India (Part 1): Auto industry envisions quadrupling in next ten years

Automotive Mission Plan 2026

2016/01/04

Summary


Maruti Suzuki's Baleno, built in India and
strategically designed for sale worldwide
(photgraphed at the Tokyo Motor Show 2015).

 This report, Part 1, outlines major, recent developments taking place in the overall automotive industry in India. Part 2 will report on performance and the latest plans being carried out by the individual OEMs.

 In September 2015, the Indian government jointly with the Society of Indian Automobile Manufacturers (SIAM) announced the Automotive Mission Plan (AMP 2026), a comprehensive vision for the automotive industry for the next 10 years. The plan envisions expanding the auto industry, i.e., its annual production output, between 3.5 and 4 times the current output produced between April 2014 and March 2015. The Indian government is promoting its "Make in India" program designed to encourage foreign investment. AMP 2026 is hoped to be the engine driving the "Make in India" program.

 Even though the Indian market contracted during the 2013/2014 fiscal year, it is showing signs of recovery after Prime Minister Modi assumed office, actually increasing 8.7% between April and November 2015, compared to the same-period the year before.

 According to LMC Automotive, the annual unit production in India will reach 5 million in 2018. At the end of this report, we have provided annual production forecasts by LMC Automotive, through 2018.

 Even though OEMs are concerned with slowdowns in many emerging countries, they are bullish on India, which is still regarded as an especially strong and resilient market.


Related reports:
India (Part 1): Extension of reform measures drives sales growth (October 2014)
India (Part 2): OEMs plan to launch models with strong local potential (October 2014)



Automotive Mission Plan (AMP 2026): Quadruple the automotive industry in next 10 years

 In September 2015, the Indian government jointly with the Society of Indian Automobile Manufacturers (SIAM) announced a new plan they called the Automotive Mission Plan 2026 (AMP 2026), which is the second round of a long-term vision following on the heels of the previous AMP 2016 that was launched to cover the years between 2006 and 2016. By March 2026, AMP 2026 aims to increase the automotive industry's annual production output 3.5 times to 4 times the current amount, which is INR 4.64 trillion (USD 70 billion), to INR 16.16-18.9 trillion (USD 242-284 billion).

 In line with the targeted growth, the government will stimulate new-car demand along with starting annual mandatory vehicle inspections and certifications for passenger cars, and an End of Life Vehicle (ELV) program while strengthening safety and environmental regulations. Also, it is planning to tighten emissions regulations.

AMP 2026 (Grow automotive industry 3.5 to 4 times current level)

FY 2015 (current FY)
April 2014-March 2015
FY 2026 (Final fiscal year)
April 2025-March 2026
Production output
(includes parts and export vehicles) (Note 1)
INR 4.64 trillion
USD70 billion
INR 16.16-18.9 trillion
USD242-284 billion
Average annual growth of GDP 5.8%~7.5% (Note 2)
Percentage that auto industry accounts for Indian GDP more than 7% 12%
Export percentage 18% 35~40%
No. of employees 65 million new hires expected
Source: SIAM
Note: 1. Based on INR 1=0.015 USD
2. Average annual GDP growth rate is forecast to be 5.8%, provided FY2026 production output reaches INR 16.16 trillion, which is the base scenario. The rosiest picture foresees an average annual GDP growth rate of 7.5%, based on the assumption that production output will reach INR 18.9 trillion.
3. Most of the targets under the current AMP 2016 will be met or nearly met by the end of the final fiscal year (April 2015-March 2016). In the above table, "Current FY" refers to the one year prior to the final year of AMP2016.
-1. The base-scenario production output (INR 5.49 trillion) is forecast to be achieved in FY2016.
-2. The plan achieved its goal of employing 25 million new employees.

 

AMP 2026 the driving force behind "Make in India" program

 India, under the leadership of Prime Minister Modi in 2014, began the "Make in India" program designed to promote foreign investment. The automotive industry is regarded as the "mother" of most manufacturing and service industries, exerting a huge influence over other industries. As a result, there are great expectations that AMP 2026 will assume the role of "engine" and drive the "Make in India" program. A saying goes: There is not one developed country that grew without having a mature automotive industry.

 While the "Make in India" program has 25 priority areas, the automobile and auto-parts industries are at the top of the list.

Make in India program

 In September 2014, Prime Minister Modi announced India's "Come, Make in India" program. Based on this, the country erased its image among the world community as being laden with bureaucratic processes, declaring that the country openly welcomes foreign investment. Also, India emphasized that it would provide the world's corporations and investors a framework that promotes free competition and fair trade.
 In order to attract new foreign investment, India is forging ahead with simplifying procedures for launching businesses, deregulating investment regulations in all industries, building the industrial infrastructure such as constructing high-speed railways, and developing human resources. The Indian federal and state governments are both working in order to make simplified and efficient administrative procedures a reality.

 

 



Introduction of "Vehicle Inspection & Certification" and "End of Life Vehicle" (ELV) programs

 Currently, commercial vehicles only are subject to vehicle inspections in India, with no inspection program in effect for passenger cars. Passenger-car owners register their vehicles for 15 years, and when the registration ends, they can renew it and continue driving their vehicles.

 India is introducing a vehicle-inspection and certification program as part of AMP 2026. In line with this, the government is introducing an End of Life Vehicle (ELV) program for vehicles that no longer can pass the inspections, which in essence is aimed at creating demand for new vehicles.

Inspection & Certification/End of Life Vehicle programs

Vehicle inspection
& certification
 An inspection and certification regime for passenger cars is being introduced as part of AMP 2026. Regulations will be established to determine what requirements vehicles need to meet in order to travel on roads, while other regulations will clarify the standards determining what accounts as failure to pass.
 Periodic inspections of all cars traveling on roads throughout India will become mandatory, with the government deciding the requirements for passing. In line with this, the government will need to set up inspection locations throughout the country so that inspections can be done anywhere in India.
"End of Life Vehicle"
program
 The government is setting up "End of Life Vehicle" (ELV) regulations as an extension of the vehicle inspection and certification regime. This will involve the government's setting up regulations that prohibit on-road use of both vehicles and any of their parts that fail to meet the on-road requirements from the point of safety and environmental protection.
 The ELV regime takes into account both safety and environmental aspects, while at the same time aims at having older vehicles scrapped in order to create new-car demand. The government is considering initiating a tax-incentive program, or so called 'cash-for-clunkers' scheme for older cars.

Source: SIAM

 

Emissions regulations: Bharat Stage 6 to be adopted during AMP 2026

 India adopted Bharat Stage 1 emission standards in 2000 for both cars and motorcycles.(The numbers under the Bharat Stage standards such as "Bharat Stage 1" equate to the same numbers in Euro standards, i.e., Euro 1.)The standards have gradually been raised over the years, with Bharat Stage 4 standards being applied in certain regions in India starting from 2010. Fuel meeting the standards is being supplied to the regions subject to the standards. Eventually, the applicable areas are being expanded in stages, with Stage 4 standards to be in effect from April 2017 throughout all of India.

 Furthermore, in the years covered under AMP 2026, Stage 5 and 6 are planned to be adopted as a means of further tightening emissions regulations. Currently, India's environmental regulations lag the latest global standards by seven or eight years. However, that wide gap is planned to be closed by the time AMP 2026 ends.

 The Indian government and SIAM have asserted that tighter emissions standards are essential to both environmental protection and the competitive strength of the auto industry. Specifically, efforts will be made in the following four areas: 1) vehicle technology, 2) fuel quality, 3) inspections and maintenance of on-road vehicles, and 4) administration over roads and traffic.

Tightening of emissions standards

Bharat Stage 4 Equivalent to Euro 4  Equivalent to Euro 4, Bharat Stage 4 regulates emissions of toxic substances such as CO, NOx, PM, etc. It was first adopted in limited areas such as Mumbai from 2010, but is gradually going to be adopted throughout all regions of the country by April 2017.
Bharat Stage 5 Euro 5  From 2019, passenger cars will be subject to Stage 5.
Bharat Stage 6 Euro 6  From 2023, passenger cars will be subject to Stage 6.

Source: SIAM

 

 



Indian auto industry builds 4 million units annually; with 3.5 million sold in India

Production and Domestic sales in India Indian vehicle production (passenger cars and commercial vehicles combined) reached 4 million in the 2011/2012 fiscal year covering April 2011 through March 2012. Even though production volume fell during FY2013/2014, it recovered in FY2014/2015 and is expected to again reach the 4-million range in FY2015/2016.

 Vehicle sales in India during FY2011/2012 and FY2012/2013 almost reached 3.5 million units. Sales during FY2013/2014 fell 9.3%, but have been recovering ever since Narendra Modi was elected as Prime Minister in May 2014.

 In October 2015, vehicle sales were 19.8% higher compared to October 2014, totaling 327,225 units, and November sales were 11.1% higher, at 288,430 units. These were two-digit increases for two months in a row, and sales in the April-November period increased 8.7%, compared to the same period in 2014. New-car demand has been sparked by recent launches of redesigned models by OEMs, lower fuel prices, and lower interest rates on loans.

 Vehicle exports have been steadily increasing year by year, surpassing 700,000 units in FY2014/2015. Thanks to the positive effects of AMP 2006-2016, India has grown into a global production hub for small passenger cars. In FY2014/2015, 31% of small passenger cars built worldwide were built in India, according to SIAM.


Production, sales and exports in India

FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 Apr.-Nov.
2014
Apr.-Nov.
2015
Production Passenger Vehicles 2,982,772 3,146,069 3,231,058 3,087,973 3,220,172 2,109,794 2,255,463
CommercialVehicles 760,735 929,136 832,649 699,035 697,083 452,903 488,469
Total 3,743,507 4,075,205 4,063,707 3,787,008 3,917,255 2,562,697 2,743,932
Domestic
sales
Passenger Vehicles 2,501,542 2,629,839 2,665,015 2,503,509 2,601,111 1,686,006 1,835,606
CommercialVehicles 684,905 809,499 793,211 632,851 614,961 393,180 424,957
Total 3,186,447 3,439,338 3,458,226 3,136,360 3,216,072 2,079,186 2,260,563
Exports Passenger Vehicles 444,326 507,318 559,414 596,142 622,470 412,461 430,215
CommercialVehicles 74,043 92,663 80,027 77,050 85,782 56,085 64,619
Total 518,369 599,981 639,441 673,192 708,252 468,546 494,834
Source: SIAM
Notes: 1.  The 2013/2014 fiscal year is from April 2013 through March 2014.
2.  "Passenger vehicles" means total passenger vehicles including utility vehicles、vans.
3.  From FY2012/2013 and after, BMW, Audi, JLR, and Mercedes-Benz vehicles are not included.
4.  Not included in the above table are figures for 3-wheel vehicles (950,000 units built in FY2014/2015, 530,000 sold in India, and 400,000 exported).

 

 



Units sales by segment: 60% of passenger cars are compact/mini cars.

Units sales by Segment India imposes a 12.5% excise tax on vehicles that are 4000mm or less in length and have engines with displacements of 1.5L or less. However, the excise tax practically doubles for vehicles over 4000mm. As a result, compact/minicars, which are 4000mm or under account for 60% of total passenger vehicles, creating a unique market crowded with all of the OEMs' mainstream models. For example, the Maruti Suzuki Baleno (3995mm long) belongs to the Compact segment. It was released in October 2015 and was strategically designed for sale worldwide, with Indian, European, and Japanese versions all the same.

 The vehicle lineup of Honda, which is increasing its sales in India, consists mainly of compact cars such as the Brio and Amaze, and the all-new Jazz that was released in July 2015.

 On the other hand, the premium-car market is forecast to expand in line with the growing maturity of the market. As a result, OEMs are also planning to strengthen their lineup of vehicles in the Mid-size segment. For example, between April and November, Honda sold 52,603 units of the Honda City that is 4440mm long, becoming the best-selling car in the Mid-size segment. In addition, Maruti Suzuki launched the Ciaz in October 2014, which at 4490mm, is also in the Mid-size segment. The Ciaz is being built and sold in China and Thailand also.


Excise tax by category

Category Tax rate Category Tax rate
Small-car (4000mm or less in
length/1.5L or smaller engine)
12.5% Special parts designed for HVs/EVs 6%
Length over 4000mm/1.5L or smaller engine 24% Bus 12.5%
Length over 4000mm/engine over 1.5L 27% Truck 12.5%
SUVs/MUVs (Length over 4000mm/ engine
over 1.5L/minimum road clearance 170mm)
30% Motorcycles 12.5%
Hybrid vehicle (HV) 12.5% Three-wheelers 12.5%
Electric vehicle (EV)
(including motorcycles and 3-wheelers)
6%

Source: SIAM

 

Unit sales in India by segment

Segment FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 Apr.-Nov.
2014
Apr.-Nov.
2015
Micro 70,432 74,527 53,848 21,129 16,901 9,919 15,884
Mini 690,812 642,009 570,023 568,234 524,247 347,230 345,866
Compact 833,721 855,480 795,580 975,823 1,078,589 694,201 800,820
Super Compact 141,867 187,026 226,502 45,770 47,284 27,786 47,681
Mid-size 174,077 204,743 200,176 155,090 186,556 113,087 121,670
Executive 50,085 41,102 23,537 18,250 20,372 13,425 10,870
Premium 11,046 10,441 4,387 2,529 2,063 1,410 1,515
Luxury 626 601 2 1 5 4 0
Coupe/roadster 179 186 0 0 0 0 0
Total Passenger cars 1,972,845 2,016,115 1,874,055 1,786,826 1,876,017 1,207,062 1,344,306
Utility Vehicles 315,123 367,012 553,662 525,839 553,699 362,279 373,327
Vans 213,574 234,945 237,298 190,844 171,395 116,665 117,973
Total Passenger Vehicles 2,501,542 2,618,072 2,665,015 2,503,509 2,601,111 1,686,006 1,835,606
Total Commercial Vehicles 684,905 809,532 793,211 632,851 614,961 393,180 424,957
Grand Total 3,186,447 3,427,604 3,458,226 3,136,360 3,216,072 2,079,186 2,260,563
Source: SIAM
Notes: 1.  From FY2012/2013 and after, BMW, Audi, JLR, and Mercedes-Benz vehicles are not included.
2.  The large drop seen in the Super Compact segment in FY2013-2014 was due to a redesign of the Maruti Suzuki Swift Dzire, which was reduced in size to 3995mm, thus becoming classified under the Compact segment, from the Super compact segment. The previous version's exterior and interior design elements were simplified, and the facelifted version became the Dzire Tour specifically designed for use as taxis.

 

 



Maruti Suzuki and Hyundai still retain 60% of the market share in passenger cars.

Market share by brand Maruti Suzuki has continued to attain around 45% of the passenger-car market in India (Total Passenger Vehicles), which includes UVs and MPVs. Hyundai Motor has about 15-17% of the share. Tata Motors' share nosedived after sales of the Nano plunged.

 The share of the passenger-car market of three Japanese OEMs (Toyota, Nissan, and Honda) is growing, especially that of Honda.

 Even though Ford's, GM's, and VW's shares are falling, the OEMs are still keeping their eyes on the growth potential of the Indian market. GM announced in July 2015 that it would invest USD 1 billion in India. Ford announced in September that it would expand its production capacity and build a new technical center.

 Local OEMs, namely Mahindra & Mahindra and Tata Motors have a strong presence in the commercial-vehicle segment. Combined, they have a 70% share of the commercial-vehicle market that consists of 600,000-800,000 units per year. As for combined sales of both passenger cars and commercial vehicles,, Mahindra sold 254,000 units and Tata sold 289,000 units. Hyundai sold 322,000 units. Suzuki and Hyundai do not sell commercial vehicles.

 (Individual OEMs' performance and latest plans will be covered in a separate report.)


Total passenger-car sales by brand

FY2010-11 FY2011-12 FY2012-13 FY2013-14 FY2014-15 Apr.-Nov.
2014
Apr.-Nov.
2015
Maruti Suzuki 1,132,739 1,006,316 1,051,046 1,053,689 1,170,702 755,423 860,625
Hyundai Motor 359,366 388,779 383,611 380,253 420,668 276,554 322,530
Mahindra & Mahindra 180,170 245,700 310,706 254,344 223,968 145,414 145,419
Tata Motors 349,133 370,834 314,464 198,812 161,791 100,704 102,395
Honda Cars 59,463 54,427 73,483 134,339 189,062 116,705 132,095
Toyota Kirloskar 84,088 160,203 165,504 128,811 141,347 91,822 91,588
Nissan 13,027 33,268 37,006 38,024 47,474 31,886 25,427
Renault 0 3,964 52,463 57,368 43,384 28,024 32,151
Renault-Nissan 13,027 37,232 89,469 95,392 90,858 59,910 57,578
Ford India 98,537 92,665 77,225 84,469 75,138 53,525 53,932
General Motors 106,986 110,048 88,150 80,890 51,839 36,664 21,964
Skoda 22,971 34,089 29,067 19,953 15,003 9,773 10,135
VW 51,610 78,281 65,472 52,528 45,018 28,783 28,421
Audi 1,892 3,381
VW Group 76,473 115,751 94,539 72,481 60,021 38,556 38,556
Others 41,560 36,117 16,818 20,029 15,717 10,729 8,924
Total 2,501,542 2,618,072 2,665,015 2,503,509 2,601,111 1,686,006 1,835,606

Source: SIAM

 

 



Production Forecast by LMC Automotive: Indian light vehicle production to be 5 million units in 2018

(LMC Automotive、November 2015)

Production Forecast in India "Compared with many emerging economies, India's economic outlook appears fairly stable, with GDP growth expected to pick up to 7.5% this year, with a similar pace seen in 2016, from 7.1% in 2014. A key positive factor is the lower oil price, which will limit the current deficit and is resulting in lower inflation. Indeed, wholesale price inflation was negative for the ninth consecutive month in July, while CPI inflation fell to an eight-month low. This will support consumers' purchasing power and encourage spending." These comments were made by LMC Automotive in the fall 2015.

 Under these circumstances, LMC Automotive forecasts that light vehicle production in India in 2015 will increase to 3.8 million units, up 7.5% from 2014, after two years of downturn between 2013 and 2014. Production in India will reach 4.95 million units in 2018, up 39.8% from 2014.

 Suzuki Group's production in 2018 will be 1.52 million units, up 20.0% from 2014. Its production share in India, however, will decrease to 30.6% from 35.7% in 2014. Hyundai Group's production in 2018 will be 644K, up 5.2% from 2014, growth rate of which will be a little smaller than that of Suzuki Group.

 Tata Group's production, which had decreased significantly between 2013 and 2015, will recover to 520K units in 2018. It will be, however, still far below the level of 2012, 722K units.

 Renault-Nissan's production in 2018 will be 319K units, up by 46.2% from 2014, including 54K vehicles of Datsun brand. Toyota Group and Ford Group, of which production in 2014 was around 150K units, will be about 280K units in 2018, nearly twice as many as 2014, respectively.

 Companies following Suzuki Group and Hyundai Group will increase their production, grabbing some shares from the two leading Groups.

 

Light vehicle production un India will be nearly 5 million units in 2018 (LMC Automotive)

GLOBAL MAKE 2012 2013 2014 2015 2016 2017 2018
Total 3,869,054 3,521,835 3,537,410 3,802,156 4,139,324 4,559,230 4,945,948
Suzuki Group Suzuki 1,151,297 1,147,835 1,260,673 1,416,604 1,466,515 1,441,114 1,515,925
Maruti-Suzuki 32,179 24,447 2,260 0 0 0 0
Suzuki Group 1,183,476 1,172,282 1,262,933 1,416,604 1,466,515 1,441,114 1,515,925
Hyundai Group Hyundai 638,765 632,978 612,604 640,063 583,658 616,115 644,304
Tata Group Tata 721,423 413,845 333,242 318,177 393,282 425,724 515,376
Land Rover 445 550 960 903 1,891 2,483 2,696
Jaguar 0 1,326 1,521 1,308 1,728 1,782 1,793
Tata Group 721,868 415,721 335,723 320,388 396,901 429,989 519,865
Mahindra Group Mahindra 425,052 391,472 365,676 376,726 406,375 474,592 499,886
Ssangyong 659 2,678 1,154 467 9,308 13,838 14,390
Mahindra Group 425,711 394,150 366,830 377,193 415,683 488,430 514,276
Renault-Nissan Group Nissan 165,249 144,204 149,456 115,173 108,457 98,531 112,882
Renault 11,323 12,641 4,858 23,774 63,248 73,969 87,889
Dacia 24,116 60,200 46,353 35,064 29,940 52,435 63,567
Datsun 0 0 17,242 24,187 32,665 49,826 54,482
Samsung 473 213 211 16 0 0 0
Renault-Nissan Group 201,161 217,258 218,120 198,214 234,310 274,761 318,820
Toyota Group Toyota 192,343 173,773 147,717 160,608 182,473 256,277 284,825
Ford Group Ford 115,570 119,298 151,102 192,408 241,351 266,424 275,111
Honda Group Honda 75,201 115,072 170,816 224,955 233,649 256,901 266,116
Volkswagen Group Volkswagen 71,080 74,184 102,735 106,810 105,637 135,185 152,005
Skoda 35,580 17,806 14,267 16,207 15,184 20,052 21,011
Audi 6,180 5,680 7,551 9,374 10,262 12,514 13,359
Volkswagen Group 112,840 97,670 124,553 132,391 131,083 167,751 186,375
Other Indian Manufac-turers Bajaj 0 0 0 0 26,056 37,836 41,226
Force 27,449 22,506 22,418 23,179 27,682 34,616 39,236
Ashok Leyland 29,593 32,955 25,137 27,114 24,535 30,280 34,910
Premier 4,843 3,317 3,546 3,456 4,176 5,665 6,525
Eicher 839 627 582 628 1,694 1,841 2,153
Hindustan 2,736 3,778 523 0 0 0 0
Other Indian Manufacturers 65,460 63,183 52,206 54,377 84,143 110,238 124,050
General Motors Group Chevrolet 70,462 57,827 34,345 31,945 73,973 88,581 99,025
Isuzu 21,333 12,189 13,274 11,265 9,335 14,011 15,429
Wuling 11,216 20,861 9,787 6,765 3,518 6,938 5,108
General Motors Group 103,011 90,877 57,406 49,975 86,826 109,530 119,562
Fiat Chrysler Automobiles Fiat 11,032 8,071 13,614 8,320 45,748 65,197 75,267
Jeep 0 0 0 0 0 1,461 19,423
Fiat Chrysler Automobiles 11,032 8,071 13,614 8,320 45,748 66,658 94,690
Isuzu Motors Isuzu 0 0 720 1,796 9,065 38,643 42,586
Daimler Group Mercedes-Benz 6,003 7,455 7,637 10,138 12,828 17,163 18,015
BMW Group BMW 8,353 6,291 7,645 7,507 7,616 9,594 10,989
MINI 0 93 106 34 0 0 0
BMW Group 8,353 6,384 7,751 7,541 7,616 9,594 10,989
Other Piaggio 4,502 5,631 6,320 5,001 5,566 6,873 7,732
Mitsubishi Motors Mitsubishi 3,758 2,032 1,358 2,184 1,909 2,769 2,707
Source: LMC Automotive "Global Automotive Production Forecast (November 2015)"
(Note) 1. Data indicates figures of only small-size vehicle, including passenger cars and light commercial vehicles with gross vehicle weight of under 6 ton.
2. All rights reserved. Reproduction of any data will require permission of LMC Automotive.
For more information or inquiries of forecast data, please contact LMC Automotive.

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