India Autos Report - Q2 2019

Q2 2019
www.fitchsolutions.com
India
Aut
utos
os R
Report
eport
Includes 10-year forecasts to 2028
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India Autos Report | Q2 2019
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 5
Autos SWOT .................................................................................................................................................................................................................................... 5
Industry Forecast........................................................................................................................................................................... 6
Industry Forecast Scenario....................................................................................................................................................................................................... 6
Passenger Vehicles ....................................................................................................................................................................................................................14
Commercial Vehicles ................................................................................................................................................................................................................15
Motorcycles ..................................................................................................................................................................................................................................16
Industry Risk/Reward Index ....................................................................................................................................................18

Asia Autos Sales Risk/Reward Index ...................................................................................................................................................................................18
Asia Autos Production Risk/Reward Index.......................................................................................................................................................................27
India Autos Sales Risk/Reward Index..................................................................................................................................................................................36
India Autos Production Risk/Reward Index .....................................................................................................................................................................38
Company Profile...........................................................................................................................................................................40
Hyundai Motor India..................................................................................................................................................................................................................40
Maruti Suzuki ...............................................................................................................................................................................................................................41
Tata Motors ..................................................................................................................................................................................................................................42
Regional Overview.......................................................................................................................................................................43
Asia Autos Overview..................................................................................................................................................................................................................43
India Demographic Outlook .....................................................................................................................................................47
Autos Methodology.....................................................................................................................................................................50
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Key View
Key View: We believe that the strong growth of the Indian economy, supported by a strengthening consumer market will drive up
the demand for both commercial and passenger vehicles. This elevated demand coupled with the improved operating
environment for businesses will also attract automakers to start producing vehicles in the country.
Passenger Car And Commercial Vehicle Sales

Passenger Car And Commercial Vehicle Sales (India 2016-2028)
e/f = Fitch Solutions estimate/forecast. Source: SIAM, Fitch Solutions
Key Views
• We have revised up our forecast for total new vehicle sales in India to growth of 14% in FY2018/19 (April-March), up from 9.4%
previously. This will result in vehicle sales reaching a total of 4.7mn units by the end of the financial year.
• We expect private consumption growth to remain solid over the coming quarters on the back of the government's ongoing
labour market reforms, which will bode well for growth in new passenger vehicle purchases.
• We believe that rising fuel prices and an increase in interest rates will act as barriers to further growth in India's vehicle market.
• Strong infrastructure spending by the government combined with demand from the mining sector will drive sales in the medium
and heavy truck segment.
• The goods and service tax will be a positive for India's autos manufacturing industry by helping to reduce the cost of business for
both carmakers and suppliers.
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SWOT
Autos SWOT
SWOT Analysis
Strengths • India is one of the world's largest auto manufacturers.
• Strong economic growth will lead to rising incomes and growth in new vehicle purchases.
• India will become an ever more important regional export hub over the long term.
• The strong construction sector activity drives demand for commercial vehicles.
• India has good demand for both high-volume and luxury vehicles.
Weaknesses • Tight controls on credit and foreign direct investment remain barriers to the development of the market.
• New vehicle ownership remains out of reach for the majority of Indians.
• Uncertainty surrounding diesel vehicles in India will negatively impact autos investment in the country.
Opportunities • A young, fast-growing population means significant long-term potential.

• Motorcycle sales are expected to continue growing strongly.
• New infrastructure projects should drive heavy commercial vehicle sales.
• Growing levels of personal wealth bode well for the luxury segment.
• The government's plan to electrify all new vehicles sold in the country by 2030 offers opportunities to
develop the local electric vehicle industry.
Threats • The rollback of excise duty cuts and rising fuel duties could combine to increase the cost of vehicle
ownership for poorer people.
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Industry Forecast
Industry Forecast Scenario
Key View: We have revised up our forecast for total new vehicle sales in India to growth of 14% in FY2018/19 (April-March), up from
9.4% previously. This will result in vehicle sales reaching a total of 4.7mn units by the end of the financial year. Breaking this down,
we have maintained our forecast for passenger vehicle sales to rise by 8.7% in FY2018/19, while we have revised up our forecast for
total commercial vehicle sales to growth of 34.5% in FY2018/19, up from 12.2% previously. Lending support to growth in India's
autos market will be robust private consumption and strong construction sector activity.
AUTOS TOTAL MARKET - HISTORICAL DATA AND FORECASTS (INDIA 2017-2028)

Indicator 2017 2018e 2019f 2020f 2021f 2022f 2023f 2024f 2025f 2026f 2027f 2028f
Vehicle production, mn 4.78 5.32 5.93 6.59 7.30 8.17 9.11 10.12 11.27 12.46 13.79 15.27
Vehicle production, % y-o-y 6.5 11.2 11.6 11.0 10.9 11.9 11.5 11.1 11.4 10.6 10.6 10.7
Vehicle sales, mn 4.14 4.73 5.31 5.87 6.46 7.10 7.79 8.44 9.12 9.79 10.49 11.21
Vehicle sales, % y-o-y 10.2 14.0 12.3 10.6 10.1 9.9 9.8 8.3 8.1 7.3 7.1 6.9
e/f = Fitch Solutions estimate/forecast. Source: OICA, SIAM, Fitch Solutions
Latest Developments
• Total vehicle sales grew by 10.4% y-o-y in the first nine months of FY2018/19 (April-December 2018).
• Total vehicle production increased by 8.3% y-o-y in the first nine months of FY2018/19 (April-December 2018).
• Automotive exports grew by 24.3% y-o-y in the first half of FY2018/19 (April-September 2018).
• Lending support to growth in India's autos market will be robust private consumption and strong construction sector activity.
• Suzuki Motor announced that they will construct a JPY60bn (USD547mn) plant in India, in an effort to increase their
manufacturing capacity by double digits.
• The Indian government is further committing to drive the demand for electric vehicles (EVs) by investing in establishing 225 EV
charging stations in Bangalore.
• This quarter Maruti Suzuki India remains the largest passenger vehicle brand in the country with a market share of around
51.0%. In distant second place, Hyundai holds a market share of 16.2%.
• That said, Tata is the largest commercial vehicle brand in India, with a market share of 43.5%.
Structural Trends
Sales
We have revised up our forecast for total new vehicle sales in India to growth of 14% in FY2018/19 (April-March), up from 9.4%
previously. This will result in vehicle sales reaching a total of 4.7mn units by the end of the financial year. Breaking this down, we
have maintained our forecast for passenger vehicle (PV) sales to rise by 8.7% in FY2018/19, while we have revised up our forecast
for total commercial vehicle (CV) sales to growth of 34.5% in FY2018/19, up from 12.2% previously. Lending support to growth in
India's autos market will be robust private consumption and strong construction sector activity.
That said, there exists some risks to our sales forecast for FY2018/19. Although the Indian economy is largely driven by domestic
demand, rising global trade tensions could raise uncertainty among consumers and businesses in India, causing them to hold back
on new vehicle purchases. Furthermore, a sustained rise in global Brent crude oil prices will likely result in raising input costs for
businesses as higher fuel prices feed into transport prices, posing headwinds to growth through reduced consumer spending. This
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and rising interest rates present a threat to growth in new vehicle sales in India.
Looking further ahead, we expect total new vehicle sales in India to continue to grow at a robust pace, averaging annual growth of
9.3% over FY2019/20-FY2028/29, reaching a total of around 11.2mn units by the end of FY2028/29. This expansion will be
supported by strong and steady private consumption, solid investment growth and robust construction sector activity.
Sales Outlook Remains Positive

India - Vehicle Sales Forecast By Segment, Units
Our Country Risk team expects India’s economic growth momentum to remain strong, with forecast real GDP growth of 7.1% in
FY2018/19. This will be driven by the manufacturing, construction and broad services sectors, supported by robust private
consumption, investment and external demand. We therefore expect this stable and favourable economic environment to have a
positive impact on job creation and overall consumer and business sentiment, spilling over into growth in big-ticket purchases,
including on new vehicles.
Robust Private Consumption To Support Growth In Passenger Vehicle Segment
We remain bullish on the outlook for consumer spending in India, with forecast real growth of 8.8% in FY2018/19, up from an
estimated 6.6% in FY2017/18, on the back of the government's ongoing labour market reforms.As part of its Union Budget for
FY2018/19, the Indian government announced that it would allow fixed-term or contractual employment in all industrial sectors, a
provision that until then had applied only to apparel manufacturing. We believe that this will help support job creation over the
coming months, given the positive economic growth momentum in the economy. We therefore expect this rise in household
spending to be reflected in strong sales in the PV segment.
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Consumption Outlook Remains Strong

India - Private Final Consumption, Real Growth % y-o-y
e/f = Fitch Solutions estimates/forecast. Source: Central Statistics Organisation, Fitch Solutions
Rising Inflation And Interest Rates To Be Growth Barriers
Although private consumption is forecast to remain robust, rising inflation and an increase in interest rates poses a risk to consumer
spending and in turn auto sales. We expect a sustained rise in global Brent crude oil prices, which our Oil & Gas team forecasts to
average USD72.00/bbl in 2018 and USD75.00/bbl in 2019. This is significant as India relies on oil imports for 80% of its oil needs.
This rising fuel inflation will contribute to rise in overall inflation in India, which we forecast to average 4.0% in FY2018/19, putting
it close to the upper bound of the Reserve Bank of India's (RBI)'s 4.0±2.0% inflation target range.These rising fuel costs will serve to
increase the running cost of vehicles, which will be a risk to growth in PV sales.
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More Upside To Come

India - Consumer Price Inflation, % chg y-o-y
Source: Bloomberg, Fitch Solutions
We expect the Reserve Bank of India (RBI) to progressively tighten monetary policy in order to help contain growing inflationary
pressures, and we forecast the central bank to hike its policy repurchase (repo) rate by another 25bps, bringing the repo rate to
6.75%, by end-FY2018/19. We therefore believe that this will place affordability pressures on consumers and thus provide some
headwinds to growth in PV sales in India, despite the overall positive outlook.
Robust Construction Industry Growth To Fuel CV Demand
We expect the CV segment in India to benefit from solid levels of business spending, robust mining sector activity and government
spending on infrastructure development. We believe that robust capital expenditure by businesses will support growth in domestic
new light commercial vehicle (LCV) sales. This is informed by our Country Risk team's view that fixed capital formation - a proxy we
use for total business investment - will expand by 9.0% in FY2018/19, up from 7.6% in FY2017/18, which will translate into capital
expenditure on new LCVs, as they are more agile to meet quick delivery times.
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Robust Growth To Continue

India - Commercial Vehicle Sales, Units
We expect the construction industry in India to grow robustly over the coming years, which will help drive domestic demand
for medium and heavy commercial vehicles. Our Infrastructure team forecasts real growth of 7.3% and 6.7% in real terms in 2018
and 2019, as the government expands investment in public infrastructure projects and as ongoing reforms improve the market's
attractiveness to private and foreign firms. We expect this construction activity to help drive demand for both LCVs and heavy trucks
that are needed to meet the logistical requirements of these various projects.
Strong Construction Growth Ahead

India - Construction Industry Forecasts
e/f = Fitch Solutions estimate/forecast. Source: Reserve Bank of India, Fitch Solutions
In addition, our Mining team expects India's mining sector to experience solid growth, primarily boosted by the country's positive
reforms, vast mineral reserves and improving commodity prices. This will result in strong production growth in the aluminium,
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refined copper and refined zinc sectors over the coming years. We forecast growth of 12.4% in India's mining sector in 2018, and
growth at a rate of 4.9% a year to 2028. We expect this positive outlook for the mining sector to support an increase in demand for
heavy trucks in particular, which are used to meet the logistical requirements of heavy industries.
Solid Growth In Mining Sector Provides Further Tailwinds To CV Demand

India - Mining Industry Value
e/f = Fitch Solutions estimate/forecast. Source: UN Data, Fitch Solutions
Production
We have revised up our forecast for total vehicle production in India to growth of 11.2% in FY2018/19, up from growth of 7.9%
previously. Breaking this down, we have maintained our forecast for PV production to rise by 8.2% in FY2018/19, while we have
revised up our forecast for total CV production to growth of 25.3% in FY2018/19, up from 6.6% previously. With around 85% of the
total vehicles produced in India destined for the domestic market, we believe that our positive outlook for local autos sales, as
mentioned above, will help fuel robust growth in autos manufacturing.
Furthermore, we forecast Indian vehicle production to average annual growth of 11.1% over our FY2018/19-FY2027/24 forecast
period. This growth will be driven by investments by Suzuki Motors, Kia Motors and Groupe PSA in PV production in India.
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Strong Growth Outlook For India's Autos Production

India - Vehicle Production By Segment, Units & % chg y-o-y
e/f = Fitch Solutions estimate/forecast. Source: OICA, SIAM, Fitch Solutions
Investment Inflows Providing Further Tailwinds
Investments announced by Suzuki, Kia and Groupe PSA in PV production in India over the last year total around USD2.2bn and
further inform our positive outlook for autos manufacturing in the country over the coming years. In September 2017, Japanese
automaker Suzuki announced fresh investment of INR38bn (USD593mn) to add a third car production line to its Hansalpur facility
in India. This new facility will have a production capacity of 250,000 units annually; however, there is no set time for when it will
come online. This new investment is set to take Suzuki's total capacity in Gujarat to 750,000 cars a year, with the company's first
production line having come online earlier in 2017 and the second expected to become operational in 2019. Becoming operational
in the same year as Suzuki's plant will be Kia's first car plant in India, representing a USD1.1bn investment by the South Korean
automaker, which will look to produce mass market sedans and SUVs. This new facility will be situated in the state of Andhra
Pradesh, which will be in close proximity to parent company Hyundai Motor's Chennai factory. The new factory is expected to have
an installed capacity of 300,000 units a year, with vehicle production set to start in H219.
Rounding out car production set to commence within our forecast period is PSA's plan to re-enter the Indian autos market through
a joint venture (JV) agreement with New Delhi-based CK Birla Group to produce and sell vehicles and components by 2020. PSA
will invest EUR100mn (USD107mn) to build cars in the Indian state of Tamil Nadu under a partnership agreement with Birla-owned
Hindustan Motor Finance Corporation, with an annual production capacity of 100,000 vehicles. The French automaker has
stated that it will begin by producing 10,000-15,000 vehicles annually, raising output gradually to an expected 100,000 vehicles,
depending on market demand. A second deal with AVTEC (another CK Birla company), will build engines and transmissions for PSA
and potentially for other manufacturers - the groups announced in a joint statement. We believe that these investments will bode
well for India's autos industry by fuelling technological and skills development, as well as developing supplier networks.
Local Production To Offer Cost Savings
We believe that by producing vehicles and components domestically, PSA, Suzuki and Kia will be able to avoid high vehicle import
duties and therefore price vehicles more competitively in the local market. Import duties on completely built up (CBU) units in India
can range from 60% on vehicles with a cost, insurance and freight (CIF) value less than USD40,000 and petrol engine size less than
3,000cc to 100% on vehicles with a CIF value greater than USD40,000 and petrol engine size greater than 3,000cc (see table
below). Furthermore, by manufacturing larger components, such as the engine and transmission, for its vehicles domestically, PSA
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will also be able to bypass duties on these imported vehicle components, allowing for greater costs efficiency.
VEHICLE IMPORT DUTIES

Import Duty, %
Used car import 125
Cars (CBU), CIF value > USD40,000
or petrol engine > 3,000cc 100
or diesel engine > 2,500cc 100
Cars (CBU), CIF value < USD40,000
and petrol engine < 3,000cc 60
and diesel engine < 2,500cc 60
Source: SIAM, Fitch Solutions
GST A Positive For Autos Production
In terms of car manufacturers and suppliers, we believe that the goods and services tax (GST) will help reduce logistics costs by
removing trade hurdles and allowing for more competitive manufacturing. Furthermore, these cost savings will then be passed
down to the consumer in the form of lower vehicle prices.
With around 80.0% of vehicle sales in India occurring to dealers outside the state of manufacture, the removal of multiple taxes
levied at different rates on goods and services as they travel across state boundaries will allow access to a single market, thereby
reducing logistics costs and improving the flow of goods and services. In addition, moving towards a simpler and more uniform tax
structure will help improve the ease of doing business in India, which will continue to improve its position as an attractive
investment destination for foreign automakers looking for expansion opportunities.
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Passenger Vehicles
Key View: Private consumption in India will remain robust in 2019, driven by strong economic growth, uptick in consumer credit
and election-related spending in the lead up to the 2019 election, which will bode well for passenger vehicle sales in India. We
forecast passenger vehicle sales in India to grow by 8.7% in FY2018/19 (April-March), and for sales to reach a annual sales volume
high of just over 3.8mn units by the end of FY2018/19
PASSENGER CAR MARKET - HISTORICAL DATA AND FORECASTS (INDIA 2017-2028)

Passenger car production, mn 3.95 4.28 4.67 5.06 5.51 6.05 6.69 7.38 8.21 9.06 10.02 11.11
Passenger car production, % y-o-y 7.5 8.2 9.1 8.5 8.8 9.8 10.7 10.3 11.2 10.3 10.6 10.9
Passenger car sales, mn 3.29 3.57 3.85 4.13 4.45 4.82 5.29 5.74 6.19 6.64 7.11 7.59
Passenger car sales, % y-o-y 7.9 8.7 7.6 7.3 7.9 8.3 9.7 8.5 7.9 7.3 7.0 6.7
f = Fitch Solutions forecast. Source: OICA, SIAM, Fitch Solutions
Latest Developments And Segment Drivers
• Passenger vehicle sales grew by 6.2% y-o-y in the first nine months of FY2018/19 (April-December 2018).
• Passenger vehicle production increased by 2.9% y-o-y in the first eight months of FY2018/19 (April-November 2018).
• Robust private consumption will help drive growth of 8.7% in new passenger vehicle sales in India in FY2018/19.
• Rising fuel prices and an increase in interest rates will act as barriers to further growth in new passenger vehicles in India.
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Commercial Vehicles
Key View: India's construction industry is poised for strong growth over the coming years as the government expands
investment in public infrastructure projects and as ongoing reforms improve the market's attractiveness to private and foreign firms.
We therefore forecast new commercial vehicle sales to increase by 26.7% in 2019 to reach a sales volume high of just under 1.5mn
units sold annually.
COMMERCIAL VEHICLE MARKET - HISTORICAL DATA AND FORECASTS (INDIA 2017-2028)

Commercial vehicle production, mn 0.83 1.04 1.27 1.52 1.80 2.13 2.42 2.74 3.06 3.41 3.77 4.16
Commercial vehicles production, % y-o-y 2.3 25.3 21.8 20.2 17.9 18.4 13.7 13.2 11.8 11.3 10.7 10.2
Commercial vehicle sales, % y-o-y 19.9 34.5 26.7 19.2 15.4 13.4 9.9 8.0 8.5 7.4 7.3 7.2
Commercial vehicle sales, mn 0.86 1.15 1.46 1.74 2.01 2.28 2.50 2.70 2.93 3.15 3.38 3.62
e/f = Fitch Solutions estimate/forecast. Source: SIAM, OICA, Fitch Solutions
• Total commercial vehicle sales increased 27.2% y-o-y in the first three quarters of 2018 - FY2018/19 (April-December 2018).
This consists of a 30.2% y-o-y increase in light commercial vehicles sales and a 23.0% y-o-y increase in medium and heavy
commercial vehicle sales in the first quarter of FY2018/19.
• Total commercial vehicle production grew by 33.6% y-o-y in the first three quarters of 2018 - FY2018/19 (April-December 2018).
• We have revised up our forecast for total commercial vehicle sales to growth of 34.5% in FY2018/19, up from 12.2% previously.
• Robust capital expenditure by businesses will support growth in domestic new light commercial vehicle sales.
• Government investment into public infrastructure projects and demand from the mining sector will drive sales in the medium
and heavy truck segment.
Commercial Vehicle Production By Type

Commercial Vehicle Production By Type (2017-2028)
e/f = Fitch Solutions estimate/forecast. Source: SIAM, OICA, Fitch Solutions
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Motorcycles
Key View: We believe that the rapid rise in the lower-end incomes will shift more of the population into the motorcycle market as
they are not yet able to afford passenger vehicles. Therefore, we forecast growth of 11% in motorcycle sales in India in FY2018/19
(April-March).
MOTORCYCLE MARKET - HISTORICAL DATA AND FORECASTS (INDIA 2017-2022)

Indicator 2017 2018e 2019f 2020f 2021f 2022f
Motorbike production 23,147,057 24,507,926 26,484,751 28,569,714 30,842,154 33,302,483
Motorbike production, % y-o-y 16.1 5.9 8.1 7.9 8.0 8.0
Motorbike sales 20,192,672 22,413,865 24,475,941 26,654,300 28,999,878 31,522,868
Motorbike sales, % y-o-y 14.8 11.0 9.2 8.9 8.8 8.7

MOTORCYCLE MARKET - HISTORICAL DATA AND FORECASTS (INDIA 2023-2028)
Indicator 2023f 2024f 2025f 2026f 2027f 2028f
Motorbike production 36,000,660 38,959,315 42,203,764 45,761,596 49,663,066 53,941,354
Motorbike production, % y-o-y 8.1 8.2 8.3 8.4 8.5 8.6
Motorbike sales 34,233,834 36,767,138 38,973,167 41,077,718 43,542,381 46,416,178
Motorbike sales, % y-o-y 8.6 7.4 6.0 5.4 6.0 6.6

f = Fitch Solutions forecast. Source: SIAM, Fitch Solutions
• Motorcycle sales increased 10.1% y-o-y in the first half of FY2018/19 (April-September 2018).
• Motorcycle exports grew by 26.3% y-o-y in the first half of FY2018/19 (April-September 2018).
• We expect strong growth in the rural agriculture economy to bolster consumer spending power and benefit sales in the
motorcycle segment.
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Motorcycle Sales Market

(2017-2028)
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Industry Risk/Reward Index

Asia Autos Sales Risk/Reward Index
Key View: Asia's overall score in this quarter's update of our Auto Sales Risk/Reward Index has decreased slightly to 51.1 out of a
possible 100, down from 51.3 previously. Asia's attractiveness as a vehicle retailing destination lies in the fact that the region boasts
two of the world's largest vehicle markets (notably India and China) as well as having a large underlying driving-age population for
automakers to tap into. That said, high industry and country risks, particularly in the emerging Asia sub-region, present challenges to
automakers looking to set up and maintain retailing activities in the region.
Australia Retains Its Lead In Our RRI

Asia - Autos Sales Risk/Reward Heat Map
Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Autos Sales Risk/Reward Index
Main Regional Features And Latest Updates
• Asia's overall score in this quarter's update of our Auto Sales Risk/Reward Index (RRI) has decreased slightly to 51.1 out of a
possible 100, down from 51.3 previously. Despite this, Asia retains its position as the second-highest scoring region globally in
our Autos Sales RRI, although it remains quite some way behind global leader Europe on 61.7.
• Asia's attractiveness as a vehicle retailing destination lies in the fact that the region boasts two of the world's largest vehicle
markets (notably India and China) as well as having a large underlying driving-age population for automakers to tap into.
• A significant point to highlight is that none of the countries that we cover in our Autos Sales RRI for the Asia region has been able
to make it into the top 10 ranking on a global basis, as the strongest performers in the Asia region fail to get a good balance
between their Risks and Rewards scores.
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• Overall the Asia region fails to score higher on our RRI due to its underperforming Industry Rewards pillar, which only manages to
score 46.9 out of a possible 100, and lies below the global average of 50.0. This is due to the region's low vehicle ownership
levels, scoring only 40.5 out of a possible 100, as well as the unfavourable competitive landscape (scoring only 33.5 out of a
possible 100).
• That said, the region has positive attributes, namely a large driving-age population (66.2), a large vehicle sales volume (60.9) and
relatively low Country Risks (57.8) which highlights the large growth potential in the region once its consumer base starts to
develop.
• Finally, Australia once again holds onto its status as the most attractive market to enter and operate vehicle retailing activities in
Asia, with a score of 73.6 out of a possible 100, up slightly from 73.2 previously.
Strong Grouping In The High Rewards, Low Risks Quadrant

Asia - Autos Sales Risk/Reward Index
Note: Scores out of 100; higher score = more attractive market; red point = regional average. Source: Fitch Solutions Autos Sales Risk/Reward Index
High Rewards, Low Risks Grouping Highlights Region's Attractiveness
As indicated in the scatter chart above, 12 out of the 23 countries that we cover in our Autos Sales RRI for the Asia region fall in the
high reward, low risk region of the chart. This indicates that the risks present in the region are well worth undertaking in order to
gain access to the relatively large reward potential, especially in the long term when automakers can benefit from the fast
developing consumer base. We forecast vehicle sales in Asia to grow by 1.9% in 2019, which is just below our global forecast of 2.0%
and just ahead of Europe on 1.8%. This is a significant slowdown from the 3.6% growth we estimate for 2018 and can largely be
attributed to an expected decline in the Chinese market as a previously proposed tax cut to prop up sales has been ruled out.
However, Asia will still keep its place as the fourth fastest growing market, although only marginally ahead of Europe (see 'Asia Autos:
Slower Growth As Chinese Market Declines', December 12 2018). However, in the longer term we expect growth to remain healthy,
averaging above 2.5% annually over 2022-2028. We also note that this average is significantly dragged down by the Chinese
automotive market, which will struggle to break through the 1.0% growth mark over our 2019-2028 forecast period.
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Asia Presents Strong Long-Term Growth Potential

Asia - Vehicle Sales, Units % y-o-y
f = forecast. Source: Fitch Solutions
Asia Presents High Long-Term Growth Opportunities
Emerging Asia countries offer automakers some of the highest growth opportunities both on a regional and global level when
compared to more developed Asian nations, largely due to low base effects and the infancy of new vehicle markets in some of the
countries in this sub-region. On average the emerging Asia region has seen its score for the vehicle sales growth indicator (which is
based on our five-year average forecast) for Q219 rise to 71.7 out of a possible 100, from 67.6 the previous quarter. Sri Lanka and
Thailand are the most notable emerging Asia countries that have seen the sharpest upward revisions to their vehicle sales growth
indicators. This can be largely attributed to robust growth in commercial vehicle sales, which are benefiting from high construction
sector activity, driven by solid infrastructure project pipelines (see 'Private Sector Investment And Strong Infrastructure Project
Pipeline To Fuel Thailand CV Sales', September 3).
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Emerging Asia Offers High Growth Opportunties

Asia - Vehicle Sales Growth Indicator Score
Large Populations Improve Long-Term Growth Prospects
We believe that the long-term growth potential for automakers to invest in the region is quite substantial as the region boasts a very
large relatively underdeveloped consumer base, scoring 66.2 for the driving-age population category in our Autos Sales RRI. This
highlights the growth potential for automakers whom are willing to contend with the risks present in the region, and that they could
benefit from the increased likelihood of substantial new vehicle sales over the longer term. That said, automakers will have some
challenges to overcome in order to monetise the region's large population. Foremost is the fact that the majority of the population
remains rural (scoring 47.2 for the urban/rural split category) and therefore will be tough to access in order to benefit from a large
portion of the population. However, the population is quickly becoming more urbanised, which further improves the long-term
attractiveness of the region.
Elevated Risks Weigh On Emerging Markets Appeal
While emerging Asia offers automakers high growth opportunities, the region's high Industry Risks and Country Risks act as a drag
on its attractiveness. Emerging Asia gets low scores on the Industry Risk and Country Risk pillars of our RRI. This is largely down to
the sub-region's high risk operating environment (score of 35.1), uncertain long-term political outlook (score of 37.5), unfavourable
regulatory environment (score of 39.4) as well as the elevated tax burden faced by consumers when it comes to making vehicle
purchases (score of 18.6). These will present challenges to automakers looking to set up and maintain retailing activities in the
region.
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ASIA AUTOS SALES RISK/REWARD INDEX

Industry Country REWARDS Industry Country RISKS RRI Regional Global
Rewards Rewards Risks Risks Rank Rank
Australia 69.8 75.5 72.0 69.1 82.9 76.0 73.6 1 10
Japan 54.2 92.9 69.7 68.0 80.3 74.2 71.5 2 18
New Zealand 66.7 65.6 66.3 66.1 88.5 77.3 70.7 3 20
South Korea 49.8 84.2 63.6 66.7 85.0 75.8 68.5 4 27
Singapore 37.0 79.5 54.0 86.0 87.9 87.0 67.2 5 32
Taiwan 46.4 75.0 57.8 58.1 85.2 71.6 63.3 6 34
China 63.9 68.1 65.6 43.5 74.7 59.1 63.0 7 35
Thailand 65.9 58.1 62.8 46.2 62.4 54.3 59.4 8 44
Hong Kong 28.6 83.1 50.4 59.4 86.1 72.8 59.3 9 45
Macau 47.2 66.1 54.8 62.9 61.5 62.2 57.7 10 48
Malaysia 55.0 63.7 58.5 41.7 71.3 56.5 57.7 11 49
Vietnam 54.6 44.4 50.5 59.1 60.5 59.8 54.2 12 57
Indonesia 59.5 49.7 55.6 29.6 58.7 44.1 51.0 13 58
India 54.6 44.7 50.7 44.6 52.8 48.7 49.9 14 60
Philippines 42.5 35.8 39.8 50.8 54.3 52.5 44.9 15 75
Brunei 32.7 47.4 38.6 49.7 56.6 53.2 44.4 16 77
Cambodia 49.4 21.8 38.3 51.9 28.7 40.3 39.1 17 87
Laos 50.2 17.7 37.2 46.8 28.7 37.7 37.4 18 91
Sri Lanka 42.9 40.0 41.8 21.5 36.0 28.7 36.6 19 92
Pakistan 43.5 36.8 40.8 29.0 19.4 24.2 34.2 20 97
Bangladesh 26.4 34.8 29.8 28.8 44.7 36.7 32.6 21 101
Myanmar 25.0 29.0 26.6 54.3 20.1 37.2 30.8 22 103
Afghanistan 12.2 15.2 13.4 2.7 3.0 2.8 9.2 23 125
Global 50.0 50.0 50.0 50.0 50.0 50.0 50.0 ~ ~

Average
Regional 46.9 53.4 49.5 49.4 57.8 53.6 51.1 ~ ~

Average
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ASIA AUTOS SALES INDUSTRY REWARDS

Vehicle Sales Vehicle Vehicle Sales Competitive Industry REWARDS
Volume, Units Ownership, Per Growth Landscape Rewards
1,000 People
Australia 87.1 92.7 41.9 57.3 69.8 72.0
Japan 97.6 82.3 6.5 30.6 54.2 69.7
New Zealand 62.9 93.5 34.7 75.8 66.7 66.3
South Korea 88.7 71.0 12.1 27.4 49.8 63.6
Singapore 44.4 40.7 0.0 62.9 37.0 54.0
Taiwan 68.5 59.7 15.3 41.9 46.4 57.8
China 100.0 39.5 22.6 93.5 63.9 65.6
Thailand 86.3 55.6 88.7 33.1 65.9 62.8
Hong Kong 27.4 24.2 1.6 61.3 28.6 50.4
Macau 8.9 37.9 97.6 44.4 47.2 54.8
Malaysia 82.3 75.0 38.7 24.2 55.0 58.5
Vietnam 76.6 5.6 99.2 37.1 54.6 50.5
Indonesia 87.9 54.0 77.4 18.5 59.5 55.6
India 98.4 12.1 93.5 14.5 54.6 50.7
Philippines 77.4 13.7 58.9 20.2 42.5 39.8
Brunei 12.1 81.5 8.9 28.2 32.7 38.6
Cambodia 46.0 14.5 98.4 38.7 49.4 38.3
Laos 60.5 29.0 84.7 26.6 50.2 37.2
Sri Lanka 50.8 21.8 95.2 4.0 42.9 41.8
Pakistan 72.6 7.3 91.9 2.4 43.5 40.8
Bangladesh 47.6 1.6 53.2 3.2 26.4 29.8
Myanmar 4.0 4.8 69.4 21.8 25.0 26.6
Afghanistan 13.7 12.9 20.6 1.6 12.2 13.4
Global Average 50.0 50.0 50.0 50.0 50.0 50.0
Regional Average 60.9 40.5 52.6 33.5 46.9 49.5
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AUTOS SALES COUNTRY REWARDS

Driving-Age GDP Per Urban/Rural Spending Quality And Country REWARDS
Population Capita, USD Split Population, % Extent Of Rewards
Of Total Transport
Network
Australia 65.3 91.1 87.1 58.1 75.8 75.5 72.0
Japan 93.5 80.6 93.5 99.2 97.6 92.9 69.7
New Zealand 24.2 81.5 79.8 57.3 85.5 65.6 66.3
South Korea 82.3 76.6 75.8 93.5 92.7 84.2 63.6
Singapore 34.7 91.9 99.2 81.5 90.3 79.5 54.0
Taiwan 66.1 72.6 66.1 91.9 78.2 75.0 57.8
China 100.0 51.6 38.7 66.9 83.1 68.1 65.6
Thailand 85.5 43.5 27.4 67.7 66.1 58.1 62.8
Hong Kong 39.5 87.1 99.2 100.0 89.5 83.1 50.4
Macau 5.6 99.2 99.2 96.8 29.8 66.1 54.8
Malaysia 71.8 55.6 62.9 41.9 86.3 63.7 58.5
Vietnam 91.1 19.4 10.5 50.0 50.8 44.4 50.5
Indonesia 97.6 27.4 30.6 33.9 58.9 49.7 55.6
India 99.2 15.3 8.1 29.0 71.8 44.7 50.7
Philippines 89.5 25.0 20.2 19.4 25.0 35.8 39.8
Brunei 0.8 74.2 65.3 48.4 48.4 47.4 38.6
Cambodia 53.2 9.7 3.2 21.8 21.0 21.8 38.3
Laos 28.2 21.0 18.5 17.7 3.2 17.7 37.2
Sri Lanka 61.3 29.0 1.6 43.5 64.5 40.0 41.8
Pakistan 96.0 6.5 16.9 16.9 47.6 36.8 40.8
Bangladesh 94.4 13.7 12.9 26.6 26.6 34.8 29.8
Myanmar 79.8 11.3 11.3 36.3 6.5 29.0 26.6
Afghanistan 63.7 1.6 4.8 5.6 0.0 15.2 13.4
Global Average 50.0 50.0 50.0 50.0 50.0 50.0 50.0
Regional Average 66.2 47.2 44.9 52.3 56.5 53.4 49.5
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AUTOS SALES INDUSTRY RISKS

Regulatory New Sales As % Of Tax Rates Industry Risks RISKS
Environment Fleet
Australia 50.0 71.0 86.3 69.1 76.0
Japan 41.9 69.4 92.7 68.0 74.2
New Zealand 54.0 53.2 91.1 66.1 77.3
South Korea 60.5 66.1 73.4 66.7 75.8
Singapore 97.6 82.3 78.2 86.0 87.0
Taiwan 64.5 25.8 83.9 58.1 71.6
China 33.9 91.1 5.6 43.5 59.1
Thailand 79.0 58.1 1.6 46.2 54.3
Hong Kong 96.0 38.7 43.5 59.4 72.8
Macau 76.6 81.5 30.6 62.9 62.2
Malaysia 82.3 33.1 9.7 41.7 56.5
Vietnam 79.8 94.4 3.2 59.1 59.8
Indonesia 39.5 41.9 7.3 29.6 44.1
India 41.1 91.9 0.8 44.6 48.7
Philippines 34.7 86.3 31.5 50.8 52.5
Brunei 27.4 36.3 85.5 49.7 53.2
Cambodia 62.1 85.5 8.1 51.9 40.3
Laos 19.4 96.8 24.2 46.8 37.7
Sri Lanka 16.1 48.4 0.0 21.5 28.7
Pakistan 16.9 46.8 23.4 29.0 24.2
Bangladesh 7.3 66.9 12.1 28.8 36.7
Myanmar 14.5 98.4 50.0 54.3 37.2
Afghanistan 0.0 4.0 4.0 2.7 2.8
Global Average 50.0 50.0 50.0 50.0 50.0
Regional Average 47.6 63.8 36.8 49.4 53.6
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AUTOS SALES COUNTRY RISKS

Long-Term Short-Term Long-Term Short-Term Operational Country Risks RISKS
Economic Economic Political Risk Political Risk Risk Index
Risk Index Risk Index Index Index
Australia 85.5 77.4 92.7 72.6 86.3 82.9 76.0
Japan 73.4 57.3 89.5 92.7 88.7 80.3 74.2
New Zealand 92.7 79.0 87.9 87.9 95.2 88.5 77.3
South Korea 99.2 99.2 82.3 63.7 80.6 85.0 75.8
Singapore 78.2 80.6 80.6 100.0 100.0 87.9 87.0
Taiwan 94.4 96.0 71.8 76.6 87.1 85.2 71.6
China 91.9 92.3 53.6 81.5 54.0 74.7 59.1
Thailand 75.8 82.3 34.7 59.7 59.7 62.4 54.3
Hong Kong 89.5 94.0 64.5 83.5 99.2 86.1 72.8
Macau 44.4 66.1 50.0 80.6 66.1 61.5 62.2
Malaysia 80.6 79.8 51.6 68.5 75.8 71.3 56.5
Vietnam 64.5 65.3 35.5 87.1 50.0 60.5 59.8
Indonesia 71.0 70.2 44.4 61.3 46.8 58.7 44.1
India 56.5 67.3 69.4 66.9 4.0 52.8 48.7
Philippines 77.4 71.8 46.0 43.1 33.1 54.3 52.5
Brunei 37.1 36.3 50.8 96.0 62.9 56.6 53.2
Cambodia 17.7 25.0 29.8 39.5 31.5 28.7 40.3
Laos 7.3 4.0 26.6 82.3 23.4 28.7 37.7
Sri Lanka 42.7 47.6 45.2 41.1 3.2 36.0 28.7
Pakistan 30.6 23.4 16.9 11.3 14.5 19.4 24.2
Bangladesh 58.9 75.0 37.9 26.6 25.0 44.7 36.7
Myanmar 23.4 31.5 6.5 27.8 11.3 20.1 37.2
Afghanistan 4.0 6.5 0.8 2.8 0.8 3.0 2.8
Global Average 50.0 50.0 50.0 50.0 50.0 50.0 50.0
Please Note: Our Risk/Reward Indices are updated frequently. As a result, scores in this section may not necessarily match scores
in the rest of the report.
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Asia Autos Production Risk/Reward Index

Key View: In the most recent update of our Autos Production Risk/Reward Index, Asia's overall score has remained
largely unchanged, coming in at 56.5 out of a possible 100, compared to 57.6 previously. As a result, Asia maintains its position as
the most attractive region to begin or maintain autos manufacturing operations globally. Asia still has the highest overall rewards
score of all regions globally in our Autos Production Risk/Reward Index because of the region's high volume vehicle production,
healthy competitive landscape, low labour costs and good manufacturing capabilities in most countries.
Despite Its Slide, China Remains An Attractive Manufacturing Market

Asia - Autos Production Risk/Reward Index Heat Map
Note: Scores out of 100, higher score = more attractive market. Source: Fitch Solutions Autos Production Risk/Reward Index
Main Regional Features And Latest Updates
• In the most recent update of our Autos Production Risk/Reward Index (RRI), Asia's overall score has remained largely unchanged,
coming in at 56.5 out of a possible 100, compared to 57.6 previously. As a result, Asia maintains its position as the most attractive
region to begin or maintain autos manufacturing operations globally, above second place Europe (with a score of 53.1).
• Asia's presence in the top 10 of the global rankings in our Autos Production RRI has remained unchanged, with four markets
present. The countries in the global top 10 come predominately from the emerging Asia sub-region, with Thailand, China
and Malaysia making the cut. Japan remains the only developed Asia market in the global top 10.
• Asia still has the highest overall Rewards score out of all regions globally in our Autos Production RRI, coming in at 58.9 in our
latest update, down slightly from its previous score of 59.9.These high rewards are due to the region's high volume vehicle
production (overall score of 59.6), healthy competitive landscape (overall score of 66.8), large and cheap labour force (overall
score of 59.5 and 65.5 respectively) and good manufacturing capabilities in most countries (overall score of 65.1).
• High operational and political risks in the emerging Asia sub-region remain challenges for automakers looking to set up
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manufacturing facilities on the continent.

• Thailand, Malaysia and China remain the top three most attractive markets for automakers looking to begin or maintain autos
manufacturing operations in the region with overall scores of 72.0, 71.5 and 69.3 out of a possible 100 respectively.
• China's ranking in our Autos Production RRI for the Asia region dropped to third place, behind Malaysia, as the threat from the
US/China trade disputes drive up the risks and drag down the country's overall attractiveness. That said, the impact until now
has been relatively small. Furthermore, the spillover from the US-China trade dispute is placing pressure on the wider region's
overall attractiveness due to the highly integrated nature of the Asian automotive manufacturing industry.
High Rewards, Low Risk Region Remains Crowded

Asia - Autos Production Risk/Reward Index
Note: Scores out of 100; higher score = more attractive market; red point = regional average. Source: Fitch Solutions Autos Production Risk/Reward Index
Countries In Asia Congregate In High Reward Region
The majority of the countries (7 of 12) that we cover in our Autos Production RRI convene in or close to the high reward, low risk
section in our Autos Production Risk/Reward Index scatter chart (see chart above). This highlights the favourable balance between
Asia's Risk and Reward scores, which makes the region the most attractive region globally. In the most recent update of our Autos
Production RRI, Asia's overall score has remained largely unchanged, coming in at 56.5 out of a possible 100, compared to 57.6
previously. Asia still has the highest overall Rewards score of all regions globally in our Autos Production RRI, coming in at 58.9 in our
latest update, down slightly from its previous score of 59.9. These high rewards are due to the region's high volume vehicle
production (overall score of 59.6), healthy competitive landscape (overall score of 66.8), large and cheap labour force (overall score
of 59.5 and 65.5 respectively) and good manufacturing capabilities in most countries (overall score of 65.1).
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High Rewards, Low Risk Sweet Spot Places Asia First

Global - Overall Risk/Rewards Scores
Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Autos Production Risk/Reward Index
Drilling down further, emerging Asia markets continue to offer the highest overall rewards in the region when compared to
developed markets. Thailand, India, China and Malaysia offer the most attractive rewards for automakers looking to begin or
maintain manufacturing operations in Asia, with Japan the only developed Asia market in the top five regionally when ranked
according to overall reward potential.
Emerging Asia Markets Leading

Asia - Rewards Score
While emerging Asia countries offer automakers attractive rewards, the sub-region's high operational and political risks act as a drag
on its attractiveness. Emerging Asia gets low overall scores of 31.7 and 35.9 respectively on its short- and long-term political risk
indicators. In addition, the sub-region's high risk operating environment (with an overall score of 31.7), presents challenges to
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automakers looking to set up and maintain manufacturing activities in the region.
Trade War Dragging On China's Performance
The trade war between China and the US have had a detrimental effect on China's overall performance on our Autos Production
RRI, as its score weakened from a high of 77.6 to a low of 69.3 out of a possible 100. Our Country Risk team believes that China
faces a difficult short-term economic outlook as real GDP growth declines due to unwinding credit growth amid efforts by the
government to rein in financial risks as well as the ongoing trade conflict with the US. However, China's economic outlook is still
relatively brighter than many peer emerging market peers due to strong private consumption growth and its external position in
particular remains sound.
Trade War Weighing On China's Overall Attractiveness

China - Autos Production Risk/Reward Index Score
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ASIA AUTOS PRODUCTION RISK/REWARD INDEX

Industry Country REWARDS Industry Country RISKS RRI Regional Global
Rewards Rewards Risks Risks Rank Rank
Thailand 78.6 75.9 77.5 72.8 54.9 63.8 72.0 1 2
Malaysia 67.3 78.1 71.6 77.2 65.5 71.4 71.5 2 3
China 73.8 67.9 71.4 70.1 62.1 66.1 69.3 3 4
Japan 65.8 67.4 66.4 60.3 75.3 67.8 67.0 4 7
India 91.1 54.9 76.6 63.8 26.5 45.2 64.0 5 12
South Korea 48.2 70.5 57.1 62.1 82.7 72.4 63.2 6 14
Taiwan 43.2 72.8 55.0 37.5 84.2 60.9 57.3 7 23
Indonesia 64.3 52.7 59.6 60.3 43.8 52.0 56.6 8 25
Philippines 50.3 52.7 51.3 46.0 39.6 42.8 47.9 9 32
Vietnam 54.8 58.0 56.1 21.4 42.0 31.7 46.3 10 35
Pakistan 71.4 30.8 55.2 47.8 9.2 28.5 44.5 11 37
Australia 6.5 54.0 25.5 41.1 81.8 61.5 39.9 12 42
Bangladesh 45.8 37.9 42.7 15.2 29.2 22.2 34.5 13 45
Global Average 50.0 50.0 50.0 50.0 50.0 50.0 50.0 ~ ~
Regional Average 58.5 59.5 58.9 52.0 53.6 52.8 56.5 ~ ~
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ASIA AUTOS PRODUCTION INDUSTRY REWARDS

Vehicle Production Vehicle Production Competitive Industry Rewards REWARDS
Growth Volume Landscape
Thailand 60.7 82.1 92.9 78.6 77.5
Malaysia 50.0 55.4 96.4 67.3 71.6
China 21.4 100.0 100.0 73.8 71.4
Japan 32.1 96.4 68.8 65.8 66.4
India 83.9 94.6 94.6 91.1 76.6
South Korea 30.4 89.3 25.0 48.2 57.1
Taiwan 12.5 48.2 68.8 43.2 55.0
Indonesia 62.5 71.4 58.9 64.3 59.6
Philippines 48.2 33.9 68.8 50.3 51.3
Vietnam 46.4 39.3 78.6 54.8 56.1
Pakistan 89.3 50.0 75.0 71.4 55.2
Australia 1.8 1.8 16.1 6.5 25.5
Bangladesh 100.0 12.5 25.0 45.8 42.7
Global Average 50.0 50.0 50.0 50.0 50.0
Regional Average 49.2 59.6 66.8 58.5 58.9
Note: Scores out of 100; higher scores = more attractive market. Source: Fitch Solutions Autos Production Risk Reward Index
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ASIA AUTOS PRODUCTION COUNTRY REWARDS

Size Of Labour Average Wages/ Cost And Manufacturing Country REWARDS
Force Labour Costs Availability Of Capability Rewards
Utilities
Thailand 73.2 71.4 78.6 80.4 75.9 77.5
Malaysia 60.7 89.3 92.9 69.6 78.1 71.6
China 83.9 44.6 42.9 100.0 67.9 71.4
Japan 94.6 16.1 62.5 96.4 67.4 66.4
India 8.9 96.4 37.5 76.8 54.9 76.6
South Korea 87.5 19.6 82.1 92.9 70.5 57.1
Taiwan 85.7 30.4 91.1 83.9 72.8 55.0
Indonesia 39.3 94.6 17.9 58.9 52.7 59.6
Philippines 35.7 92.9 8.9 73.2 52.7 51.3
Vietnam 78.6 80.4 33.9 39.3 58.0 56.1
Pakistan 1.8 100.0 0.0 21.4 30.8 55.2
Australia 98.2 17.9 58.9 41.1 54.0 25.5
Bangladesh 25.0 98.2 16.1 12.5 37.9 42.7
Global Average 50.0 50.0 50.0 50.0 50.0 50.0
Regional Average 59.5 65.5 47.9 65.1 59.5 58.9
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ASIA AUTOS PRODUCTION INDUSTRY RISKS

Logistics Risk Strength Of Industry Industry Risks RISKS
Policy
Thailand 64.3 81.3 72.8 63.8
Malaysia 73.2 81.3 77.2 71.4
China 58.9 81.3 70.1 66.1
Japan 78.6 42.0 60.3 67.8
India 46.4 81.3 63.8 45.2
South Korea 82.1 42.0 62.1 72.4
Taiwan 66.1 8.9 37.5 60.9
Indonesia 39.3 81.3 60.3 52.0
Philippines 10.7 81.3 46.0 42.8
Vietnam 33.9 8.9 21.4 31.7
Pakistan 14.3 81.3 47.8 28.5
Australia 62.5 19.6 41.1 61.5
Bangladesh 8.9 21.4 15.2 22.2
Global Average 50.0 50.0 50.0 50.0
Regional Average 49.2 54.7 52.0 52.8
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ASIA AUTOS PRODUCTION COUNTRY RISKS

Long-Term Short-Term Long-Term Short-Term Operational Country Risks RISKS
Economic Economic Political Risk Political Risk Risk Index
Risk Index Risk Index Index Index
Thailand 66.1 77.7 25.0 53.6 53.6 54.9 63.8
Malaysia 75.0 75.0 44.6 66.1 66.1 65.5 71.4
China 91.1 93.8 48.2 46.4 46.4 62.1 66.1
Japan 62.5 39.3 87.5 87.5 87.5 75.3 67.8
India 39.3 55.4 58.9 1.8 1.8 26.5 45.2
South Korea 100.0 100.0 76.8 73.2 73.2 82.7 72.4
Taiwan 94.6 96.4 62.5 83.9 83.9 84.2 60.9
Indonesia 57.1 58.9 39.3 35.7 35.7 43.8 52.0
Philippines 69.6 62.5 41.1 21.4 21.4 39.6 42.8
Vietnam 48.2 53.6 26.8 41.1 41.1 42.0 31.7
Pakistan 14.3 10.7 8.9 7.1 7.1 9.2 28.5
Australia 82.1 71.4 91.1 82.1 82.1 81.8 61.5
Bangladesh 41.1 66.1 30.4 12.5 12.5 29.2 22.2
Global Average 50.0 50.0 50.0 50.0 50.0 50.0 50.0
Please Note: Our Risk/Reward Indices are updated frequently. As a result, scores in this section may not necessarily match scores
in the rest of the report.
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India Autos Sales Risk/Reward Index

Key View: In the most recent update of our Autos Sales Risk/Reward Index, India's overall score of 49.9 out of a possible 100,
weakened slightly, compared to 51.0 previously. The country still gets the second and third highest marks globally for its driving-age
population and vehicle sales volumes, reflecting the sheer size of the vehicle market, with a large potential consumer base on offer
for automakers. Dragging on India's attractiveness are its low income profile, large rural populations, poor regulatory environment
and high operational risks.
High Growth Opportunities Available For Automakers

India & Asia Region - Autos Sales Risk/Reward Index By Component
Global And Regional Rank
• Regional rank (out of 23): 14th

• Global rank (out of 125): 60th
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Country Rewards Below Regional Average

India & Asia Region - Autos Sales Risk/Reward Scores
Key Features And Latest Updates
• In the most recent update of our Autos Sales Risk/Reward Index (RRI), India's overall score of 49.9 out of a possible 100,
weakened slightly, compared to 51.0 previously. This places the country's score just below the Asia regional average score of
51.1.
• Following India's overall performance weakening slightly, its regional ranking followed suit and went from 13th to 14th. However,
its global ranking improved to 60th place, up from its 61st ranking previously.
• India scores the second and third highest marks globally on the Rewards side, for its driving-age population and vehicle sales
volumes (based on our five-year average forecast), scoring 99.2 and 98.4 out of a possible 100 respectively. This reflects the
sheer size of the vehicle market, with a large potential consumer base available for automakers to target by setting up retailing
activities in the country.
• Staying on the Rewards side, India's third highest score in our Autos Sales RRI is for its vehicle sales growth (also based on our
five-year average forecast), scoring 93.5 out of a possible 100, far outpacing the Asian regional average of 52.6. This indicates
high growth opportunities on offer for new entrants and existing players in the local autos market.
• Rewards on offer are, however, weighed down by India's low income profile and large rural population, reflected in its low scores
of 15.3 and 8.1 for its GDP per capita and urban/rural split respectively.
• Further dragging on India's attractiveness are its poor regulatory environment and high operational risks, scoring 41.1 and 42.7
respectively, lagging behind the regional average scores of 47.6 and 53.6 out of 100 for the respective indicators.
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India Autos Production Risk/Reward Index

Key View: In the most recent update of our Autos Production RRI, India's overall score remained unchanged at 67.1 out of a
possible 100. Despite this, both the country's regional and global ranking in our Autos Production RRI improved. India's
attractiveness as a vehicle production destination is due to its strong automotive policy, diverse competitive landscape and low-cost
labour force. On the risk side, high levels of operational and short-term political risk combine to create a difficult operating
environment for automakers.
Robust Automotive Policy Boosts India's Appeal As Production Destination

India And Asia Region - Autos Production Risk/Reward Index By Component
Global And Regional Rank
• Regional rank (out of 13): 4th

• Global rank (out of 57): 7th
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High Industry Rewards On Offer

India & Asia Region - Autos Production Risk/Reward Scores
Key Features And Latest Updates
• In the most recent update of our Autos Production Risk/Reward Index (RRI), India's overall score remained unchanged at 67.1
out of a possible 100. despite this, both the country's regional and global ranking in our Autos Production RRI improved.
• Despite India's slightly lower overall score on our RRI, it still remains well above the Asia regional average of 57.6, placing the
country in the top five most attractive markets in the region for its appeal as an autos production base.
• India's high scores of 94.6 and 96.4 for its competitive landscape and average wage/labour costs indicators rank it in the top five
globally, reflecting low barriers to entry for new entrants and a low-cost labour force.
• While the country has attractive labour costs compared to its regional peers, this is negated by its low score on its size of labour
force indicator, which gets a score of 8.9 out of 100. Despite India having one of the world's largest labour markets, this poor
score reflects low rates of life expectancy and formal employment, which are characteristics of the domestic labour market.
• India also gets a high score of 94.6 out of a possible 100 on its vehicle production volume indicator (which is based on our five-
year average forecast), reflecting the large size of the market. Furthermore, the country also gets a high score of 76.8 on its
manufacturing capability indicator.
• Growth opportunities for automakers in India are also very attractive, reflected in its score of 83.9 out of a possible 100 on its
vehicle production growth indicator (which is also based on our five-year average forecast).
• India's attractiveness is further boosted by its score of 81.3 on its strength of industry policy indicator, reflecting the country's
strong automotive industry policy.
• On the risk side, India's attractiveness as an autos manufacturing destination is weighed down by high levels of operational (30.4)
and short-term political (1.8) risk, which combine to create a difficult operating environment for automakers.
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Company Profile
Hyundai Motor India
Latest Developments
• Hyundai's domestic sales up 4.3% y-o-y in the first nine months of FY2018/19 (April-December 2018). Furthermore, Hyundai
retains its position as the second most attractive passenger vehicle brand in India, selling 550,002 units in the first nine
months of FY2018/19 (April-December 2018) to hold a market share of 16.2%, far of Suzuki which holds a market share of
51.0%.
Strategy
In June 2018, Hyundai Motor India announced plans to increase its annual production capacity to 750,000 units from January 2019
from its current capacity of 700,000 units. This is due to the South Korean automaker's plans to bring out eight new products
between 2018 and 2020. An electric SUV is among the eight products planned to be launched in India, and it is expected to enter
the market in the second half of 2019. Initially, it will be imported as a completely knocked down unit.
In October 2017, Hyundai Motor announced plans to launch its commercial vehicle, premium car and financing businesses in India,
as the automaker aims to claim a bigger share of this fast-growing domestic vehicle market. The South Korean carmaker is
expected to invest more than USD4bn in India over the next four to five years, including in its new businesses, product launches and
the money committed by affiliate Kia Motors.
In April 2017, Hyundai opened its Global Quality and Training Center located in Faridabad, in the Delhi-National Capital Region (NCR).
Named India Quality Centre (INQC), the centre is one of five Hyundai quality centres worldwide, including in the US, Europe, China
and the Middle East. INQC is established with the objective of improving product quality by deeply understanding the needs of
customers. The centre will primarily focus on 'Top Level Safety Quality' through proactive communication and understanding
customer feedback to eliminate potential risks. The centre will also significantly monitor aspects including vehicle durability,
unexpected safety issues, system and vehicles benchmarking.
The new INQC brings in equipment at par with world-class diagnostic research and development tools for the examination of
Vehicle Communication and Complete Engine Diagnosis. The centre also studies new cars from their pilot stage until launch in the
market. The cars are checked at each development stage and static and dynamic tests are used to ensure high quality products.
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Maruti Suzuki
Latest Developments
• Maruti Suzuki India total domestic vehicle sales up 8.1% y-o-y in the first nine months of FY2018/19 (April-December 2018), to
gain a market share of 51.0% over the first nine months of FY2018/19 (April-December 2018)
• Suzuki Motor announced that they will construct a JPY60bn (USD547mn) plant in India, in an effort to increase their
manufacturing capacity by double digits.
Strategy
In September 2016, Maruti Suzuki announced a partnership with Uber India through a Memorandum of Understanding (MoU).
Under the MoU, the company will train more than 30,000 individuals/Uber-partner drivers in safe driving over a period of three
years. The initiative is aimed at providing aspiring commercial drivers with micro-entrepreneurship opportunities and equipping
them with the necessary skills to operate on the Uber platform. The pilot phase will be rolled out in Hyderabad, Chennai, Delhi-NCR
region and will be introduced in Mumbai, Bangalore, Ahmedabad and Pune thereafter.
In December 2015, the business-standard.com reported on Maruti Suzuki's plan to invest almost INR150bn (USD2.25bn) between
then and 2020, in a bid to boost its annual sales to around 2mn units. The investment will be directed towards the purchase of land,
warehouses and transport infrastructure and to expand the automaker's existing dealership network.
Financial Data
• Net sales up by 4.3% y-o-y in the first nine months of FY2018/19 (April-December 2018), coming in at INR622,890mn.
• Operating profit were down 2.6%% y-o-y in the first nine months of FY2018/19 (April-December 2018), coming in at
INR81,535mn.
• Net profit were down 2.3% in the first nine months of FY2018/19 (April-December 2018), coming in at INR57050mn.
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Tata Motors
Latest Developments
• Total domestic passenger vehicle sales for Tata Motors were up 24.13% y-o-y in the first nine months of FY2018/19 (April-
December 2018), to gain a market share of 7.0%.
• Total domestic commercial vehicle sales for Tata Motors were up 30.76% y-o-y in the first nine months of FY2018/19 (April-
December 2018), to gain a market share of 44.2%.
Strategy
In September 2017, the Indian government announced that it would procure 10,000 electric vehicles (EVs) from Tata Motors in
order to start replacing petrol and diesel cars used by its agencies over the next three to four years. Tata Motors will supply the EVs in
two phases, with 500 units in the first phase in November 2017 and the remaining 9,500 units in the second phase.
In June 2016, Tata Motors and Uber Technologies closed a new USD160mn tie-up to offer drivers and owners on the ride-sharing
company's platform comprehensive vehicle purchase and financing solutions. Under the partnership, those looking to operate Uber
cars will be able to buy Tata cars including the Indica and Indigo models, and get access to flexible and customisable financing
solutions from Tata Capital and Tata Motors Finance. Adding to the list of benefits, owners will be able to buy insurance from Tata
AIG, and operational support to drivers will be provided by Tata Business Support Services.
In December 2015, the Press Trust of India (PTI) reported on Tata's announcing a series of initiatives to expand its market share in
the passenger vehicles segment, according to Mayank Pareek, president of the company's Passenger Vehicle Business Unit.
According to Pareek, the number of dealerships will be expanded from 500 to 1,500 in the next three years. In addition, the
automaker will attempt to fill the gaps in its product portfolio by introducing two new products each year until 2020, noted Pareek.
He added that the company intends to improve its manufacturing processes and brand image, and is also targeting improving
manufacturing quality and workforce efficiency at multiple levels.
In terms of the luxury car segment, Tata's JLR subsidiary is also looking to boost its presence in India and double its market share in
the luxury segment to over 20% over the next three years. The automaker plans to build more domestic models as well as introduce
its XE sedan to compete with Mercedes-Benz, Audi and BMW in the luxury car segment. The company is reviewing which models
can be manufactured at its Chikale plant in Pune, Maharashtra, and is also studying the possibility of assembling more sports utility
vehicles. JLR currently manufactures four models in India, namely the XF, XJ, Discovery Sport and Evoque, and is expected to start
local production of the XE sedan from 2016.
Financial Data
• Net revenue up 33% y-o-y in Q2 of FY2018-19 (July-September 2018), standing at INR177.6bn.

• Net profit of INR1.1bn recorded in Q2 of FY2018-19 (July-September 2018). Tata Motors had reported a net loss of INR2.8bn in
Q2FY2017-2018.
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Regional Overview
Asia Autos Overview
Key View
• Asia still offers opportunities for growth in manufacturing as evidenced by the number of brand new facilities in the round-up as
opposed to expansions or upgrades.
• EV batteries are the source of the most investment with China leading the way due to the size of its EV market.
• Pakistan's industry policy continues to be successful in attracting investment with the CV segment becoming the most popular.
In our regular round-up of production investments, we track the latest projects from the production side of the industry and analyse
regional trends that we see developing. In doing so, we hope to build a picture of any potential hubs that may be developing, as well
as company strategy in terms of production bases and export programmes.
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ASIA AUTOS PRODUCTION INVESTMENT

Date Country City/State/ Company Value Brief Description Date
Announced Region Onstream
Oct-18 India Madhya VE INR4bn New plant for production of trucks with an initial 2020
Pradesh Commercial (USD53.9mn) annual capacity of 40,000 units
Vehicles
Oct-18 Pakistan Lahore King Long USD200mn King Long will form a joint venture with local firm na
United Shine Autos to build buses and mini trucks at a new
Automotive plant
Industry
Oct-18 Indonesia Bekasi Mitsubishi JPY4bn Expansion of existing facility to increase annual 2020
(USD35mn) production of the Xpander MPV from 115,000 units
to 160,000 units, creating 800 new jobs
Oct-18 China Shanghai VW and na New plant for production of electric cars on the MEB 2020
SAIC platform and battery systems, with an annual
production capacity of 300,000 cars
Oct-18 Japan Matsusaka Gestamp EUR40mn New plant for production of Body-in-White 2018
(USD46mn) components for Japanese carmakers, with an annual
capacity of 1,200 tonnes, creating around 60 jobs
Oct-18 China Nanjing LG Chem KRW2.1trn Second electric vehicle battery plant with a planned 2019-2023
(USD1.85bn) annual production capacity of battery packs for
500,000 high performance cars by 2023
Oct-18 China Yangtze River Lithium CNY12.8bn New plant for production of lithium ion battery cells 2021
Delta Werks (USD1.9bn) with an annual production capacity of 8 gigawatt-
hours, equivalent to batteries for 160,000 vehicles
Oct-18 China Changzhou SK KRW400bn New plant for production of components used in 2020
Innovation (USD354mn) electric vehicle batteries
Nov-18 Pakistan Karachi VW and na New plant for assembly of completely knocked down na
Premier kits of light commercial vehicles in three phases,
Motors creating 5,400 jobs. First phase will include the
Amarok and T-6, second phase will add Caddy LCV
and final phase will add Skoda models
Nov-18 China Zhangjiagang DuPont USD80mn New plant for production of engineering plastics and 2020-2023
adhesives, including automotive adhesive
Nov-18 Thailand na Mitsubishi THB11bn New plant for production of traditional and plug-in TBC
(USD333mn) hybrid electric vehicles and batteries
Nov-18 China Changshan SKF SEK200mn New plant to consolidate the operations of three 2019
(USD21.9mn) existing plants producing tapered roller bearings,
with room to expand
Nov-18 Thailand Rayong Jiangsu USD300mn New plant for production of tyres for both passenger 2020
General cars and trucks and buses, with an annual production
Science capacity of 6mn and 1mn respectively
Technology
Nov-18 China Tianjin Gestamp CNY395mn New plant for production of Body-in-White and 2018
(USD58.5mn) chassis components to supply major clients such as
Daimler and Hyundai, creating 250 new jobs
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Date Country City/State/ Company Value Brief Description Date

Announced Region Onstream
Nov-18 China TBC Honda and CNY3.27bn New plant for production of electric and plug-in TBC
GAC (USD469mn) hybrid vehicles under GAC's Trumpchi brand, with an
annual production capacity of 170,000 units
Dec-18 Indonesia na Hyundai USD880mn New plant for production of cars, including electric TBC
models, with an annual production capacity of
around 250,000 units, with plans to export 53% of
output to the rest of South East Asia and Australia
Dec-18 Thailand Chonburi Draxlmaier THB540m New plant for production of battery modules for 2019
(USD16.4mn) BMW plug-in hybrid models
Dec-18 China Taicang Brose EUR180mn New plant for production of door systems, seating 2019
(USD205.3mn) structures and motors, ultimately creating 1,600 new
jobs
Dec-18 China Wuhan Geely CNY9bn New plant for production of gasoline, hybrid and TBC
(USD1.3bn) electric cars with an initial annual production
capacity of 150,000 units
Dec-18 China Pinghu Great Wall CNY2bn New plant for production of vehicles with an annual TBC
(USD296.5mn) production capacity of 30,000 SUVs, 20,000 light
trucks and 50,000 electric vehicles
na = not available; TBC = to be confirmed. Source: Fitch Solutions
In Q418, we identified 20 new autos manufacturing projects announced or inaugurated in Asia, worth a combined total of
USD8.4bn (for those projects providing financial details). This is up slightly from 15 projects identified in Q417, which were worth a
combined value of USD6.7bn (for those projects providing financial details).
Still Room For Greenfield Expansion
Unlike some of the regions with more developed and saturated markets, it is most noticeable that all but one of the projects in this
latest round-up are for brand new plants rather than expansions or upgrades of existing facilities. This shows that there is still room
for growth in the region, even in China, which is the world's largest car market but still accounts for 11 of the 20 new projects.
However, the government is keen to avoid the prospect of overcapacity and has introduced new regulation to curb new plants,
particularly for vehicles with internal combustion engines, thereby combining the capacity restrictions with its environmental
targets. Therefore, we can expect to see investment in new capacity in China slowing in future round-ups.
Outside of China, South East Asia is the most prominent destination for investment with three projects in Thailand and two in
Indonesia. As one of the most established production bases in the region it is not surprising to see companies investing in Thailand,
especially if exports to other markets are involved, while new government policy is attracting investment to Indonesia, particularly in
the electric vehicle (EV) segment (see 'Indonesia Elections: Continuity And EV Opportunities For Autos From Jokowi Win', January 31).
Batteries Are Big Business
Asia is already leading other regions in terms of EV battery capacity and this looks set to continue as five of the projects include new
facilities for producing batteries themselves or components used in batteries. The two biggest projects in the round-up by value are
Dutch company Lithium Werks' USD1.9bn investment into a Chinese plant for battery cells and LG Chem's USD1.85bn
investment in a second battery plant in China. While China is dominating much of the investment into batteries due to its large, well
supported EV market, Thailand is also building its hybrid and EV industry, underlined by Draxlmeier's investment into a plant for
battery modules to supply BMW, which appeared in a previous round-up with its plug-in hybrid production.
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Competition Increases In Pakistan's Commercial Vehicle Segment
Two investments into Pakistan's commercial vehicle segment support our long-held view that the country's Automotive
Development Policy would attract new investment to the market and challenge the dominance of Japanese incumbents.
Volkswagen is targeting the light commercial vehicle segment in particular, where there are currently three companies dominating
domestic production: Suzuki, Toyota and JAC. China's King Long is teaming up with a local partner, Shine Autos, to produce
buses.
We believe that Pakistan's bus segment will continue to attract the attention of Chinese bus producers due to the significant growth
opportunities available in the country as the Chinese-Pakistan economic corridor develops. Furthermore, the continued
development of Pakistan's transport networks and its increasingly urbanised population will drive up the demand for public
transport and bus services will remain the most affordable option in the medium term.
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India Demographic Outlook

Demographic analysis is a key pillar of our macroeconomic and industry forecasting model. Not only is the total population of a
country a key variable in consumer demand, but an understanding of the demographic profile is essential to understanding issues
ranging from future population trends to productivity growth and government spending requirements.
The accompanying charts detail the population pyramid for 2017, the change in the structure of the population between 2017 and
2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key
metrics such as population ratios, the urban/rural split and life expectancy.
Population
(1990-2050)
f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
India Population Pyramid

2017 (LHS) & 2017 Versus 2050 (RHS)
Source: World Bank, UN, Fitch Solutions
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POPULATION HEADLINE INDICATORS (INDIA 1990-2025)

Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, total, '000 870,133.5 1,053,050.9 1,144,118.7 1,230,980.7 1,309,054.0 1,383,197.8 1,451,829.0
Population, % y-o-y 1.79 1.60 1.38 1.17 1.06 0.92
Population, total, male, '000 450,351.8 545,513.6 593,062.0 638,471.9 678,564.3 716,370.8 750,945.2
Population, total, female, '000 419,781.7 507,537.3 551,056.7 592,508.8 630,489.7 666,827.0 700,883.8
Population ratio, male/female 1.07 1.07 1.08 1.08 1.08 1.07 1.07
na = not available; f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
KEY POPULATION RATIOS (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Active population, total, '000 506,787.4 640,951.0 714,450.9 787,765.4 860,127.6 924,931.8 983,415.0
Active population, % of total population 58.2 60.9 62.4 64.0 65.7 66.9 67.7
Dependent population, total, '000 363,346.1 412,099.9 429,667.7 443,215.3 448,926.4 458,265.9 468,414.0
Dependent ratio, % of total working age 71.7 64.3 60.1 56.3 52.2 49.5 47.6
Youth population, total, '000 330,035.9 365,773.8 375,114.2 380,274.3 375,144.9 367,656.9 359,641.6
Youth population, % of total working age 65.1 57.1 52.5 48.3 43.6 39.7 36.6
Pensionable population, '000 33,310.2 46,326.1 54,553.5 62,940.9 73,781.5 90,609.0 108,772.4
Pensionable population, % of total working age 6.6 7.2 7.6 8.0 8.6 9.8 11.1
URBAN/RURAL POPULATION & LIFE EXPECTANCY (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Urban population, '000 222,293.0 291,347.6 334,483.1 380,742.3 428,675.9 481,117.7 537,713.9
Urban population, % of total 25.5 27.7 29.2 30.9 32.7 34.8 37.0
Rural population, '000 647,840.5 761,703.3 809,635.6 850,238.4 880,378.1 902,080.1 914,115.1
Rural population, % of total 74.5 72.3 70.8 69.1 67.3 65.2 63.0
Life expectancy at birth, male, years 57.6 61.8 63.7 65.5 66.9 68.0 68.9
Life expectancy at birth, female, years 58.3 63.4 65.4 67.8 69.9 71.2 72.3
Life expectancy at birth, average, years 57.9 62.6 64.6 66.6 68.3 69.5 70.5
POPULATION BY AGE GROUP (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, total, '000 121,428.3 127,607.0 129,579.4 128,484.5 121,415.3 121,159.4 119,816.8
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Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 85-89 yrs, total, '000 911.1 1,479.8 1,850.2 2,305.2 3,000.5 3,803.2 4,628.4
Population, 90-94 yrs, total, '000 249.9 417.9 531.5 686.3 917.5 1,224.1 1,567.7
Population, 95-99 yrs, total, '000 37.8 72.2 103.2 137.2 193.6 265.8 357.1
Population, 100+ yrs, total, '000 4.8 9.0 12.0 17.9 26.8 39.0 53.9
POPULATION BY AGE GROUP % (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, % total 13.96 12.12 11.33 10.44 9.28 8.76 8.25
Population, 100+ yrs, % total 0.00 0.00 0.00 0.00 0.00 0.00 0.00
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Autos Methodology
Industry Forecast Methodology
How We Generate Our Industry Forecasts
Our industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric
modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard
practice, by the prevailing features of the industry data being examined. We mainly use OLS estimators and in order to avoid relying
on subjective views and encourage the use of objective views, uses a ‘general-to-specific’ method. We mainly use a linear model, but
simple non-linear models, such as the log-linear model, are used when necessary. During periods of ‘industry shock’, for example a
deep industry recession, dummy variables are used to determine the level of impact.
Effective forecasting depends on appropriately selected regression models. We select the best model according to various different
criteria and tests, including, but not exclusive to:
• R2 tests explanatory power; Adjusted R2 takes degree of freedom into account

• Testing the directional movement and magnitude of co-efficients
• Hypothesis testing to ensure co-efficients are significant (normally t-test and/or P-value)
• All results are assessed to alleviate issues related to auto-correlation and multi-co-linearity.
We use the selected best model to perform forecasting.
It must be remembered that human intervention plays a necessary and desirable role in all of our industry forecasting. Experience,
expertise and knowledge of industry data and trends ensures that analysts spot structural breaks, anomalous data, turning points
and seasonal features where a purely mechanical forecasting process would not.
Within the autos industry, this intervention might include, but is not exclusive to, significant company expansion plans, new product
development that might influence pricing levels, dramatic changes in local production levels, product taxation, the regulatory
environment and specific areas of legislation, changes in lifestyles and general societal trends, the formation of bilateral and
multilateral trading agreements and negotiations, political factors including trade and the development of the industry in
neighbouring markets that are potential competitors for foreign direct investment.
Example of Vehicle Sales Model:
(Vehicle Sales)t = β0 + β1*(GDP)t + β2*(Population)t + β3*(Inflation)t + β4*(Lending Rate)t + β5* (Foreign Exchange Rate)t +
β6*(Government Expenditure)t + β7*(Vehicle Sales)t-1 + εt
Sources
Aside from government departments and official company reports, we rely on the International Organization of Motor Vehicle
Manufacturers (OICA), other established think tanks, institutes and international and national news agencies.
Autos Production Risk/Reward Index
Our Autos Production Risk/Reward Index (RRI) quantifies and ranks a country's attractiveness within the context of the automotive
industry, based on the balance between the Risks and Rewards of beginning or maintaining autos manufacturing operations in
different countries.
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We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision-making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of firstly the balance between opportunities and risk and secondly between
sector-specific and broader market traits. This enables users of the index to assess a market's attractiveness in a regional and global
context.
The index uses a combination of our proprietary forecasts and analyst assessment of the regulatory climate. As regulations evolve
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.
Benefits Of Using Fitch Solutions' Autos Production RRI
• Global Rankings: One global table, ranking all the countries in Fitch Solutions universe for autos production from least (closest to
zero) to most attractive (closest to 100).
• Accessibility: Easily accessible, top down view of the global, regional or sub-regional Risk/Reward profiles.
• Comparability: Identical methodology across 56 countries allows users to build lists of countries they wish to compare, beyond
the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the country profile.
• Quantifiable: Quantifies the Rewards and Risks of doing business in the autos sector in different countries around the world and
helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic and
operating risks.
• Entry Point: A starting point to assess the outlook for the autos sector, from which users can dive into more granular forecasts
and analysis to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology is a combination of proprietary Fitch Solutions forecasts, analyst insights and globally acceptable benchmark
indicators (for example, World Bank's Doing Business Scores and Transparency International's Corruption Perceptions Index).
Weightings Of Categories And Indicators

Autos Production Risk/Reward Index
Source: Fitch Solutions
fitchsolutions.com
The RRI matrix divides into two distinct categories:
Rewards
Evaluation of an industry's size and growth potential (Industry Rewards), and also macro industry and/or country characteristics
that directly impact the size of business opportunities in a specific sector (Country Rewards).
Risks
Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the country's political, economic and operational profile (Country Risks).
Assessing our Weightings
Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry size
and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour statistics
and infrastructure quality) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging and frontier
markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities in countries where
regulatory frameworks are not as developed and industry sizes not as big as in developed markets, but where we know there is a
strong desire to invest.
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INDICATORS - EXPLANATION AND SOURCES

Indicator Source Rationale
Rewards
Industry Rewards
Vehicle Production
Fitch Forecasted growth in production indicates growth opportunities and future speed of industry
Growth, % Chg y-o-y
Solutions development.
(five-year average)
Vehicle Production
Fitch
Volume, Units (five- Volume indicates size and development stage of local production industry
Solutions
year average)
Fitch
Competitive Solutions Indicates competition for productive resources and industry concentration using the number of
landscape Subjective vehicle brands being produced/assembled domestically.
Indicator
Country Rewards
Fitch
Size Of Labour Force The size of the working population indicates broad availability of labour.
Solutions
Fitch
Solutions
Average Wages/
Operational Indicator of the cost of labour, a major input in autos manufacturing.
Labour Costs
Risk
Indicator
Fitch
Cost and Availability Solutions Proxy for energy availability, a key input in establishing modern, mechanised and large scale
Of Utilities Operational production activities.
Risk Index
Fitch
Manufacturing A measure of complex goods as a percentage of total manufacturing, important to a value-added
Solutions
Capability industry such as autos manufacturing
Forecast
Risks
Industry Risks
Fitch
Evaluates the ability of producers to maintain production supply chains by assessing the quality and
Solutions
Logistics Risk extent of transport infrastructure, the availability and reliability of utilities networks, and the ease of
Operational
cross-border trading.
Risk Index
Fitch
Strength Of Industry Solutions
Identifies if local autos-related industrial policies are present and their respective strength.
Policy Subjective
Indicator
Country Risks
fitchsolutions.com
Fitch
The LT ERI takes into account the structural characteristics of economic growth, the labour market,
Long-Term Solutions
price stability, exchange rate stability and the sustainability of the balance of payments, as well as
Economic Risk Index Country
fiscal and external debt outlooks for the coming decade.
Risk Index
Fitch
The ST ERI seeks to define current vulnerabilities and assess real GDP growth, inflation,
Short-Term Solutions
unemployment, exchange rate fluctuation, balance of payments dynamics, as well as fiscal and
Economic Risk Index Country
external debt credentials over the coming two years.
Risk Index
Fitch
The LT PRI assesses a country's structural political characteristics based on our assumption that
Long-Term Political Solutions
liberal, democratic states with no sectarian tensions and broad-based income equality exhibit the
Risk Index Country
strongest characteristics in favour of political stability, over a multiyear timeframe.
Risk Index
Fitch
Short-Term Political Solutions The ST PRI assesses pertinent political risks to investment climate stability over a shorter time frame,
Risk Index Country up to 24 months forward.
Risk Index
Fitch
Operational Risk Solutions The Operational Risk Index focuses on existing conditions relating to four main risk areas: Labour
Index Operational Market, Trade and Investment, Logistics, and Crime and Security.
Risk Index
Autos Sales Risk/Reward Index
Our Autos Sales Risk/Reward Index (RRI) quantifies and ranks a country's attractiveness within the context of the automotive
industry, based on the balance between the Risks and Rewards of entering and operating vehicle retailing activities in different
countries.
We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision-making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of firstly the balance between opportunities and risk and secondly between
sector-specific and broader market traits. This enables users of the index to assess a market's attractiveness in a regional and global
context.
The index uses a combination of our proprietary forecasts and analyst assessment of the regulatory climate. As regulations evolve
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.
The Autos Sales Risk/Reward Index universe comprises 124 countries.
Benefits Of Using Fitch Solutions' Autos RRI
• Global Rankings: One global table, ranking all the countries in Fitch Solutions' universe for autos sales from least (closest to zero)
to most attractive (closest to 100).
• Accessibility: Easily accessible, top down view of the global, regional or sub-regional Risk/Reward profiles.
• Comparability: Identical methodology across 124 countries for Autos sales allows users to build lists of countries they wish to
compare, beyond the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
fitchsolutions.com
favourable the country profile.

• Quantifiable: Quantifies the Rewards and Risks of doing business in the autos sector in different countries around the world and
helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic and
operating risks.
• Entry Point: A starting point to assess the outlook for the autos sector, from which users can dive into more granular forecasts
and analysis to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology is a combination of proprietary Fitch Solutions forecasts, analyst insights and globally acceptable benchmark
indicators (for example, World Bank's Doing Business Scores and Transparency International's Corruption Perceptions Index).
Weightings Of Categories And Indicators
The RRI matrix divides into two distinct categories:
Rewards
Evaluation of an industry's size and growth potential (Industry Rewards), and also macro industry and/or country characteristics
that directly impact the size of business opportunities in a specific sector (Country Rewards).
Risks
Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the country's political, economic and operational profile (Country Risks).
Assessing Our Weightings
Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry size
and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour statistics
fitchsolutions.com
and infrastructure quality) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging and frontier
markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities in countries where
regulatory frameworks are not as developed and industry sizes not as big as in developed markets, but where we know there is a
strong desire to invest.
INDICATORS - EXPLANATION AND SOURCES

Rewards
Industry Rewards
Vehicle Sales Volume, Units Fitch Size of the overall vehicle market indicates potential for opportunities and scale of
(five-year average) Solutions operations.
Vehicle Ownership, Registered Fitch Ownership rates indicate market development/maturity and strength of consumer
Vehicles per 1,000 population Solutions needs/desires for vehicle ownership.
Vehicle Sales Growth, % chg y- Fitch

Forecasted growth in sales indicates growth opportunities for new/existing entrants.
o-y (five-year average) Solutions
Market Concentration, Fitch

Herfindahl-Hirschman Index Solutions Market concentration indicates the ease of entering and competing in the market.
Values Calculation
Country Rewards
Fitch
Driving Age Population Solutions The size of the population eligible to drive indicates underlying potential market size.
Forecast
Fitch
GDP Per Capita, USD Solutions GDP per capita identifies the purchasing power of consumers.
Forecast
Fitch
High and growing concentration of population in urban areas indicates greater pressure
Urban Population, % Of Total Solutions
for vehicle ownership and road-based public transport.
Forecast
Fitch
Spending Population, % Of Growth of spending population identifies the relative strength/influence of household
Solutions
Total decision makers who are ultimately responsible for vehicle purchase decisions.
Forecast
Fitch
Solutions Road quality highlights strength of road infrastructure and ability to cater for more
Quality Of Road Network
Operational developed vehicle fleets.
Risk Index
Risks
Industry Risks
Fitch
Regulatory environment for businesses is captured in the Operational Risk indicator for
Solutions
Regulatory Environment 'Economic Openness'. It assesses a country's openness to investment and trade,
Operational
especially by new market entrants.
Risk Index
Fitch
Measures the maturity of the new vehicle market and proxies for the rate of vehicle
New Sales, As % Of Fleet Solutions
replacement.
Forecast
fitchsolutions.com
Fitch
Measures the tax burden incurred by an imported new vehicle including MFN tariff rates,
Solutions
Vehicle Tax Rates excise and special taxes and VAT/GST. It is a strong determinant of how competitively
Subjective
priced a new market entrant would be.
Indicator
Country Risks
Fitch
The LT ERI takes into account the structural characteristics of economic growth, the
Long-Term Economic Risk Solutions
labour market, price stability, exchange rate stability and the sustainability of the balance
Index Country Risk
of payments, as well as fiscal and external debt outlooks for the coming decade.
Index
Fitch
The ST ERI seeks to define current vulnerabilities and assess real GDP growth, inflation,
Short-Term Economic Risk Solutions
unemployment, exchange rate fluctuation, balance of payments dynamics, as well as
Index Country Risk
fiscal and external debt credentials over the coming two years.
Index
Fitch The LT PRI assesses a country's structural political characteristics based on our
Solutions assumption that liberal, democratic states with no sectarian tensions and broad-based
Long-Term Political Risk Index
Country Risk income equality exhibit the strongest characteristics in favour of political stability, over a
Index multiyear timeframe.
Fitch
Solutions The ST PRI assesses pertinent political risks to investment climate stability over a shorter
Short-Term Political Risk Index
Country Risk time frame, up to 24 months forward.
Index
Fitch
Solutions The ORI focuses on existing conditions relating to four main risk areas: Labour Market,
Operational Risk Index
Operational Trade and Investment, Logistics, and Crime and Security
Risk Index
fitchsolutions.com
fitchsolutions.com
Fit
Fitch
ch Solutions, 30 North C
Colonnade
olonnade,, Canary W
Wharf
harf,, L
London.
ondon. E14 5GN, UK
Tel: +44 (0)20 7248 0468
Fax: +44 (0)20 7248 0467
Web: www.fitchsolutions.com
IS SN: 1748-9946
ISSN:
Copy Deadline: February 2019

opy
© 20
2019
19 Fit
Fitch
ch Solutions Gr
Group
oup Limit
Limited.
ed. All rights rreserv
eserved.
ed.
All information, analysis, forecasts and data provided by Fitch Solutions Group Limited is for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Fitch Solutions Group Limited.
All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Fitch
Solutions Group Limited makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.
This report from Fitch Solutions Macro Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch
Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2019 Fitch Solutions Group Limited.


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Q2 2019

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Industry Risk/Reward Index ....................................................................................................................................................18

India Demographic Outlook .....................................................................................................................................................47

Passenger Car And Commercial Vehicle Sales

e/f = Fitch Solutions estimate/forecast. Source: SIAM, Fitch Solutions

Opportunities • A young, fast-growing population means significant long-term potential.

AUTOS TOTAL MARKET - HISTORICAL DATA AND FORECASTS (INDIA 2017-2028)

Sales Outlook Remains Positive

e/f = Fitch Solutions estimate/forecast. Source: SIAM, Fitch Solutions

Robust Private Consumption To Support Growth In Passenger Vehicle Segment

Consumption Outlook Remains Strong

Rising Inflation And Interest Rates To Be Growth Barriers

More Upside To Come

Source: Bloomberg, Fitch Solutions

Robust Construction Industry Growth To Fuel CV Demand

Robust Growth To Continue

e/f = Fitch Solutions estimate/forecast. Source: SIAM, Fitch Solutions

Strong Construction Growth Ahead

Solid Growth In Mining Sector Provides Further Tailwinds To CV Demand

e/f = Fitch Solutions estimate/forecast. Source: UN Data, Fitch Solutions

Strong Growth Outlook For India's Autos Production

e/f = Fitch Solutions estimate/forecast. Source: OICA, SIAM, Fitch Solutions

Investment Inflows Providing Further Tailwinds

Local Production To Offer Cost Savings

VEHICLE IMPORT DUTIES

Used car import 125

Cars (CBU), CIF value > USD40,000

or petrol engine > 3,000cc 100

or diesel engine > 2,500cc 100

Cars (CBU), CIF value < USD40,000

and petrol engine < 3,000cc 60

and diesel engine < 2,500cc 60

Source: SIAM, Fitch Solutions

GST A Positive For Autos Production

PASSENGER CAR MARKET - HISTORICAL DATA AND FORECASTS (INDIA 2017-2028)

Latest Developments And Segment Drivers

COMMERCIAL VEHICLE MARKET - HISTORICAL DATA AND FORECASTS (INDIA 2017-2028)

Latest Developments And Segment Drivers

Commercial Vehicle Production By Type

e/f = Fitch Solutions estimate/forecast. Source: SIAM, OICA, Fitch Solutions

MOTORCYCLE MARKET - HISTORICAL DATA AND FORECASTS (INDIA 2017-2022)

Motorbike production 23,147,057 24,507,926 26,484,751 28,569,714 30,842,154 33,302,483

Motorbike production, % y-o-y 16.1 5.9 8.1 7.9 8.0 8.0

Motorbike sales 20,192,672 22,413,865 24,475,941 26,654,300 28,999,878 31,522,868

Motorbike sales, % y-o-y 14.8 11.0 9.2 8.9 8.8 8.7

Motorbike production 36,000,660 38,959,315 42,203,764 45,761,596 49,663,066 53,941,354

Motorbike production, % y-o-y 8.1 8.2 8.3 8.4 8.5 8.6

Motorbike sales 34,233,834 36,767,138 38,973,167 41,077,718 43,542,381 46,416,178

Motorbike sales, % y-o-y 8.6 7.4 6.0 5.4 6.0 6.6

Latest Developments And Segment Drivers

Motorcycle Sales Market

e/f = Fitch Solutions estimate/forecast. Source: SIAM, Fitch Solutions

Industry Risk/Reward Index

Australia Retains Its Lead In Our RRI

Main Regional Features And Latest Updates

Strong Grouping In The High Rewards, Low Risks Quadrant

High Rewards, Low Risks Grouping Highlights Region's Attractiveness

Asia Presents Strong Long-Term Growth Potential