Economy of two wheeler

• Delhi city travelling cost per month comparison

Ordinary Bus AC Bus Metro2W Executive Segment

4W Entry segment

Distance Travelled 1000 1000 1000 1000 1000Fuel Efficiency (km/ltr) 70 15Fuel cost per litre 64 64

Service charge 67 250Insurance charge 63 500Running charge per Km 0.88 1.5 1.04 0.87 4Total Operating cost 875 1500 1040 986 4750

Value Chain Analysis

Value Chain

ServiceMarketing & sales

Outbound logisticsOperationsSuppliers

Supplier Market

• Matured Auto Component industry• Strong supply chain to major OEM’s• Majority are small and Medium enterprise• Small Companies need to invest heavily in latest

machineries, manufacturing processes, technologies and capacity building to remain competitive

Source: Strategic Plan, Ministry of Heavy Industry and Public Enterprise

10 20 6120

20

40

60

80

100

120

Cumulative sales %

Cumulative sales %

Source : INDIAN AUTO COMPONENT INDUSTRY- AN OVERVIEW, ACMA

Quality Award & Certifications Number of Companies

ISO 9000 552

TS 16949 438

QS 9000 33

ISO 14001 204

OHSAS 18001 95

JIPM 3

Deming Award Winners 11

TPM Award Winners 15

Japan Quality Medal Winners 1

Shingo Silver Medallion Winners 1

Performance of auto component sector

Parameters 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Turnover 8.7 12 15 18 18.4 22Growth rate (%) 29% 38% 25% 20% 2% 20%

Export 1.69 2.47 2.67 3.52 3.8 3.8Growth rate (%) 34% 46% 8% 32% 8% 0%

Imports 1.9 2.48 3.6 5.22 6.8 8.16Growth rate (%) 33% 30% 45% 45% 30% 20%

Investment 3.75 4.4 5.4 7.2 7.3 9Growth rate (%) 21% 17% 23% 33% 1% 23%

Engine Part31%

Drive Transmission Part19%

Body & Chasis12%

Suspension & Braking Part12%

Equipment10%

Electrical9%

Others7%

% share of the Components

Major Players

• India is a net importer of auto components of USD 4.36 Bn

• Export market

Operations

Outbound logistics- Dealers

• Necessity to expand customer touch points• Sales as well as service capability• Semi Urban & rural area are focus(45% sales)• Satellite dealership• Challenge for smaller player and new Entrant

• Hero Motocorp– 800 dealers– 4200 customer touch points– Dedicated rural vertical– Direct Sales effort-5000 & above poulation

Source: Two Wheelers Industry, Growth drivers-ICRA

• Bajaj auto– 500 dealers– Expansion in rural area with commuter bike

• TVS- rural & small city focused• Yamaha

– Tier 2 and Tier 3– Sub dealers for rural market

• HMSL– Product for mass market

Dealer Margins ComparisonBajaj Dealer Yamaha Dealer

Annual Dealer Sales Volumes (units Nos.) 4800 600

Service Load Per Year (units Nos.) 18,000 2,520Revenues (Sales + Service + Spares) (Rs. Crore) 27.3 4.1

Gross margin % 4.3 9.3

Operating Margins (%) 3.60% 3.30%

PAT (Rs. Crore) 0.4 0.1

Payback (years)* 4 8.4

Marketing

Motorcycles

Entry level Executive Premium

Complementors

• Modification • Number plates• Helmets• Financing• Insurance• Comparison websites

External Stake holders• Ministries– Department of road

transport– Department of heavy

industries– Ministry of Petroleum

and natural gas– Ministry of Environment

and Forests– Department of Science

& Technology

• Other associations

ACMASIAMWP-29NAB

To be modified• Fiscal Policy

The Union Budget for 2001-02 had lowered the excise duty on two-wheelers (with engine capacity in excess of 75 cc) from 24% to 16%. The manufacturers responded to this by passing on a relatively large part of the excise cut to customers. The Union Budget thereafter have left the excise duty on two-wheelers unchanged. But the Union Budget 2004-05 provides for a weighted deduction of 150% for investments in R&D. This may facilitate increasing R&D allocations and allow for improvement in the technical as well as product development skills of the Indian companies.

Indian Auto Policy 2002

The Government of India approved a comprehensive automotive policy in March 2002, the main proposals of which are as under:

Foreign direct investment : Automatic approval is proposed to be granted to foreign equity investment up to 100% for manufacture of automobiles and components.

Import tariff : Import tariffs are proposed to be fixed at a level such that they facilitate the development of manufacturing capabilities as opposed to mere assembly.

Incentives for R&D : The weighted average tax deduction under the Income Tax Act, 1961 for automotive companies is proposed to be increased from current level of 125% (The weighted average deduction for R&D was increased to 150% in the Union Budget 2004-05). Further, the policy proposes to include vehicle manufacturers for a rebate on the applicable excise duty for every 1% of the gross turnover of the company expended during the year on R&D.

Environmental aspects : Adequate fiscal incentives are proposed to promote the use of low-emission auto fuel technology (in line with the Auto Fuel Policy). The auto policy states the Government's intent to align domestic policy with the international practice of imposing higher road tax on old vehicles so as to discourage their use.

Vehicle Emission Norms• Emission norms for all categories of petrol and diesel vehicles at the manufacturing stage were introduced for the first time in

India in 1990 and were made stricter in 1996. When the 1996 norms were introduced, it resulted in certain models being withdrawn from the market. With Stage I India 2000 emission norms coming into place, the cost of developing suitable technology has remained high.

The emission norms that are currently in force for two-wheelers and three-wheelers are more stringent than the Euro II norms. The roadmap suggested for emission norms for two/three-wheelers by the Expert Committee on Auto Fuel Policy is as follows:

For two-/three-wheelers the emission norms are recommended to be the same in the entire country:

For new vehicles:

Bharat Stage II norms throughout the country from April 1, 2005

Bharat Stage III norms to be applicable preferably from April 1, 2008 but not later than April 1, 2010.

For reducing pollution from in-use vehicles

▪ New pollution under control (PUC) checking system for all categories of vehicles to be put in place by April 1, 2005• • ▪ Inspection & maintenance (I&M) system for all categories of vehicles to be put place by April 1, 2010• • ▪ Performance checking system of catalytic converters and conversion kits installed in vehicles to be put in place by April 1, 2007.