Passenger Cars Industry Trend 2017-2018

DATE: 28.11.2017

PASSENGER CARS INDUSTRY TREND

India is expected to emerge as the world’s third-largest passenger-vehicle market by 2021. It took India
around seven years to increase annual production to four million vehicles from three million. However, the
next milestone—five million—is expected in less than five years. Hitting that mark will depend on today’s rapid
economic development continuing, with a projected annual GDP growth rate of 7 percent through 2020,
ongoing urbanization, a burgeoning consuming class, and supportive regulations and policies.

Key trends shaping the Indian passenger-vehicle market

1. Favorable macroeconomic and demographic trends

Currently, the automotive sector contributes more than 7 percent to India’s GDP. The Automotive Mission
Plan 2016–26 sets an aspiration to increase the contribution to 12 percent.
A number of economic trends could help in meeting this target. Rapid urbanization means the country will
have over 500 million people living in cities by 2030—1.5 times the current US population. Rising incomes will
also play a role, as roughly 60 million households could enter the consuming class (defined as households with
incomes greater than $8,000 per annum) by 2025.
In the future, these macroeconomic and demographic trends could shift pockets of growth in passenger-
vehicle market. Mini cars and hatchback cars have been the mainstay for the automobile industry in India,
with share around 50 percent and growth of 6 to 7 percent between financial year 2014 and 2017. These
segments will continue to maintain a dominant position, but the majority of growth is expected to come from
new segments such as compact SUVs, sedans, and luxury vehicles.

2. Continued government focus on supporting the industry

Through the Automotive Mission Plan, the National Electric Mobility Mission Plan (NEMMP), and other
initiatives, the government seeks to achieve two objectives—facilitate long-term growth in the industry and
reduce emissions and oil dependence.
In the Automotive Mission Plan 2026, the government and industry set a target to triple industry revenues,
to $300 billion, and expand exports sevenfold, to $80 billion.
To tackle emissions, the government seeks to bring local standards up to par with global standards, enabling
India to leapfrog from BS-4 to BS-6 emissions (the Euro 6 equivalent) by 2020 (Exhibit 1). Additionally, India has
implemented Corporate Average Fuel Efficiency norms in which the manufacturers have to improve their fuel
efficiency by 10 percent between 2017 and 2021 and by 30 percent or more from 2022.
Passenger Cars Industry Trend 2017-2018

Exhibit 1
Change in regulations of g/km of CO2

180 World of Today,

Until 100 g/Km CO2, a portfolio of
160 IC Engines, mild hybrids and less
than 10% electrification can meet
140 targets.

120
World of Near Future,
100 Below 100 g/Km CO2, a portfolio
game with equal of ICE, plug-in
80 hybrid EVs and EVs can meet
targets.
60
Electric Vehicle World,
40 to achieve target below 50 g/Km
CO2, a portfolio mainly consisting
20 of EVs and PHEVs is required.

0
2015 2020 2025 2030
Source: International Council on Clean Transportation,
EU CHINA INDIA US McKinsey Analysis

Additionally, to address pollution from old vehicles, the government is working

on an initiative that focuses on formulation of end-of-life or scrappage policies. It plans to give incentive for
the adoption of these policies with the help of lower taxes, discounts on purchase prices, and simple
compliance processes.
To reduce dependency on oil imports, the government is promoting adoption of alternative fuels through
FAME2, which is an extension of the original FAME (Faster Adoption and Manufacturing of Hybrid and Electric
Vehicles) initiative. Where “FAME1” offered incentives to electric vehicles (EV) and hybrid EV buyers, FAME2 is
expected to incentivize electrification of the public-transport fleet of buses and taxis, as well as facilitate
demand for all types of alternative fuel. Furthermore, to enable immediate adoption, a lower goods and
services tax of 12 percent is applied to battery electric vehicles, compared with 31 to 48 percent for other
vehicles.

3. The development of India as a manufacturing hub

Although there is still a long way to go before India becomes a leader in the manufacturing arena, companies
in the automotive sector are embracing this opportunity to leverage India as a hub for low-cost, high-quality
products. After creating a strong value proposition in mini cars, India is gaining global recognition in the
compact sedan and SUV category.

4. The potential for global disruptions

The global automotive industry is undergoing a cascade of disruptions that will reshape it in unexpected ways,
and India will be no exception to this. Four key trends will shift markets and revenue pools, change mobility
behavior, and build new avenues for competition and cooperation.

Electrification. Electrification has just started to take off in India. Factors such as declining prices of batteries
and supportive policies from the government are stimulating the segment’s growth. In 2017, only 2,352 units
Passenger Cars Industry Trend 2017-2018

of electric vehicles were sold. However, early signs of growth are visible through an order for 10,000 electric
vehicles by the government’s energy-service company known as Energy Efficiency Services Limited. Likewise,
local governments in ten cities, with populations of one million or more people, have placed orders for 390
electric buses during phase one. In the next phase, the order book is expected to be in the range of 1,000 e-
buses.
The pros and cons of electrification continue to evolve. Reduction in emissions and less dependency on oil
imports are clear advantages of electrification. The level of adoption of electric vehicles will determine its
impact on the automobile industry.
Once the market starts evolving, penetration rates for scooters, 3-wheelers, buses and passenger vehicles in
India will rise.

Expected Battery-Electric-Vehicles (BEV) penetration in India across vehicle segments by 2030 -

0-5 % 5-15% 15-25% 25-35%
 Medium and Heavy  Executive Sedans  Light commercial  Motorcycles under
commercial vehicles  Full-size utility vehicles under 3.5 125cc
 Light commercial vehicles tons  Scooters and
vehicles over 3.5 tons  Motorcycles over mopeds
 Construction 125cc  3-wheelers
Equipment  Mini or Compact  Premium and luxury
cars cars
 Mid-size cars  Buses
 Compact utility  Light commercial
vehicles passenger vehicles
 Passenger vans
Source: Industry roundtables organized by the McKinsey Centre for Future Mobility for automotive industry experts and executives,
August 2017

From a customer point of view, the value proposition of electric vehicles will be reduced total cost of
ownership, particularly in applications where asset utilization can be high.
However, this trend requires careful planning and execution, as there are certain risks associated with it. These
include dependence on China for raw material, competitive disadvantage in power electronics and battery
manufacturing, and lack of infrastructure—for example, there are fewer than 1,000 charging stations in India.
Moreover, many consumers remain wary of electric vehicles because of the cost, range anxiety, and lack of
options.

Shared mobility. Penetration of shared mobility in India remains low compared with China and the United
States, but a major shift is under way in densely populated cities where the use of e-hailing cabs costs less,
comparatively, than driving a personal car. Major stakeholders from the government to automakers to
venture-capital funds and cab aggregators agree that the industry will continue to grow, becoming a
significant alternative to commuting in growing urban areas. For example, two of the major cab aggregators
covered 500 million trips together in 2016; that number is expected to rise with innovative models like cab-
pooling and pay-later options.
Connected vehicles. Connectivity is still in the early stages of adoption in India. A minuscule share of vehicles
sold in India come with factory-fitted connectivity features, but the mass adoption of smartphones, coupled
with low data costs could enable connectivity features to proliferate.
We see some early signs of adoption visible in the ecosystem. For example, one major vehicle-insurance player
in India offers discounts on premiums if the vehicle has an antitheft device. Several automakers have recently
introduced connectivity features, including infotainment, navigation, and communication interfaces. IRDA, the
insurance regulatory body, has also invited views on pay-as-you-drive insurance products that use telematics
to affect premium prices.
Passenger Cars Industry Trend 2017-2018

Autonomous vehicles. Autonomous vehicles (AVs) offer promise to resolve some of India’s road-safety

challenges. Drivers and passengers in India see about 12 percent of global road fatalities, and more than 80
percent of road accidents involve some aspect of driver error. AVs have the potential to reduce traffic
congestion and improve safety and fuel efficiency.
However, neither industry nor regulatory players are confident of rapid AV sales uptake due to fear of job loss,
weak infrastructure (for instance, traffic), lack of technological readiness, and lack of self-discipline in the
driving culture. That said, certain advanced driver-assistance systems features such as park assist, navigation
service, anti-lock brake assistance, electronic stability program, and others have started to make their way into
vehicles in India. And once the Bharat New Vehicle Safety Assessment Program comes into full force these
features will see significant uptake.

Passenger Cars Sales Trend for FY 2017-18

The financial year 2017-18 has seen car sales in India crossing 3.28 million units for the first time in India
and very soon is set to overtake Germany to become the third largest car market globally. Overall
3,287,965 units were sold in India in the domestic market last financial year at a growth rate of 7.89
percent. While many expected the passenger vehicle sales in India (Cars, SUVs, and Vans) to report a
double-digit growth, frequent changes to the tax structure post-GST and addition of cess of SUVs and
premium cars did have an adverse effect that resulted in slowing down the pace. Sales of premium
automakers like BMW India, Audi India, Mercedes-Benz India and Jaguar Land Rover are not included in
this list.
Passenger Cars Industry Trend 2017-2018

TOP PASSENGER CARS – FY 2017- TOP PASSENGER CARS – FY

18 (model wise) 2017-18 (brand wise)
Sl. No. Vehicle Sl. No. Vehicle
1 Maruti Alto 1 Maruti Suzuki
2 Maruti Dzire 2 Hyundai
3 Maruti Baleno 3 Mahindra & Mahindra
4 Maruti Swift 4 Tata
5 Maruti WagonR 5 Honda
6 Hyundai Grand i10 6 Toyota
7 Hyundai Elite i20 7 Renault
8 Maruti Celerio 8 Ford
9 Renault Kwid 9 Nissan
10 Tata Tiago 10 Volkswagen

CURRENT ENGINE OIL TREND:

If we consider the Top 10 selling vehicles in last financial year, 16, 00, 000 units were sold
which constitutes 50% of total passenger cars sold.

In petrol segment, the recommended viscosity grade of 0W-20 and 5W-30 (API SM and API
SN) and for diesel, 5W-30 and 15W-40 (ACEA A5/B5 and API CH4) dominates the market.

For detailed report, kindly check annexure 1.

ANNEXURE 1
 Passenger Cars Industry Trend 2017-2018

SL NO. MODEL FY 17-18 (sales in unit) FY 16-17 (sales in unit) SUMP SIZE (in L) SAE recommendation
1 Alto 258539 241635 2.8 0W-20
2 Wagon R 168644 172346 2.9 0W-20
3 DZIRE 196990 167266 3.1 0W-20
4 Swift 175928 166885 3.1 0W-20
5 Grand i10 151113 146228 3.3 5W-30
6 Elite i20 136182 126304 3.3 5W-30
7 Baleno 190480 120804 3.1 0W-20
8 Kwid 83089 109341 3 5W-30
9 Vitara brezza 108640 - -
10 Celerio 94721 97361 2.8 0W-20
11 Creta 96899 3.3 5W-30
12 Omni 84746 2.7 5W-30
13 Innova 79092 5.9 0W-40
14 Eeco 67263 4.2 5W-30
15 Ciaz 64448 3.1 0W-20
16 Ertiga 63527 3.1 0W-20
17 Eon 59489 3 5W-30
18 city 57984 3 0W-20
19 bolero 56639 - -
20 tiago 78829 56123 4 5W-30
21 scorpio 49319 - -
22 ecosport 48547 4 5W-30
23 xcent 47614 3.3 5W-30
24 KUV100 35698 - -
25 amaze 33756 3 0W-20
26 dzire tour 32612 3.1 5W-30
27 jazz 32554 3 0W-20
28 etios sedan 31177 3.9 0W-40
29 redi-go 27352    
30 zest 26907 4 5W-30
31 xuv 500 26894 - -
32 tuv 300 26241 - -
33 figo aspire 21943 4 5W-30
34 s-cross 21417 - -
35 br-v 20417 3 0W-20
36 polo 20124 2.8 0W-40
37 indica 19810 - -
38 duster 18947   15W-40
39 ritz 17833 3.1 5W-30
40 ameo 16892    
41 verna 14924 3.3 5W-30
42 ignis 14701 3.1 0W-20
   TOTAL 2748699    
TOTAL SALES 3280000 (approx.) 3046727

Extra

GOVERNMENT INITIATIVES:
Passenger Cars Industry Trend 2017-2018

The Government of India encourages foreign investment in the automobile sector and allows 100
per cent FDI under the automatic route.

Some of the major initiatives taken by the Government of India are:

 The Government of India aims to make automobile manufacturing the main driver of
"Make in India" initiative, as it expects the passenger vehicles market to triple to 9.4
million units by 2026, as highlighted in the Auto Mission Plan (AMP) 2016-26.
 The government plans to promote eco-friendly cars in the country—i.e. CNG-based
vehicles, hybrid vehicles, and electric vehicles—and also to make mandatory 5 per cent
ethanol blending in petrol.
 The government has formulated a Scheme for Faster Adoption and Manufacturing of
Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020,
to encourage the progressive introduction of reliable, affordable, and efficient electric and
hybrid vehicles into the country.
 The Automobile Mission Plan (AMP) for the period 2016–2026, designed by the
government is aimed at accelerating and sustaining growth in this sector. Also, the well-
established Regulatory Framework under the Ministry of Shipping, Road Transport and
Highways, plays a part in providing a boost to this sector.

EMISSION NORMS:

The Government of India has already made decision to implement BS VI emission norms from
2020 from the current BS IV.
The key up gradation is shown in the table below -

Tier CO THC NMHC NOx HC+NOx PM PN [#/km]

Petrol (Gasoline)
BS IV 1.0 0.10 - 0.08 - - -
BS VI 1.0 0.10 0.068 0.060 - 0.005** 6×1011***
** Applies only to vehicles with direct injection engines
*** 6×1012/km within first three years from Euro 6 effective dates
† Values in parentheses are conformity of production (COP) limits

Engine exhausts- NOx, O3, CO, CO2, PM 2.5 & 10