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Comprehensive Pack - Auto PDF
Comprehensive Pack - Auto PDF
Auto
1
• Two-Wheelers
• Overview :3
• Motorcycles : 10
• Exports : 21
• Realizations : 26
• Auto-Dealerships : 51
• Used Vehicles : 67
•Company Analysis : 78
2
2 Wheelers: Overview
3
Two wheeler industry grew at a CAGR of 7% between 2014-2019 with
scooters segment registering the fastest growth.
• Improved road network in Tier 2 and Tier 3 cities and lack of public
transport
•Reducing mileage gap between motorcycles and scooters
•Gender-neutral positioning
•Launch of new models
•Steady expansion in players' dealership network
•Capacity expansion by leading players
• HMSI’s focus on Scooters
5
MOPEDS
• Demand for mopeds mainly comes from small businessmen, shopkeepers and
farmers in rural and semi-urban areas.
• Geographically, AP and TN contribute the highest sales.
• Over the last few years, Kinetic Engineering, Majestic Auto etc have shut their
moped businesses and as a result, TVS Motors is the only player in the segment
• There was a decline in moped sales in the last 2-3 years as erratic rainfall led to
poor farm income.
• But in 2016-17, TVS launched its new four stroke XL 100.This model has been
very well received in the market. The newly launched model is also being well
received in the northern states
• Moped sales constitutes 4% of 2 wheeler sales.
Electric two wheelers to contribute ~15% of domestic two wheeler
sales by fiscal 2024
ELECTRIC VEHICLES
• The share of electric two wheelers is estimated at 1.26 lakhs in fiscal 2019
2024 aided by favourable cost of ownership, lower battery prices and initial
government subsidy.
motorcycles.
The share of motor- cycles sales has dropped from 79% in 2009 1to 64%
in 2019. In contrast, the share of scooters has increased from 15% to
32% in the same period
9
Motor-Cycle review
10
HMSI has been gaining market share at the expense of Honda and
Bajaj.
the decline.
Source: SIAM, CMIE
12
Hero lead this segment with 72.4% market share.
MOTORCYCLES SUB-SEGMENTS
EXECUTIVE • Hero is the undisputed market
MOTORCYCLES SUB-SEGMENTS
Royal Enfield retained the
PREMIUM
leadership position, with 46.2%
market share in fiscal 2019.
16
HMSI is way ahead of others in the scooters segment but it’s share
marginally dropped in FY 19.
18
Two wheelers sales to grow at a tepid pace in the long run.
FUTURE GROWTH
21
After a period of slow or negative growth for 2 years, exports picked
up after 2017.
EXPORTS DESTINATION
Share of key export destinations Share of key export destinations
(2015) (2019)
EXPORTS SHIFT
Asia, Africa and Latin America were major importers of Indian two-wheelers in
fiscal 2015 as per DGFT data .
India's share of exports to Asia and Africa rose to ~70% in fiscal 2019 from ~60%
in fiscal 2015 due to demand from key nations such as Bangladesh, Nepal and Sri
Lanka.
The share of Middle East and Latin America has declined over the same period
from 27% in fiscal 2015 to 18% in fiscal 2019.
In Latin America, countries like Mexico, Peru and Argentina are opting for
localisation of motorcycles, thereby reducing motorcycle demand.
Whereas demand from Nigeria (Africa) is increasing on account of increased
demand for taxi services.
Similarly demand from Nepal (Asia) is also growing on account of improved
economic conditions and healthy demand during Dushehra (festival demand).
24
Bajaj’s market share in exports has dropped due to over exposure to
African markets and dependence on motorcycles.
26
Realizations increased due to the combination of price hikes and
increased share of premium segment from 17% to 23% between 2014
and 2019.
MOTORCYCLES: NET REALIZATION TRENDS
27
Bajaj has the highest realization in Motorcycles due to it’s dominant
position in the premium segment.
supported by rupee
depreciation.
28
Despite having lower market share, Bajaj is the highest profit
making 2-wheeler company due to it’s premium bikes and exports.
30
Raw material costs constitute 70 to 75% of the total costs.
COST BREAK-UP
31
Source: Company Reports
Steel , Aluminium and Rubber constitute the bulk of the Raw
material for motorcycle manufacturers.
32
Source: Industry
S&D and Employee costs have been showing an upward trend.
33
Source: Industry
MARGINS AND PROFITABILITY
34
Capacity Utilization improved in FY 2018 and 2019.
36
Industry Overview
37
Small cars constitute about 60% of the Indian passenger car market
in FY 19.
SEGMENTAL MIX
MARKET SHARES
41
SMALL CARS
• The small cars segment comprised
fiscal 2019
43
Market share in the sedan segment is very volatile with players
gaining and losing the market share significantly over short period of
time.
SEDAN : MARKET SHARE
Source: SIAM
44
Hyundai and Toyota have been the major gainers in FY 2019.
SEDANS: COMPETITION
• Maruti Suzuki's share in the large cars segment started declining post GST
implementation, which imposed a higher cess on hybrid vehicles than earlier tax
rates.
• It has only one model i.e. Ciaz in this segment which is available in the hybrid
variant.
• Also, it received stiff competition from Hyundai Motors' Verna, Toyota's Etios,
and a range of large cars from other manufacturers.
• Hyundai has been able to extend its share as Verna sales improved after it was
relaunched in August 2017.
• Verna has ~21% market share in the large cars segment as of fiscal 2019
• Toyota gained ~4% market share in fiscal 2019 from 13% in fiscal 2018 due to the
launch
45 of its feature-laden Yaris model in May 2018.
Utility Vehicles
46
Mahindra’s share has fallen drastically in the last 5 years while Maruti
and Hyundai has gained considerably.
UV : MARKET SHARE
49
Electric passenger vehicles to contribute ~4% of domestic sales by
FY24 led by higher adoption within commercial use segment.
ELECTRIC VEHICLES
• Battery prices are falling at the rate of 20% annually over the last 10 years and
• In India, the adoption of EVs in cabs is expected to be faster than the personal
vars.
51
KEY FACTORS
• Number of Dealers
• Dealer profitability
• New initiatives
52
Though TVS has the largest number of dealers, sales volume per
dealer is highest for Hero Motocorp.
2 WHEELERS
COMPANY-WISE NUMBER OF SALES VOLUME PER DEALER
DEALERS
53
While Maruti has the largest number of dealers, Hyundai has the
highest sales volume per dealer.
CARS
COMPANY-WISE NUMBER OF SALES VOLUME PER DEALER
DEALERS
54
While Tata Motors has the largest number of dealers Mahindra has
the highest sales volume per dealer.
COMMERCIAL VEHICLES
COMPANY-WISE NUMBER OF SALES VOLUME PER DEALER
DEALERS
55
Workshop revenues constitute a critical portion of cars and 2-
wheeler dealerships.
56
ROCE is higher for the dealer of old OEMs like Maruti and
Hyundai.
57
Profitability of dealers varies across companies.
58
RECENT STRATEGIES BY DEALERS
59
RECENT STRATEGIES
•Such dealerships are mobile showrooms that can be deployed at any location
in about six weeks.
•This is a low-cost approach that enables dealers to reach remote locations and
also makes it flexible for them to relocate.
•One such OEM that set up mobile showrooms is BMW.
•The company opened its first mobile showroom in 2012 in Karnal that was
managed by one of its dealers in Chandigarh.
60
RECENT STRATEGIES
corporate offices of companies, airports, during festival events, carry out a road
61
RECENT STRATEGIES
•Auto dealers, especially two-wheeler and small car dealers are expanding in
tier-3 and smaller towns by opening only sales touch-points in these areas.
•This helps them expand in some of these low-turnover areas by keeping the
cost of opening a dealership low.
•Instead of increasing the number of dealerships, OEMs often prefer that their
existing dealers expand into these smaller markets through standalone sales
points.
62
RECENT STRATEGIES
•Maruti Suzuki India Ltd (MSIL) is among the first automakers to launch its
own driving school.
• While MSIL has granted franchise rights to select dealers across the country, to
run such driving schools, all systems, processes and course content are
monitored by MSIL.
•Through this additional service, dealers can help draw customers and OEMs
can create a brand recall. MSIL currently operates 332 driving schools across 172
cities.
• Other players including Tata Motors, Mahindra & Mahindra; along with
luxury carmaker Mercedes Benz have set up driving schools.
64
CV dealers setting up service stations
•Unlike car and two-wheeler dealers, commercial vehicle (CV) dealers typically
have sales touch-points only and the vehicles are usually serviced by local
garages.
•However, many large CV dealers are now looking to set up service stations as
well.
•As more international CV manufacturers enter the Indian market and more
complex models being manufactured, it makes business sense for CV dealers to
set up service stations.
65
OEMs open to multi-brand service stations
•Over the past few years, OEMs as well as standalone companies have been
setting up multi-brand service station chains in India.
•Prominent names in this space are Carz, Carnation Auto, Mahindra First Choice
Services and TVS Automobile Solutions.
•Eyeing the huge market that India is, foreign multi-brand dealerships are also
looking to set up shop in the country.
•Meineke Car Care Center, Midas Auto Service and AutoZone of the United
States, and Autodistribution International of France are some global service and
auto parts chains that are looking to enter India through an alliance with an
Indian player.
66
USED VEHICLES : CARS
67
Used car market in India is twice the size of the new car market by
sales volumes
68
Used car market is expected to reach 6 million units by 2018-19
69
USED CARS : DEMAND DRIVERS
2003-4 7
20010-11 6
2016-17 4.5
70
USED CARS BUSINESS MODELS
•Park-and-sell (pure-intermediaries):
Dealers allow sellers to park their used cars at their premises for potential
buyers to inspect and to make enquiries.
Dealers receive commissions from one or both parties.
•Buy-and-sell:
Dealers buy used cars, display them in their showroom/parking area and
eventually sell them at a margin, besides facilitating title transfers from
buyer to seller.
•Buy, refurbish and sell:
•Dealers buy used cars, refurbish and sell them at a premium (often with
certification and warranties).
71 •Dealers also facilitate title transfers from buyer to seller.
DEALERS FOLLOW MIXED MODELS IN THE USED CAR MARKET
•Transactions in the used car market differ widely from make to make, and model
to model, based on a number of factors such as car condition, vintage, accident
history, mileage, insurance records, etc.
•Dealers (both OEM-backed and independent) do not always stick to one model.
• To a certain extent, the choice of the business model is decided by the quality of
the used car.
•For example, an OEM-backed dealer would refurbish and certify used cars in
good condition, but offload the vehicles of inferior quality to dealers in the
unorganised market.
•Generally , Buy-and-sell model is more profitable than Park-and-sell. Model due
to the pricing power and potential value addition of certification and warranty.
72
USED CARS : DEMAND DRIVERS
73
USED CARS : DEMAND DRIVERS
75
USED CARS : DEMAND DRIVERS
•Used cars bridge the gap between aspiration and affordability, and provide
significantly lower than new cars, and with added quality certification and
76
USED CARS : DEMAND DRIVERS
ONLINE CLASSIFIEDS
77
Company Analysis
78
Eicher Motor’s market capitalization grew 700 times between
2008 to 2020.
4% market share in 2-
wheelers and 7%
market share in
commercial vehicles.
1
Sep 17, 2001 March 30,
79 2020
ROYAL ENFIELD VS BAJAJ AUTO VS HERO MOTO CORP
1
• If you had bought one share of Eicher at Rs.
224 in 2006, it would have been worth Rs. 15,200
on April 6, 2020.
81
MAJOR STRATEGIC DECISIONS
•Till 2004, Eicher group had a diverse spread of about 15 businesses including
tractors, trucks, motorcycles, components, footwear and garments, but none was
a market leader.
• Lal undertook an intense portfolio analysis and took a hard call.
•He decided to divest 13 businesses and put all money and focus behind Royal
Enfield and trucks, two businesses where he believed the group had a genuine
shot at leadership.
• Back then, conglomerates viewed businesses as family jewels. It was a cardinal
sin to sell anything. But Lal sold almost everything.
82
How Mr. Lal justified his strategy?
"In my mind the basic question was this: do we want to be a mediocre player in
"That's why we sold 13 out of the 15 businesses, the big one being tractors to
•In 2000,Royal Enfield was in a very bad shape. Their monthly production was
2000 units against a capacity of 6000 units. (Capacity Utilization of just 33%)
• Directors of Eicher Motors decided to either sell-off or shut down the motor-
cycle division.
• Siddarth Lal convinced the board that the Bullet need to be given another chance.
• Lal, then 26, was an unabashed Bullet fan:
• he even rode a red-coloured Bullet while leading the baraat (procession) to
his wedding venue, instead of the traditional horse.
• Though the Bullet had its reputation, following, an instantly recognisable build,
and aspirational value, it faced 1many challenges.
84
CHALLENGES
• Competition:
Liberalization of 1990s had led to the introduction of deluge of light, easy to commute, cost
Competitive bikes in the Indian market.
• Quality
There was a joke that the Royal Enfield Bullet travelled directly from Showroom to
Mechanic.
Though the bikes had diehard followers, there were also frequent complaints about them
- of engine seizures, snapping of the accelerator or clutch cables, electrical failures and oil
leakages.
85
CHALLENGES
• Design:
The company had to deal with many basic design questions –
Should the gears be shifted close to the rider's left foot - as in most bikes - or
retained on the right side? Long-term users were dead opposed to this
change.
Many prospective buyers found the Bullet too heavy, difficult to maintain,
with the gear lever inconveniently positioned and a daunting kick-start.
Engine was made of Cast iron that made it prone to oil leaks and frequent
seizures. Its ability to meet increasingly strict emission norms was also
suspect.
A modern aluminium engine would eliminate these problems, but it would
lack the old engine's pronounced vibrations and beat - which Royal Enfield
86 customers loved.
ROYAL ENFIELD: KEY DECISIONS
• The company decided to retain the bikes' rugged looks, including the build, the
design of the head lamp and the petrol tank, many of the old engine's
characteristics - the long stroke, the single cylinder, the high capacity with push rod
mechanism.
• But the company decided to make some bold changes:
• The gear lever was shifted to the left despite the opposition from long-term users
• The new aluminium engine, unlike the old, had hydraulic tappets, a new engine
arrangement, and fewer moving parts. But it did not produce the vibrations and the
beat of the old, but international experts were consulted and sound mapping carried
out for over 1,000 hours to ensure it produced the maximum rhythmic vibrations
possible and a beat, which was 70 per cent of the amplitude of the original.
• The new engine had 30 per cent fewer parts and produced 30 per cent more power
than the old, with better fuel efficiency. By 2010, all Royal Enfield models had begun
to use the new engine.
ROYAL ENFIELD: KEY DECISIONS
89
WHY 350 CC?
90
Bajaj Domineer or KTM could not dent the dominance of Classic 350
cc
92
Both Himalayan and Twins have shown good performance with
almost 45% of Twins sales come from Exports.
93
The company significantly expanded the dealer network in the last 5-6
years.
cities.
94
Royal Enfield’s advertising spend is only 0.6% of sales whereas the
industry average is around 2.2 to 2.5%.
95
LONG CLIMB UP
In October 2008, Royal Enfield launched in Germany its newly designed 500cc
Classic model - inspired by J2, a 1950 model Bullet - with the new engine. It was a
success, admired for its performance and fuel economy.
97
FOCUS ON EXPORTS
EXPORTS
99
ROYAL ENGIELD’S PROFITABILITY
•Most profitable companies with its Net Profit margin at 23%. (Bajaj – 15.5%,
Hero Motocorp – 10%)
•The company has been consistently improving margins YoY.
•In the last ten years, the company posted 1600 bps margin expansion from
10.0% to 27%.
100
FROM BIKES TO TRUCKS
•Lal turned his attention to trucks in 2006 after turning around Royal Enfield.
•Eicher and Volvo hold 54.4% and 45.6% respectively in the joint venture VE
Commercial Vehicles (VECV). This alliance too has led to shareholder value
creation.
•Though VECV is the number 4 player in terms of market share, it has managed to
margins.
101