Rise of the Auto Industry in India

Overview
The Automotive Industry of India is one of the larger markets in the world and fast growing
India's passenger car and commercial vehicle manufacturing industry is the 6th largest* in the world behind major manufacturers such as Japan, Germany, US and the likes
Annual Production of 4.14 million units in 2012. An increase of 5.5% from 2011*
Key Pillar of Economy and major contributor to India’s GDP - 7%
This dynamic industry currently employs about 19 million* people both directly and indirectly
*Source:
en.wikipedia.org/wiki/Automotive_industry
www.oica.net/category/production-statistics/2012-statistics/
www.siamindia.com/Event/view-eventhead.aspx?id=286

Background of the Auto Industry
The automobile industry can be classified into:
a) Passenger vehicles
b) Commercial vehicles
c) Three wheelers
d) Two wheelers
Source: http://www.siamindia.com/scripts/market-share.aspx

Classification of Commercial Vehicle Market
The goods carrier market presently dominates the CV sector, with an approx. share of 88% of the market volumes*
*www.indiacommercialvehiclesummit.com

How Does Auto Sector Work?

Emergence of Auto Finance Sector
Factors:
De-licensing of the auto sector in 1991
Opening of 100% FDI
Increase in purchasing power over the years and growth of the Indian middle class with high disposable incomes

Future Growth…

Overall Expected Growth (Next 5 Years)
By the fiscal year 2017, penetration levels are expected to increase to:
74% for cars from 68%
66% for utility vehicles from 62%
as a result of a moderation in interest rates and alleviation of credit risk
Loan-to-value (LTVs) expected to increase marginally to 75% for cars and 71% for UVs from 74% and 70% respectively over the next 5 years
Source: CRISIL Research, Retail Finance - Auto, December 2012

Domestic Car & UV Industry – Expected Growth
Source: *CRISIL Research, Car & UV Opinion - March 2013

Growth Drivers for Private Vehicles
Strong prospects in the long-term. Growth to be driven by increase in income of households and higher passenger vehicle penetration
Addressable market is expected to grow at a CAGR of 16% to reach 139 Million households in 2017-18 from 67 Million in 2012-13
UV sales expected to grow at 15-17%. Moderation in growth due to expected diesel price hikes
Small Cars segment is expected to grow marginally lower than sedan with sedan sales growing at 12-14% as a result of high petrol prices
With only 11 cars per 1000 people, India’s potential is greater

Global Comparison in terms of PV per 1000 people
*Data is for CY2011

Auto Industry Volumes
*Source - Crisil

Overall Demand Drivers
Increase in affordability
Growth in Addressable Market
Entry of New Players and New Model Launches
Increase in dealerships and access to Finance
Reduction in holding period, which increases the demand for second vehicles
Growth in Economic Activity
Infrastructure development, structural changes and government initiatives

Automobile Finance Growth Factors
Entry of Private Sector banks & Financial Institutions due to Liberalization of Economy
Higher Disposable Income due to Economic Growth, especially for young professionals in the IT sector
Availability of credit data, empowering banks and financial institutes to offer high loan to value and affordable EMIs
Widespread of Automobile Finance companies to remote locations as manufacturers setup shop across the nation
Emergence of direct selling, collection and recovery agents which support banks and institutes during the lending cycle
Securitization of automobile loans after the 2008 financial crisis