Commercial-vehicle sales are estimated to have contracted by 2% in 2012/13. • The decline was largely owing to a slump in demand for medium-weight and heavy commercial vehicles, with sales down by 23% year on year in the period from April 2012 to February 2013. Registrations of light commercial vehicles were up 15% over the same period, although we expect growth in sales of this category of vehicle to slow. • In 2013/14-2017/18 sales are expected to rebound to an average of 8.9% a year as economic growth picks up again. Sales of medium-weight and heavy commercial vehicles, which are estimated to have contracted by 18.9% in 2012/13, are expected to outpace sales of light commercial vehicles in 2013/14-2017/18.
Commercial vehicle registrations
2008 a
2009 a 181.7 151.1 332.8 15.9
2010 a 211.7 179.7 391.4 17.6
2011 a 226.7 192.9 419.6 7.2
2012 a 256.5 157.3 413.8 -1.4
2013 b 284.8 165.5 450.3 8.8
2014 b 314.5 184.2 498.6 10.7
2015 b 336.6 195.9 532.4 6.8
2016 b 362.2 209.9 572.1 7.4
2017 b 401.4 232.5 633.9 10.8
Light commercial vehicle registrations ('000)c 143.6 Medium & heavy vehicle registrations ('000)c 143.5 Commercial vehicle registrations ('000)c 287.2 Commercial vehicle registration growth (%)c -33.6
Source: The Economist Intelligence Unit.
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Fiscal years beginning April 1st.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
8
India
Commercial vehicle registrations
('000)
Light commercial vehicle registrations 1,200 1,000 800 600 400 200 0 2007 08 09 10 11 12 13 14 15 16
Source: The Economist Intelligence Unit.
Medium and heavy commercial vehicle registrations
Market share • Sales of commercial vehicles will continue to be dominated by Tata, which controls more than 50% of the Indian market. Other major manufacturers include Mahindra & Mahindra and Ashok Leyland (a subsidiary of the Hinduja Group), with a market share of around 18% and 10% respectively, according to a market-research firm, Mintel. • Foreign players have only a small presence, but competition is increasing. In September 2012 Sweden's Volvo Trucks and its joint-venture partner, Eicher, announced plans to launch a new range of vehicles. Meanwhile, Germany's Daimler Trucks recently rolled out the first models produced by its Chennai plant under its Bharat Benz brand. The company intends to offer a range of 17 commercial vehicles by 2014. • Tata is fighting back with new model launches, including six new heavy and medium-weight trucks, extending the top end of its Tata Prima range. In early 2012 the company launched a new marque, the Divo, a super-luxury inter-city bus. It also launched new variants of the Tata Starbus Ultra range of mini- and medium-sized buses.
Trucks: market share, 2011
(% share of total)
SML ISUZU, 1.6 Asia Motor Works, 3.4 Others, 1.2
Eicher Motors, 11.1
Ashok Leyland, 19.7
Tata Motors, 63.0
Sources: Society of Indian Automobile Manufacturers (SIAM); GMN estimates.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
9
Production
Major vehicle manufacturers • India's automotive industry includes around 50 large companies, provides direct or indirect employment for over 10m people (around 2% of the labour force) and accounts for around 5% of industrial output. The country is the world's sixth-biggest carmaker, according to the International Organisation of Motor Vehicle Manufacturers (OICA), with vehicle output increasing by 5.5% in 2011 to over 4.1m units. • A number of major firms believe that there is still substantial potential for growth in the Indian market. Two Japanese firms, Honda and Nissan, as well as Renault are among the manufacturers that are expanding their dealership networks in the country, while VW, Mercedes-Benz and Toyota are all investing in production. Peugeot-Citroen (France) recently announced plans to halt its investment in India, however, reflecting problems in its home market of France. • Given the relatively low levels of automation in Indian automotive plants, however, labour unrest remains a key operating risk. Production at a Marutioperated facility in Manesar, in northern India, was halted for almost a month in July-August 2012 during a bout of labour unrest that resulted in one death. The plant had previously been closed in July 2011 as a result of a similar strike. • Both foreign and domestically owned companies will remain active in the automotive sector. Most production in the forecast period will be aimed at selling to the domestic market, with exports forming a relatively small but rapidly growing share. Smaller cities and rural areas will account for an increasingly large share of sales.
Vehicle production
('000 units)
Passenger cars 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2006 07 08 09 10 11 Light commercial vehicles Medium and heavy vehicles
Source: International Organisation of Motor Vehicle Manufacturers.
Components • The automotive-components industry in India is small by global standards, but it will continue to grow rapidly as a result of low costs and rising quality. The organised sector of the components industry comprises about 470 firms, and there are a further 5,000 in the unorganised sector.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
10
India
• Low costs and strong growth prospects are the main drivers of foreign investment in India's automotive-components sector. BMW and Hyundai have announced plans to source more of their components from India. • India’s component-manufacturing industry is becoming more sophisticated, especially in the areas of contract manufacturing, research and development (R&D) and design. Hyundai and Fiat have established regional R&D centres in India, while GM has a technical centre and a design studio in the country. Some of the world’s leading component suppliers, including Bosch of Germany and Delphi of the US, are also increasingly outsourcing R&D activity to India. • Carmakers and first-tier parts suppliers are also showing an ever greater interest in making high-value powertrain and electronic components in India. Ford plans to invest US$72m to expand manufacturing capacity at its powertrain plant in Chennai from 250,000 to 330,000 units, partly in order to cope with strong demand in India for its Figo car model. • It is possible that India's future may be brighter as a supplier of vehicle parts than as a manufacturer and assembler of complete cars. Low costs, a strong technological base and access to cheap rubber and steel put Indian firms on a par with those in China and give them an advantage over those in most other developing countries. In the early part of the forecast period the depreciation of the rupee will also support Indian exports of automotive components.
Market demand: motor vehicles and parts
Nominal US$ m 120,000 100,000 80,000 60,000 40,000 20,000 0 2007 08 09 10 11 12 13 14 15 16 US$ m at 2005 constant prices
Source: The Economist Intelligence Unit.
Environmental issues
Petrol prices • High petrol prices and discrepancies in fuel prices have dampened demand for cars in India. Petrol prices were raised sharply in the first half of 2012, with prices rising by a record 11.5% in May. Since then, state-controlled oil marketing companies have lowered prices as global oil prices have softened, although they still remain high. • In recent years the gap between retail diesel and petrol prices—owing to the fact that diesel prices are administered by the government and are politically highly sensitive—has contributed to the growing popularity of diesel cars. Manufacturers, who have invested heavily in petrol-engined capacity, are
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
11
now scrambling to expand their diesel offerings while combating a slump in sales of petrol-engined cars. • In September 2012 the government raised diesel prices by Rs5 (10 US cents) per litre, representing an increase of over 12%, to bolster its fiscal position and contain its ballooning subsidy bill. Nevertheless, petrol prices remain almost 44% higher than diesel prices. Since January 2013 the government has allowed oil marketing companies to raise the administered price of diesel by Rs0.50 (1 US cent) per litre every month until their losses have been recouped. • Although the market is currently dominated by petrol and diesel engines, there is growing demand for vehicles running on alternative fuels, amid volatile global oil prices, rising domestic fuel prices and increasing environmental awareness. • The two most popular alternative fuels used in vehicles in India are liquefied petroleum gas (LPG) and compressed natural gas (CNG). As part of its plans to increase its share of the Indian market, GM has announced plans to offer alternative-fuel versions of several of its models.
Oil price and petrol consumption
Petrol consumption ('000 tonnes) Oil prices (Brent; US$/b)
Source: Economist Intelligence Unit.
2008 a 2009 a 2010 a 2011 b 2012 b 2013 c 2014 c 2015 c 2016 c 2017 c 11,425 13,051 14,463 15,763 17,308 19,030 20,994 23,159 25,578 28,289 97.7 61.9 79.6 110.9 112.0 104.5 104.8 107.3 110.0 115.0
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
Item Regular unleaded petrol, 1 litre (av)
Price (US$) 1.02
% of monthly personal disposable income 1.46
Affordability rank 55 out of 57
Note. Affordability rank: for each country the price of an item as a percentage of monthly personal disposable income is calculated. Countries are ranked according to these percentages. The most affordable country will have the lowest percentage and be ranked first.
CO2 emissions • The government is enforcing increasingly strict emission requirements for cars, but India is still some way behind the standards that apply in the EU. Since 2010 all petrol sold in 13 of India's largest cities has had to meet the Euro 4 exhaust-emission standards, while Euro 3 standards now apply in the rest of the country. Alternative-energy vehicles • Petrol consumption is forecast to grow at an average annual rate of 10% in 2013-17, almost unchanged from the rate in 2008-12. • Honda became the first vehicle manufacturer to sell hybrid-engined cars in India when it introduced its Civic hybrid saloon to the market in 2008. The launch attracted considerable interest from consumers, but initial sales were
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
12
India
negligible owing to the model's high price. Honda subsequently lowered the car's price.
Petrol consumption and oil price
Petrol consumption ('000 tonnes); left scale 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2007 08 09 10 11 12 13 14 15 16 Oil (Brent) nominal spot price (US$/b); right scale 120 110 100 90 80 70 60 50
Sources: IMF; International Energy Agency; The Economist Intelligence Unit.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
13
Industry publishing schedule
Our automotive reports cover the following 58 countries and are updated quarterly, semi-annually or annually, depending on the country. Quarterly Brazil China France Germany India Indonesia Japan Mexico Russia South Korea Turkey United Kingdom United States of America Semi-annual Argentina Australia Canada Chile Colombia Czech Republic Egypt Hong Kong Israel Italy Malaysia Nigeria Pakistan Philippines Poland Saudi Arabia Singapore South Africa Spain Taiwan Thailand United Arab Emirates Vietnam Annual Austria Belgium Bulgaria Denmark Finland Greece Hungary Iran Ireland Kazakhstan Netherlands New Zealand Norway Peru Portugal Romania Slovakia Slovenia Sweden Switzerland Ukraine Venezuela
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
©2013 The Economist Intelligence Unit Ltd. All rights reserved. Copyright of Automotive Industry Report: India is the property of EIU: Economist Intelligence Unit and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. "Whilst every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd cannot accept any responsibility or liability for reliance by any person on this information"
Automotive
India
March 2013
Economist Intelligence Unit 20 Cabot Square London E14 4QW United Kingdom
Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London Economist Intelligence Unit 20 Cabot Square London E14 4QW United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8500 E-mail: [email protected] Hong Kong Economist Intelligence Unit 60/F, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: [email protected] New York Economist Intelligence Unit The Economist Group 750 Third Avenue 5th Floor New York, NY 10017, US Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 E-mail: [email protected] Geneva Economist Intelligence Unit Rue de l’Athénée 32 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: [email protected]
This report can be accessed electronically as soon as it is published by visiting store.eiu.com or by contacting a local sales representative. The whole report may be viewed in PDF format, or can be navigated section-by-section by using the HTML links. In addition, the full archive of previous reports can be accessed in HTML or PDF format, and our search engine can be used to find content of interest quickly. Our automatic alerting service will send a notification via email when new reports become available.
Copyright
© 2013 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, by photocopy, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it.
Symbols for tables
“0 or 0.0” means nil or negligible; “n/a” means not available; “–” means not applicable
India
1
Contents
2 3 13 Market data at a glance Automotive report Industry publishing schedule
Industry Reports from the Economist Intelligence Unit
Industry Reports provide the Economist Intelligence Unit's forecasts for six key industries along with relevant market analysis. They focus on sectoral and subsectoral demand in the world's major economies, and are updated quarterly, semi-annually, or annually depending on the country (see schedule at the end of this report). The Industry Reports are driven by the country-based macroeconomic forecasts for which the Economist Intelligence Unit is renowned. An Economist Intelligence Unit country expert examines our forecasts for the key indicators in each industry, taking into account economic and political developments, global and regional trends, and market- or competitor-specific factors that are likely to have an impact on the sector over the next five years. The analyst then provides commentary to outline the implications of these trends for companies in the industry. The Economist Intelligence Unit's country and industry analysis draws on the expertise of 100 in-house editors and economists, including industry specialists, and a global network of more than 600 contributors. The historical industry data on which our forecasts are based come from a variety of sources. As with all the Economist Intelligence Unit's analysis, we select the most dependable and up-to-date sources available.
Editors: Editorial closing date: All queries: Next report:
Sujatha Santhanakrishnan (editor); Ana Nicholls (consulting editor) March 15th 2013 Tel: (44.20) 7576 8000 E-mail: [email protected] To request the latest schedule, e-mail [email protected]
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
2
India
Market data at a glance
Automotive at a glance
2008 a 2009 a 2010 a 2011 a 2012 a 2013 b 2014 b 2015 b 2016 b 2017 b New passenger car registrations ('000)c 1,552.7 d 1,951.3 d 2,520.4 d 2,638.8 2,749.8 2,906.2 3,313.1 3,805.0 4,318.4 4,868.2 Stock of passenger cars (per 1,000 people) 10.9 11.8 13.2 14.6 16.0 17.3 18.9 20.7 22.7 25.0 New commercial vehicle registrations ('000)c 287.2 332.8 391.4 419.6 413.8 450.3 498.6 532.4 572.1 633.9 Medium & heavy truck registrations ('000)c 143.5 151.1 179.7 192.9 157.3 165.5 184.2 195.9 209.9 232.5 Retail sales of petrol (m tonnes) 11.4 d 13.1 d 14.5 d 15.8 17.3 19.0 21.0 23.2 25.6 28.3
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Fiscal years beginning April 1st. d Actual.
Source: The Economist Intelligence Unit.
Market opportunities
2008 a 2009 a 2010 b 2011 b 2012 b 2013 c Population (m) 1,148.0 b 1,166.1 b 1,184.1 1,202.1 1,220.0 1,237.9 GDP (US$ bn at market exchange rates) 1,272.6 1,345.2 1,673.1 a 1,857.1 a 1,875.5 2,183.5 GDP per head (US$ at market exchange rates) 1,109 b 1,154 b 1,413 1,545 1,537 1,764 GDP (US$ bn at PPP) 3,407.7 3,720.6 4,130.4 4,507.7 4,837.2 5,256.9 GDP per head (US$ at PPP) 2,968 b 3,191 b 3,488 3,750 3,965 4,247 Personal disposable income (US$ bn) 956.3 b 979.0 b 1,195.4 1,344.3 1,347.7 1,549.1 Median household income (US$) 2,886 b 2,914 b 3,510 3,893 3,850 4,365 Household consumption (US$ bn) 734.5 772.5 945.9 a 1,040.5 a 1,070.1 1,231.9 Household consumption per head (US$) 640 660 800 a 870 a 880 1,000 Exports of goods & services (% change) 14.9 -5.4 22.2 a 15.4 a 6.6 14.6 Imports of goods & services (% change) 22.6 -2.2 15.6 a 18.4 a 5.1 10.2
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
Source: The Economist Intelligence Unit.
2014 c 1,255.8 2,603.7 2,073 5,749.6 4,578 1,799.0 5,001 1,436.5 1,140 14.1 11.1
2015 c 1,274.1 3,043.6 2,389 6,290.4 4,937 2,066.9 5,668 1,649.9 1,290 13.0 9.9
2016 c 1,291.7 3,560.9 2,757 6,893.1 5,336 2,376.3 6,428 1,896.9 1,470 11.8 9.0
2017 c 1,294.7 4,132.1 3,192 7,558.8 5,838 2,738.2 7,307 2,187.4 1,690 12.6 11.8
Key indicators
Real GDP growth (%) Consumer price inflation (av; %)d Budget balance (% of GDP)e Current-account balance (% of GDP)f Lending rate (av; %) Exchange rate Rs:US$ (av)
2008 a 3.9 8.3 -6.0 -2.5 13.3 43.5
2009 a 8.2 10.8 -6.5 -2.0 12.2 48.4
2010 a 9.6 12.0 -4.9 -3.1 10.2 45.7
2011 a 6.9 8.9 -5.8 -3.2 10.2 46.7
2012 b 5.3 9.3 -5.6 -4.4 10.6 53.4 a
2013 c 6.4 8.6 -5.2 -3.8 9.7 52.7
2014 c 7.2 7.8 -4.6 -3.1 9.1 50.8
2015 c 7.3 7.2 -4.4 -2.7 9.0 49.7
2016 c 7.5 6.6 -4.2 -2.7 8.8 48.3
2017 c 7.6 7.1 -4.0 -2.4 8.8 48.0
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Seasonally adjusted. e Fiscal years (beginning April 1st of year indicated). f Based on average exchange rate in fiscal year beginning April 1st.
Source: The Economist Intelligence Unit.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
3
Automotive report
(Forecast closing date: March 15th 2013)
New passenger car registrations, international comparison
('000) Indiad US Japan China Germany
Source: The Economist Intelligence Unit.
2008 a 2009 a 2010 a 2011 b 2012 b 2013 c 2014 c 2015 c 2016 c 2017 c 1,553 1,951 2,520 2,639 2,750 2,906 3,313 3,805 4,318 4,868 13,195 10,402 11,555 12,735 14,440 15,462 16,744 17,666 18,205 18,923 4,228 3,924 4,212 3,525 4,546 4,441 4,406 4,332 4,254 4,184 6,636 10,321 13,747 14,497 15,579 16,802 17,972 19,202 20,373 21,490 3,090 3,807 2,916 3,174 3,083 3,037 3,088 3,173 3,160 3,251
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years beginning April 1st.
Overview
• India's automotive industry, once a showpiece of the country's manufacturing sector, has seen a sharp deceleration in its rate expansion in recent years amid a slowdown in overall domestic economic growth. High interest rates, differences between petrol and diesel prices, and labour disputes have also taken their toll on the industry’s prospects. • In the five years to fiscal year 2010/11 (April-March) total domestic vehicle sales nearly doubled. In 2011/12-2012/13, however, growth has slumped, with growth in new passenger-car registrations slowing to under 5% a year. • The short-term slowdown notwithstanding, the Indian automotive industry's medium-term prospects remain bright, and will be boosted by growth in private consumption as well as by demographic trends. Global carmakers are still expected to step up investment in India in the medium term. The country is already the world's sixth-largest producer of vehicles in unit terms.
Income and demographics
Nominal GDP (US$ bn) Population (m) GDP per head (US$ at PPP) Private consumption per head (US$) No. of households (m) No. of households with annual earnings above US$5,000 (m) No. of households with annual earnings above US$10,000 ('000) No. of households with annual earnings above US$50,000 ('000) No. of households with net wealth over US$1m ('000)
Source: Economist Intelligence Unit.
2008 a 2009 a 2010 a 2011 a 2012 a 2013 b 2014 b 2015 b 2016 b 2017 b 1,272.6 c 1,345.2 c 1,673.1 c 1,857.1 c 1,875.5 2,183.5 2,603.7 3,043.6 3,560.9 4,132.1 1,148.0 1,166.1 1,184.1 1,202.1 1,220.0 1,237.9 1,255.8 1,274.1 1,291.7 1,294.7 2,968 3,191 3,488 3,750 3,965 4,247 4,578 4,937 5,336 5,838 640 662 799 866 877 995 1,144 1,295 1,469 1,690 218 c 221 224 227 230 233 236 239 243 246 46 11,260 0 0 48 11,658 0 0 67 17,614 89 0 80 22,186 245 0 80 21,979 230 0 97 28,821 473 0 118 38,252 823 0 138 49,180 1,257 0 159 62,524 1,833 0 180 78,592 2,612 0
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
4
India
Passenger cars
International comparison • As a result of strong growth in vehicle sales in recent years, India is now one of the largest automotive markets in the world and is the third-largest in Asia, behind Japan and China. • Cars remain luxury items for most of the Indian population, although they are becoming increasingly affordable for a substantial number of consumers. Fewer than 20 Indians in every 1,000 own cars, meaning that the country still has one of the lowest car-ownership rates in the world. Indian car buyers focus chiefly on price and fuel economy, and small, cheap cars therefore account for the majority of sales.
Passenger car registrations
('000)
4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2007 08 09 10 11 12 13 14 15 16
Source: The Economist Intelligence Unit.
Five-year forecast • In 2012/13 sales have been battered by high inflation, tight credit markets and the gap between petrol and diesel prices. According to the Society of Indian Automobile Manufacturers (SIAM), registrations of passenger vehicles (cars, utility vehicles and non-commercial vans) rose by just over 4% year on year between April 2012 and February 2013, but they were down by nearly 17% year on year in the latter month. The Economist Intelligence Unit therefore estimates that passenger-vehicle sales rose by less than 4% in 2012/13 as whole. The slump in February 2013 was led by the car segment. • The Reserve Bank of India (the central bank) has begun loosening monetary policy since the start of 2013 and is expected to keep policy accommodative in the near term. As a result, the cost of borrowing should fall slightly in 2013/14, and we expect growth in passenger-vehicle registrations to rebound to 6.6% in that year. However, sales growth in 2014/15-2017/18 will still be below the rates recorded in the previous decade. • Personal disposable income per head in India is estimated at around US$1,100 in 2012, making vehicle ownership unaffordable for the vast majority of the population, around 60% of whom still live in rural areas. However, incomes are expected to rise rapidly in the forecast period, and this will support growth in car sales.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
5
• Demographic factors will support car demand, as the Indian population is expected to grow quickly compared with those of many other countries. The working-age population will also increase as a percentage of the total number of people in the country in 2013-17. In addition, more households are purchasing a second car, and the replacement cycle for cars has become faster.
Passenger car registrations
Passenger cars (stock per 1,000 people) Passenger car registrations ('000)d Passenger car registration growth (%)d
Source: Economist Intelligence Unit.
2008 a 2009 a 2010 a 2011 b 2012 b 2013 c 2014 c 2015 c 2016 c 2017 c 10.9 b 11.8 b 13.2 b 14.6 16.0 17.3 18.9 20.7 22.7 25.0 1,552.7 1,951.3 2,520.4 2,638.8 2,749.8 2,906.2 3,313.1 3,805.0 4,318.4 4,868.2 0.3 25.7 29.2 4.7 4.2 5.7 14.0 14.8 13.5 12.7
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years beginning April 1st.
Market share • The passenger-car sector is dominated by three firms: Maruti Suzuki India (a subsidiary of Suzuki of Japan), Hyundai Motor India (a wholly owned subsidiary of Hyundai of South Korea) and Tata Motors (a unit of a local conglomerate, the Tata Group). The three manufacturers have a combined share of the passenger-car market of almost 90%. • The best-selling car in India for many years was the ubiquitous Maruti 800, made by Maruti Suzuki, which has an engine capacity of under 1000cc. The manufacturer has announced that the Maruti 800 will be phased out slowly across India as newer emissions standards come into effect. However, other small and fuel-efficient cars from Maruti Suzuki, such as the Maruti Alto, are likely to remain the highest sellers in the market for some years to come. • Several foreign manufacturers have entered India's small-car market in recent years, including Fiat (Italy), Ford (US), Toyota (Japan) and Germany's Volkswagen (VW). In November 2012 the US-based General Motors (GM) introduced a 1200cc-engined car, Sail, while a French carmaker, Renault, is said to be developing an 800cc car for the Indian market. • The market for two-wheelers (comprising scooters, motorcycles and mopeds) and three-wheelers is highly concentrated, with the three biggest producers— local firms Hero MotorCorp, Bajaj and TVS—dominating the market. Segmentation • New-car sales continue to be dominated by small, fuel-efficient cars with small engines. The small-car market, which already accounts for two-thirds of domestic sales, offers the most promising prospects for sales growth as increasing affluence enables more Indians to trade up from motorcycles. • Until 2011/12 cars running on petrol outsold diesel-fuelled vehicles, and manufacturers invested heavily in the former. However, for much of the past year petrol prices—which are notionally deregulated and are politically less sensitive—have remained more than 40% higher than administered diesel prices. As a result, sales of petrol-engined vehicles have fallen sharply.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
6
India
• In recent months the government has attempted to lower its diesel subsidy bill by allowing administered prices to rise, and this could swing the balance back in favour of petrol-engined vehicles in the medium term. • Despite rising sales of new cars, motorcycles still outnumber cars on India's roads, and this preference shows little sign of changing. Fully 77% of the 17.4m vehicles sold in 2011/12 were two-wheelers (scooters and motorcycles), according to SIAM, compared with just 15% for cars. • The used-car market in India has traditionally been unorganised, and brokers account for most purchases. The entrance of Maruti Suzuki, Mahindra (a local industrial conglomerate) and Ford should bring greater structure to the usedcar market and generate an increase in sales. Importing used cars is currently uneconomical because of high duties, although these are gradually being lowered. • Sales of luxury cars, such as those made by two German companies, Audi and BMW, have been growing at a rate of around 50% a year, from a tiny base. Sales will continue to grow rapidly, especially given that they are better insulated from the effects of periodic economic downturns and are less sensitive to interest-rate movements than sales of small cars. However, luxury-car purchases will still account for less than 5% of the market in the forecast period. Super-luxury carmakers are expanding their presence in India, catering to demand from India's handful of very rich individuals. Pricing • The car market in India is highly competitive, and consumers are very pricesensitive. Prices range from US$3,000-6,000 for cars with engine capacities under 1000cc to US$100,000 for imported luxury vehicles. • Car prices are likely to rise in the early part of the forecast period, reflecting higher input costs. Most carmakers, including Tata, Maruti Suzuki and GM, have raised retail prices in India during 2012, partly in response to an increase in excise duties (which were raised from 2% to 10% in February 2012). • Most car purchases in India are financed by loans, and the current tight credit conditions have played an important part in ending the boom in car sales. Interest rates were raised steadily from March 2010 until March 2012, and tight monetary policy played a large role in constraining car sales in 2011/12. We expect interest rates to moderate in 2013, but they will do so only gradually, so that growth in car sales is unlikely to return to the rates seen in the boom years of the 2000s.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
7
Item Low-priced car, 900-1299cc (low) Low-priced car, 900-1299cc (high) Compact car, 1300-1799cc (low) Compact car, 1300-1799cc (high) Family car, 1800-2499cc (low) Family car, 1800-2499cc (high) Deluxe car, 2500cc upwards (low) Deluxe car, 2500cc upwards (high) Yearly road tax or registration fee (low) Yearly road tax or registration fee (high) Cost of a tune-up but no major repairs (low) Cost of a tune-up but no major repairs (high) Annual premium for car insurance (low) Annual premium for car insurance (high)
Price (US$) 14,481 14,972 20,454 30,027 65,883 72,469 204,541 245,081 150 329 61.36 102 450 1,087
% of monthly personal disposable income 20,666 21,366 29,189 42,849 94,018 103,417 291,890 349,743 214.2 470.1 87.57 145.9 642.7 1,551
Affordability rank 55 out of 58 53 out of 58 55 out of 58 55 out of 58 57 out of 58 56 out of 58 57 out of 58 56 out of 58 46 out of 52 46 out of 52 48 out of 58 45 out of 58 43 out of 58 46 out of 58
Note. Affordability rank: for each country the price of an item as a percentage of monthly personal disposable income is calculated. Countries are ranked according to these percentages. The most affordable country will have the lowest percentage and be ranked first.
Commercial and other vehicles
Five-year forecast • Demand for commercial vehicles in India will remain cyclical, in line with the country's overall economic performance. Commercial-vehicle sales are estimated to have contracted by 2% in 2012/13. • The decline was largely owing to a slump in demand for medium-weight and heavy commercial vehicles, with sales down by 23% year on year in the period from April 2012 to February 2013. Registrations of light commercial vehicles were up 15% over the same period, although we expect growth in sales of this category of vehicle to slow. • In 2013/14-2017/18 sales are expected to rebound to an average of 8.9% a year as economic growth picks up again. Sales of medium-weight and heavy commercial vehicles, which are estimated to have contracted by 18.9% in 2012/13, are expected to outpace sales of light commercial vehicles in 2013/14-2017/18.
Commercial vehicle registrations
2008 a
2009 a 181.7 151.1 332.8 15.9
2010 a 211.7 179.7 391.4 17.6
2011 a 226.7 192.9 419.6 7.2
2012 a 256.5 157.3 413.8 -1.4
2013 b 284.8 165.5 450.3 8.8
2014 b 314.5 184.2 498.6 10.7
2015 b 336.6 195.9 532.4 6.8
2016 b 362.2 209.9 572.1 7.4
2017 b 401.4 232.5 633.9 10.8
Light commercial vehicle registrations ('000)c 143.6 Medium & heavy vehicle registrations ('000)c 143.5 Commercial vehicle registrations ('000)c 287.2 Commercial vehicle registration growth (%)c -33.6
Source: The Economist Intelligence Unit.
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Fiscal years beginning April 1st.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
8
India
Commercial vehicle registrations
('000)
Light commercial vehicle registrations 1,200 1,000 800 600 400 200 0 2007 08 09 10 11 12 13 14 15 16
Source: The Economist Intelligence Unit.
Medium and heavy commercial vehicle registrations
Market share • Sales of commercial vehicles will continue to be dominated by Tata, which controls more than 50% of the Indian market. Other major manufacturers include Mahindra & Mahindra and Ashok Leyland (a subsidiary of the Hinduja Group), with a market share of around 18% and 10% respectively, according to a market-research firm, Mintel. • Foreign players have only a small presence, but competition is increasing. In September 2012 Sweden's Volvo Trucks and its joint-venture partner, Eicher, announced plans to launch a new range of vehicles. Meanwhile, Germany's Daimler Trucks recently rolled out the first models produced by its Chennai plant under its Bharat Benz brand. The company intends to offer a range of 17 commercial vehicles by 2014. • Tata is fighting back with new model launches, including six new heavy and medium-weight trucks, extending the top end of its Tata Prima range. In early 2012 the company launched a new marque, the Divo, a super-luxury inter-city bus. It also launched new variants of the Tata Starbus Ultra range of mini- and medium-sized buses.
Trucks: market share, 2011
(% share of total)
SML ISUZU, 1.6 Asia Motor Works, 3.4 Others, 1.2
Eicher Motors, 11.1
Ashok Leyland, 19.7
Tata Motors, 63.0
Sources: Society of Indian Automobile Manufacturers (SIAM); GMN estimates.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
9
Production
Major vehicle manufacturers • India's automotive industry includes around 50 large companies, provides direct or indirect employment for over 10m people (around 2% of the labour force) and accounts for around 5% of industrial output. The country is the world's sixth-biggest carmaker, according to the International Organisation of Motor Vehicle Manufacturers (OICA), with vehicle output increasing by 5.5% in 2011 to over 4.1m units. • A number of major firms believe that there is still substantial potential for growth in the Indian market. Two Japanese firms, Honda and Nissan, as well as Renault are among the manufacturers that are expanding their dealership networks in the country, while VW, Mercedes-Benz and Toyota are all investing in production. Peugeot-Citroen (France) recently announced plans to halt its investment in India, however, reflecting problems in its home market of France. • Given the relatively low levels of automation in Indian automotive plants, however, labour unrest remains a key operating risk. Production at a Marutioperated facility in Manesar, in northern India, was halted for almost a month in July-August 2012 during a bout of labour unrest that resulted in one death. The plant had previously been closed in July 2011 as a result of a similar strike. • Both foreign and domestically owned companies will remain active in the automotive sector. Most production in the forecast period will be aimed at selling to the domestic market, with exports forming a relatively small but rapidly growing share. Smaller cities and rural areas will account for an increasingly large share of sales.
Vehicle production
('000 units)
Passenger cars 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2006 07 08 09 10 11 Light commercial vehicles Medium and heavy vehicles
Source: International Organisation of Motor Vehicle Manufacturers.
Components • The automotive-components industry in India is small by global standards, but it will continue to grow rapidly as a result of low costs and rising quality. The organised sector of the components industry comprises about 470 firms, and there are a further 5,000 in the unorganised sector.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
10
India
• Low costs and strong growth prospects are the main drivers of foreign investment in India's automotive-components sector. BMW and Hyundai have announced plans to source more of their components from India. • India’s component-manufacturing industry is becoming more sophisticated, especially in the areas of contract manufacturing, research and development (R&D) and design. Hyundai and Fiat have established regional R&D centres in India, while GM has a technical centre and a design studio in the country. Some of the world’s leading component suppliers, including Bosch of Germany and Delphi of the US, are also increasingly outsourcing R&D activity to India. • Carmakers and first-tier parts suppliers are also showing an ever greater interest in making high-value powertrain and electronic components in India. Ford plans to invest US$72m to expand manufacturing capacity at its powertrain plant in Chennai from 250,000 to 330,000 units, partly in order to cope with strong demand in India for its Figo car model. • It is possible that India's future may be brighter as a supplier of vehicle parts than as a manufacturer and assembler of complete cars. Low costs, a strong technological base and access to cheap rubber and steel put Indian firms on a par with those in China and give them an advantage over those in most other developing countries. In the early part of the forecast period the depreciation of the rupee will also support Indian exports of automotive components.
Market demand: motor vehicles and parts
Nominal US$ m 120,000 100,000 80,000 60,000 40,000 20,000 0 2007 08 09 10 11 12 13 14 15 16 US$ m at 2005 constant prices
Source: The Economist Intelligence Unit.
Environmental issues
Petrol prices • High petrol prices and discrepancies in fuel prices have dampened demand for cars in India. Petrol prices were raised sharply in the first half of 2012, with prices rising by a record 11.5% in May. Since then, state-controlled oil marketing companies have lowered prices as global oil prices have softened, although they still remain high. • In recent years the gap between retail diesel and petrol prices—owing to the fact that diesel prices are administered by the government and are politically highly sensitive—has contributed to the growing popularity of diesel cars. Manufacturers, who have invested heavily in petrol-engined capacity, are
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
11
now scrambling to expand their diesel offerings while combating a slump in sales of petrol-engined cars. • In September 2012 the government raised diesel prices by Rs5 (10 US cents) per litre, representing an increase of over 12%, to bolster its fiscal position and contain its ballooning subsidy bill. Nevertheless, petrol prices remain almost 44% higher than diesel prices. Since January 2013 the government has allowed oil marketing companies to raise the administered price of diesel by Rs0.50 (1 US cent) per litre every month until their losses have been recouped. • Although the market is currently dominated by petrol and diesel engines, there is growing demand for vehicles running on alternative fuels, amid volatile global oil prices, rising domestic fuel prices and increasing environmental awareness. • The two most popular alternative fuels used in vehicles in India are liquefied petroleum gas (LPG) and compressed natural gas (CNG). As part of its plans to increase its share of the Indian market, GM has announced plans to offer alternative-fuel versions of several of its models.
Oil price and petrol consumption
Petrol consumption ('000 tonnes) Oil prices (Brent; US$/b)
Source: Economist Intelligence Unit.
2008 a 2009 a 2010 a 2011 b 2012 b 2013 c 2014 c 2015 c 2016 c 2017 c 11,425 13,051 14,463 15,763 17,308 19,030 20,994 23,159 25,578 28,289 97.7 61.9 79.6 110.9 112.0 104.5 104.8 107.3 110.0 115.0
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.
Item Regular unleaded petrol, 1 litre (av)
Price (US$) 1.02
% of monthly personal disposable income 1.46
Affordability rank 55 out of 57
Note. Affordability rank: for each country the price of an item as a percentage of monthly personal disposable income is calculated. Countries are ranked according to these percentages. The most affordable country will have the lowest percentage and be ranked first.
CO2 emissions • The government is enforcing increasingly strict emission requirements for cars, but India is still some way behind the standards that apply in the EU. Since 2010 all petrol sold in 13 of India's largest cities has had to meet the Euro 4 exhaust-emission standards, while Euro 3 standards now apply in the rest of the country. Alternative-energy vehicles • Petrol consumption is forecast to grow at an average annual rate of 10% in 2013-17, almost unchanged from the rate in 2008-12. • Honda became the first vehicle manufacturer to sell hybrid-engined cars in India when it introduced its Civic hybrid saloon to the market in 2008. The launch attracted considerable interest from consumers, but initial sales were
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
12
India
negligible owing to the model's high price. Honda subsequently lowered the car's price.
Petrol consumption and oil price
Petrol consumption ('000 tonnes); left scale 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2007 08 09 10 11 12 13 14 15 16 Oil (Brent) nominal spot price (US$/b); right scale 120 110 100 90 80 70 60 50
Sources: IMF; International Energy Agency; The Economist Intelligence Unit.
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
India
13
Industry publishing schedule
Our automotive reports cover the following 58 countries and are updated quarterly, semi-annually or annually, depending on the country. Quarterly Brazil China France Germany India Indonesia Japan Mexico Russia South Korea Turkey United Kingdom United States of America Semi-annual Argentina Australia Canada Chile Colombia Czech Republic Egypt Hong Kong Israel Italy Malaysia Nigeria Pakistan Philippines Poland Saudi Arabia Singapore South Africa Spain Taiwan Thailand United Arab Emirates Vietnam Annual Austria Belgium Bulgaria Denmark Finland Greece Hungary Iran Ireland Kazakhstan Netherlands New Zealand Norway Peru Portugal Romania Slovakia Slovenia Sweden Switzerland Ukraine Venezuela
Industry Report: Automotive March 2013
www.eiu.com/automotive
© The Economist Intelligence Unit Limited 2013
©2013 The Economist Intelligence Unit Ltd. All rights reserved. Copyright of Automotive Industry Report: India is the property of EIU: Economist Intelligence Unit and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. "Whilst every effort has been taken to verify the accuracy of this information, The Economist Intelligence Unit Ltd cannot accept any responsibility or liability for reliance by any person on this information"
