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India's Automotive Industry: Necessary Steps On Our Way To Global Excellence
India's Automotive Industry: Necessary Steps On Our Way To Global Excellence
India's Automotive Industry: Necessary Steps On Our Way To Global Excellence
Industry
Necessary steps on our way to global
excellence
February 4, 2014
About ASSOCHAM (1/3)
Mission
As a representative organ of corporate India, ASSOCHAM articulates the genuine, legitimate needs and
interests of its members. Its mission is to impact the policy and legislative environment so as to foster
balanced economic, industrial and social development. We believe education, IT, BT, health, corporate social
responsibility and environment to be the critical success factors.
Members: Our strength
ASSOCHAM represents the interests of more than 4, 50,000 direct and indirect members across the country.
Through its heterogeneous membership, ASSOCHAM combines the entrepreneurial spirit and business
acumen of owners with management skills and expertise of professionals to set itself apart as a chamber
with a difference.
Currently, ASSOCHAM has more than 100 national councils covering the entire gamut of economic activities
in India. It has been especially acknowledged as a significant voice of Indian industry in the field of corporate
social responsibility, environment and safety, HR and labour affairs, corporate governance, information
technology, biotechnology, telecom, banking and finance, company law, corporate finance, economic and
international affairs, mergers and acquisitions, tourism, civil aviation, infrastructure, energy and power,
education, legal reforms, real estate and rural development, competency building and skill development to
mention a few.
20140204_AssoCham_final.pptx 3
About ASSOCHAM (3/3)
20140204_AssoCham_final.pptx 4
About Roland Berger
Company profile
Roland Berger Strategy Consultants, founded in 1967, is one of the world's leading strategy consultancies.
With around 2,700 employees working in 53 offices in 36 countries worldwide, we have successful
operations in all major international markets.
Roland Berger Strategy Consultants advises major international industry and service companies as well as
public institutions. Our services cover all issues of strategic management – from strategy alignment and new
business models, processes and organizational structures, to technology strategies.
At Roland Berger, we develop customized, creative strategies together with our clients. Providing support in
the implementation phase is particularly important to us, because that's how we create real value for our
clients. Our approach is based on the entrepreneurial character and individuality of our consultants – "It's
character that creates impact".
In India, Roland Berger operates from offices in Mumbai, Delhi-NCR and Pune.
20140204_AssoCham_final.pptx 5
Message from Secretary General, ASSOCHAM
The present poor state of Indian automotive industry is a huge concern to not only the industry, policy makers but also to
the nation as a whole. Given the extensive forward and backward linkages that this sector enjoys, it is necessary for all
the stakeholders to seriously apply themselves to meet the challenge. ASSOCHAM, India's Apex Knowledge Chamber,
responds to this challenge by forming an exclusive 'ASSOCHAM National Council' on Automotive Industry'.
The National Council, with the inputs of stakeholders, has prepared a pragmatic roadmap. The Apex Chamber is pleased
to inform that a 'World Auto Congress' is being organised by it to deliberate on the theme of 'Automotive Industry:
Developing an Indian Model for Excellence'.
In this endeavor, ASSOCHAM has received good support from the Government. The Apex Chamber would like to place
on record its appreciation and regard for particularly, Dr. Sutanu Behuria, IAS, Secretary, Ministry of Heavy Industry &
Public Enterprises, Government of India.
The Apex Chamber would like to thank Dr. Wilfried Aulbur, Managing Partner, Roland Berger Strategy Consultants for his
support in bringing out a very relevant publication at this juncture.
I, on behalf of ASSOCHAM, take pleasure in inviting the inputs and active participation of all the concerned members in
finding out appropriate solutions and taking them up with the Government from time to time.
D. S. Rawat
Secretary General
Email: d.s.rawat@assocham.com ; Website: www.assocham.org
The Associated Chambers of Commerce & Industry of India
ASSOCHAM Corporate Office: 5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021
Tel: 011-46550555 (Hunting Line) Fax: 011-23017008 / 9
20140204_AssoCham_final.pptx 6
Message from Secretary, Ministry of Heavy Industries
and Public Enterprises
I am very happy to note that The Associated Chambers of Commerce and Industry of India (ASSOCHAM)
is organizing the WORLD AUTO CONGRESS to identify the challenges and emerging opportunities in the
Automobile sector on Tuesday February 4, 2014 in New Delhi.
While most of the leading global Auto companies have their presence in the Indian market, the Industry is
currently facing some challenges, yet is poised for higher growth in the coming years. Indian OEMs also
need to gear up to tackle challenges of stringent emission norms, skilled manpower, safety norms in
vehicles etc. I strongly believe that Indian Automobile Sector is one of the examples of successful
manufacturing success story in the country and ultimately becoming an export hub for the Automobile and
Auto Component sector.
I deeply appreciate the initiative taken by ASSOCHAM to promote the Automobile Sector. I am sure that the
ASSOCHAM will continue to engage in providing an effective forum to facilitate dialogue between
Government, the Auto Industry and other Stakeholders for ensuring resurgence and growth of Auto sector
as a whole.
I convey my good wishes for the success of World Auto Congress.
Dr. Sutanu Behuria
Secretary
Ministry of Heavy Industries and Public Enterprises
Department of Heavy Industry, Government of India
20140204_AssoCham_final.pptx 7
Message from Managing Partner, Roland Berger Strategy
Consultants
The automotive industry plays a key role in terms of employment and knowledge creation around the world.
Time and again, the automotive industry has generated a virtuous cycle, enabling more and more people to
buy the products that they themselves produce.
It is hardly surprising that key industrial nations such as Germany, Japan or Korea have taken active steps
in enabling their national automotive industry to succeed on a global scale. Infrastructure that was put in
place helped automotive exports as well as the countries at large. Knowledge partnerships drive innovation
and leverage co-operation with universities. Labor flexibility safeguards jobs for many even in the face of
manufacturing competition from China.
Many emerging countries realize the potential that the industry holds. Brazil focuses on innovation and
local value addition via tax-based incentives. South Africa upgrades its port infrastructure to become a
global vehicle export hub. The list of examples is long and growing.
In the light of these developments, it is imperative that the Indian government develops a long-term,
sustainable policy for the automotive industry that is diligently and fully executed. This is an area where
ASSOCHAM and its National Automotive Council aim to work with the government to create sustainable
and positive change.
This document shall be treated as confidential. It has been compiled for the exclusive, internal use by our client and is not complete without the underlying detail analyses and the oral presentation. It may
not be passed on and/or may not be made available to third parties without prior written consent from Roland Berger Strategy Consultants. RBSC does not assume any responsibility for the completeness
and accuracy of the statements made in this document.
20140204_AssoCham_final.pptx 10
The global automotive industry: A growth story lasting more than
125 years! Much cooler than IT!
Global sales of passenger vehicles1) [million vehicles]
FORECAST
96.2
92.0 +4.6%
86.9 +5.9%
79.5 +3.0% 81.9 +6.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
SAAR
79.5 82.0
80
75 69.5
70 64.1 63.8
65
60
55
50
2005 2006 2007 2008 2009 2010 2011 2012 2013e
12
6.3 May '13
10 8.0 10.4 6.2 Jan '13
6.8 6.7
8 6.0
6.4 5.9 May '13
6 5.4 5.8 5.9 Jan '13
4.3 4.3
4 2.6
2.9 1.5 1.6 2.7 Mar'13
2
1.1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013e
Note: For India the volume is for financial year ending in March of the year indicated
Source: IHS, OICA, SIAM, Roland Berger 20140204_AssoCham_final.pptx 13
Regional growth rates: Western Europe will see another weak year
in 2013
Global sales of passenger vehicles1)2)
NAFTA Western Europe China
12% 11%
9% 4% 6% 7% 9% 9% 7%
5% 3% 4%
3% 3% 2% 0%
-3%
-9%
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
South America
World 19% Japan/Korea
10% 1%
5% 6% 6% 6% 5% 6% 6% 5% 0%
4% 3%
0%
-2%
-8%
-12%
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
Forecast
1) Incl. light commercial vehicles 2) Year-on-year growth rate
19 18.3
17.7 -23%
18
17
16
15 SAAR
14.0
14 13.8 Jan '13
Going back to 1994… 13.7 Mar '13
13 Lowest volume with 13.5 May '13
12 13.5 m
11
10
2005 2006 2007 2008 2009 2010 2011 2012 2013e
Truck order intake has historically proven as leading indicator for European car production and
4 has risen in Q1 2013
Consumer confidence in Europe increased for the sixth consecutive month in May
5 to its strongest level since the middle of last year
Interest rates to Euro area households have steadily declined since January, following
6 interest rate cuts by the ECB – Loan volumes have risen by 15.4% in the same time frame
Source: HIS, ECB, KBA, ANFIA, SMMT, CCFA, Roland Berger 20140204_AssoCham_final.pptx 16
Supplier profitability: After the all-time high in 2010, the profitability
of the global auto supplier industry is now declining again
Key performance indicators of automotive suppliers
Revenue growth [2000=100] EBIT margin [%]
~180 6.9
180 ~175 7 6.6 6.6
167 6.1 6.1 6.1 ~6.0
170 5.8
6
5.2 5.0
160 154 ~5.5-6.0
148 150 5
150
141 4
140
129 3
130 125 3.3
120 117 2
2.3
110 106 1.8
100 1
0 0
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '121) 131) '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '121)131)
1) Estimate – Calculation of final 2012 data currently in progress
12
10.3
~9-10 ~9-10
10
9.8
8 7.1 9.3
7.0
6.3 ~6 6.5 6.5
~6
5.6
6 ~5-6 5.1
'07 '11'122) '07 '11'122) '07 '11'122) '07 '11'122) '07 '11'122)
Trend 2012 vs. 2011
1) n = approx. 600 suppliers, 2012 estimated 2) Estimate – Calculation of final 2012 data currently in progress
CAGR
13 25
800 23%
700 12 20
600
11
500 15
16% 10
400
10
300 9
200
5
8
100
0 7 0
2000 2002 2004 2006 2008 2010 2012 2002 2004 2006 2008 2010 2012 2002 2004 2006 2008 2010 2012
-5
Top Low
4,000 20 30
3,500 18
25
3,000 16
2,500 14 20
2,000 12
10 15
1,500
1,000 8
10
500 6
0 4 5
2001 2004 2007 2010 2002 2004 2006 2008 2010 2012 2002 2004 2006 2008 2010 2012
Top Low
20140204_AssoCham_final.pptx 22
B. Reforms,
Commitment and
Social Cohesion
Matter
German Competitiveness 1995 -
2011: A Case Study
20140204_AssoCham_final.pptx 23
Several key factors contributed to Germany's success in recent
years
2.3 120
2.2
110
1.5 100
1.3 USA
90 France
80 EU15
70 Italy
> Poor competitiveness – low growth – rising unemployment – declining wealth (GDP per capita: #
3 in EU 1995 ➔ # 11 2005)
> High competitiveness – high growth – structural decline of unemployment – highest employment
ever – growing wealth (GDP p.c.: # 11 in EU '05 ➔ # 9 '11)
1) Eurozone, USA, Japan, UK, Switzerland, Norway, Sweden, Denmark, Canada, Australia, New Zealand
20140204_AssoCham_final.pptx 27
B1
… created a political framework for superior competitiveness of German business and for growth,
employment and wealth creation/distribution
20140204_AssoCham_final.pptx 28
B2
Source: DIW Berlin, German Federal Employment Agency, European Commission, Eurostat, ECB, OECD, German Federal Statistical Office 20140204_AssoCham_final.pptx 30
B4
7 Diversified globalization
20140204_AssoCham_final.pptx 32
D1
Market share Unit labor costs Productivity Domestic light Employees car Employees
Europe 2000 vs. 2008 [cars/employee] vehicle production manufacturing suppliers
2000 vs. 2011 2000 vs. 2011 2000 vs. 2011 2000 vs. 2010 2000 vs. 2010
Ø EBIT 2011 ∑ EBIT 2011 Premium per worker Premium per worker
[% of revenue] [EUR bn] 2011 [EUR] 2011 [EUR]
4,100 5,000
2.5 3,000
1,500
2.6 600
> All stakeholders gain from growing competitiveness and business cycle
> VW's premium for workers correspond dividends of € 42.3 bn share value
> Flexibility of labor costs keeps value added and employment in the country
1) Excluding Nissan
20140204_AssoCham_final.pptx 35
Hyundai Group today – #3 car producer in the world, high
profitability, broad product portfolio and geographical reach
Overview Hyundai Group today
> #3 passenger car maker in the Segment Sedan Hatch Wagon SUV MPV/Van Coupé Total
world (6.8 m units in 2012)
A 2% 10% 0% 12%
> Revenues: EUR 59.1 bn2)
> Operating Income: EUR 5.9 bn2)
B 4% 5% 1% 10%
> Market cap.: EUR 39.3 bn3) 47% 26% 2% 20% 4% 1% 100%
1) In % of segment/body style combination within total global sales 2) At 31st December 2012 3) At 29th November 2013
1967 1976 1986 1991 1994 1997 1998 2003 2008 2011
> Inauguration of the Export to USA Annual production > Acquisition of Kia Became #5 in
company by Chung exceeds 1 m units > Completion of passenger car sales
Ju-yung (private India plant
entrepreneur)
> License production
of Ford Taunus as
first model
20140204_AssoCham_final.pptx 41
The impact of a major crisis on India is comparatively minor, it is
time to focus on the root causes of India's recent performance
Impact of Eurozone and US Crisis on 2012 GDP Growth
(deviation from baseline forecast in percentage points)
Indonesia
Malaysia
Philippines
Thailand
Hong Kong, China
Korea, Republic of
Singapore
Taipei, China
China, People's Republic of
India
Japan
Asia
-4.00 -3.50 -3.00 -2.50 -2.00 -1.50 -1.00 -0.50 0
New global crisis Severe recession Eurozone recession
7 Diversified globalization
20140204_AssoCham_final.pptx 43
In addition, several basic challenges need to be addressed
1 Develop and execute long-term, growth-oriented, stable policy roadmap across all industries
5 Communicate a clear long-term roadmap for vehicle emissions, fuel efficiency and safety
standards to enable investment planning by industry
20140204_AssoCham_final.pptx 44
Roland Berger
Strategy Consultants
20140204_AssoCham_final.pptx 45
Roland Berger Strategy Consultants is a truly global firm –
We provide strategic advice to the world's top decision makers
Roland Berger Strategy Consultants – Key facts
Amsterdam I Barcelona I Beijing I Beirut l Berlin I Brussels I Bucharest I Budapest I Casablanca I Chicago I Detroit I Doha l Dubai l Düsseldorf
I Frankfurt I Göteborg I Hamburg I Hong Kong I Istanbul l Jakarta I Kuala-Lumpur I Kyiv l Lagos l Lisbon I London I Madrid I Manama I Milano I
Moscow I Munich I Mumbai I New York I New Delhi NCR I Paris I Prague I Pune I Riga I Roma I Sao Paulo I Shanghai I Singapore I
Stockholm I Stuttgart I Tokyo I Vienna I Warsaw I Zagreb I Zurich
20140204_AssoCham_final.pptx 48
We have successfully advised a broad client portfolio from different
industries in various strategic projects in India (2/3)
Selected industrial references in India
Selected customers
Typical projects
> Product portfolio optimization & export strategy for major Indian supplier
> Lean manufacturing for India's largest foundry
> Indian market studies for European automotive supplier
> Location strategy for a global auto component player
> M&A and due diligence support for a leading Indian engineering services player
> India growth strategy for a Japanese supplier
> India growth strategy for a business unit of a leading Indian automotive
conglomerate
> Commercial due diligence for an Indian engine and transmission manufacturer
> M&A target identification in Europe & SEA for leading Indian supplier
> Off-sett strategy for globally leading aerospace and defence players
> Logistics study for automotive industry association
> Creation of off-set toolbox for Government of India
> Definition of Engineering Export strategy for the Government of India
> Definition of Manufacturing Codes for Electronics for the Government of India
> M&A search in Europe & SEA for an Indian automotive supplier
20140204_AssoCham_final.pptx 49
We have successfully advised a broad client portfolio from different
industries in various strategic projects in India (3/3)
Selected other references in India
Selected customers
Typical projects
> Accelerated Zero Base Budgeting for a major global bank
> Customer satisfaction assessment for a global Re-Insurer
> Market overview for a global insurance player
> Market potential and entry study for a global specialty chemicals
player
> Growth initiative for a global chemicals player
> Mining services entry strategy for a diversified Indian agro-chemicals
business
> Renewable energy foot-print for a global chemical player
> Lean Manufacturing for a major global renewable energy player
> Renewable energy roadmap 2020 for a leading industry association
> Market entry strategy for major CGR companies
> Due diligence of potential take over target for a Brazilian CGR player
(India part)
20140204_AssoCham_final.pptx 50
Further, through numerous research studies and close work with
industry associations we gained a profound knowledge about the
Indian market
India chem Green energy Power sector reforms India automotive SIAM India auto- India's Aerospace &
(2010) blueprint for India – task force committee study (2012) motive logistics Defence Sector
report for CII (2010) (2010) (2013) perspectives (2013)
and solutions
Draft Security Manual European Car crisis Thermo Processing – Achieving Theme Paper: SIAM Theme Paper: CII
for Private Industry – and implications for Key market trends Manufacturing Contribution of auto Manufacturing
Key issues and suppliers (2013) (2013) Excellence (2013) industry to economic Excellence Conclave
approach (2013) development (2013) (2013)
20140204_AssoCham_final.pptx 52