400 Industry Focus

India’s automobile output totaled 3.84 million units in 2014, declining by 1.5% over 2013 and

showing a consecutive 2-year downward trend. Despite the record high exports of 0.707 million units, the outputs decreased due to shrinking domestic demand. In terms of vehicle types, passenger cars (including SUVs and MPVs) grew slightly by 0.1% over 2013 (3.15 million units). However, commercial vehicles declined by 8.2% (0.682 million units) over 2013 due to a major slide in light models. The leading OEM automakers such as Maruti Suzuki increased the output; Honda’s sales grew; both Ford and Volkswagen exhibited a rising trend in output while manufacturers such as Tata, Toyota, Hyundai and Mazda showed a two-year decline. The decrease was especially significant for Tata and Mazda due to the long term sales stagnation and adjustment of inventory. For the outlook of 2015, as all the makers step up with the production of new car models and foreign car manufacturers adjust their export strategies, India’s automobile output will show a return to growth.

I. India’s Auto Production and Sales(1) Overview of Production of Major Manufacturers

India produced 2.369 million passenger cars in 2014 for an output close to 2013. The production of car models with the total length of less than 4 meters decreased by 2.7% (1.932 million) units while models with the length of over 4 meters increased by 13.8% (0.437 million units) thanks to the sales driven by Honda’s new model “City”; the output of utility cars increased by 8.4% (0.616 million units) and continued the growth momentum. Despite the fact that the

India’s Auto and Auto Parts Production and Sales and Opportunities for Taiwanese Manufacturersby James Hsiao, Industry Analyst of IEK (ITRI)

Figure 1. Comparison of India’s Vehicle Production Quantities by Vehicle Types

Passenger cars(full-lengthunder 4ms)

Passenger cars(full-length over

4ms)SUV MPV

Lightcommercial

vehicles

Medium andlarge commercial

vehiclesUnit: 10,000 units

193.2 43.7 61.6 17.3 43.3 24.7

0

50

100

150

200

250

Source: SIAM; FOURIN; IEK (2015/07)

Figure 2.Comparison of Outputs of India’s Major Automakers in 2014

MarutiSuzuki Hyundai Tata Mahindra Renault/Ni

ssan Honda Ford Toyota VW AshokLeyland

Othermakers

Output 126.9 61 48.8 41.3 21.8 17.1 15.1 14.8 10.3 9.7 14.2

020406080

100120140

10, 000 units

Source: SIAM; FOURIN; IEK (2015/07)

production of the utility car leader Mahindra (including SsangYong) decreased by 10.0%, the new models such as Honda Mobilo, Ford EcoSport, Nissan Terrano Datsun Go powered the increase of production. The output of small vans decreased by 20.5% (0.173 million units), the biggest reduction among all vehicle types.

In 2014, India’s commercial vehicle production fell by 8.2% (682,000 units), light commercial vehicle production fell by 16.0% (433,000 units) due to the impact of decrease in the production of light trucks (LGVs) while the production of medium-to-large commercial vehicles grew by 9.6% (249,000 units). The impact of economic downturn, resulted in the reduction of production of large commercial vehicles for two consecutive years from 2012 to 2013. The inauguration of the

401Industry Focus

new regime after the election along with infrastructure investment and recovery in demand, triggered the momentum for the increase of large commercial vehicles. Fig. 1 shows the comparison of quantities of vehicle production in India by vehicle types in 2014.

Maruti Suzuki, India’s largest car maker, showed a production growth of 8.3% in 2014 compared with 2013 and reached 1.269 million units, in which passenger cars output grew by 6.0% (1.069 million), SUV by 14.7% (74,000 units), and MPV by 27.1% (126,000 units), and the total automobile production was higher than that in 2013. The passenger cars benefited from new models Celerio and Ciaz while the production of MPV was lifted by the partial remodeling of Omni; Suzuki began the construction of a new plant in January 2015 in Gujarat state with production scheduled in 2017 when Suzuki’s annual capacity is expected to reach 1.76 million units and targeted at 2 million units by 2020.

Hyundai's automobile production fell by 3.5% (611,000 units) due to the relocation of production operations to Turkey for the exports of i10 / i20 models to the European market. The capacity was adjusted in the production base in India in consideration of capacity surplus. Hyundai plans to strengthen its presence in India’s domestic market and is expected to reach the goal of production growth in 2015.

Tata’s car production fell by 21.9% (488,000 units), of which passenger cars decreased by 6.1% (106,000 units), partially modified cars such as Nano showed a production increased by 3.8% (19,000 units) and the production of Indigo / Indica / Zest declined by 8.0 % (87,000 units). In 2015 Tata Motors will add 2 van models Bolt and small SUV Nexon and the production is expected to increase. Despite a 31.0% (173,000 units) production decrease of light trucks which had a higher market share, the recovery of the large truck market powered up the production by 11.4% (an increase of 121,000 units).

The production of Mahindra (including Mahindra & Mahindra, Mahindra Trucks and Buses, SsangYong)

Figure 3. Forecast of India’s Auto Market

10, 000 units

2013 2014 2015(e) 2016(f) 2017(f)Sales Qty. 324.2 318.1 324.3 333.4 343.9Growth rate -9.7% -2.0% 2.1% 2.8% 3.1%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

305310315320325330335340345350

10, 0

00 u

nits

Source: SIAM; IEK (2015/07)

Figure 4. Percentages of India’s Vehicle Sales by Type in 2014

Passenger cars, 80.9%

Light trucks, 12.3%

Large and mediumtrucks, 5.7%

Buses, 1.1%

Source: SIAM; IEK (2015/07)

Figure 5. Market Shares of India’s Major Auto Makers in 2014

Maruti Suzuki, 36.3%

Tata, 14.0%Hyundai, 13.0%

Mahindra, 12.2%

VW, 1.7%

Ashok Leyland, 2.7%

Toyota, 4.2%

Honda, 5.7%

Ford, 2.4%

Others, 6.4%GM(Chevorlet), 1.4%

Source: SIAM; IEK (2015/07)

Figure 6. Forecast of India’s Production, Sales, and Exports of Cars.

2013 2014 2015(e)Output 390.1 384.0 398.1Sales 324.4 318.3 328.3Exports 66.8 70.7 72.6

050

100150200250300350400450

10, 0

00 u

nits

Source: SIAM; IEK (2015/07)

402 Industry Focus

decreased by 9.2% (413,000 units) as its SUV market share was taken by Ford and Honda with the production decline by 10.0% (213,000 units). The car maker plans to strengthen its sales power through a joint development plan with SsangYong for small SUVs.

In 2014, Renault’s / Nissan’s production fell by 1.9% (218,000 units), of which Nissan increased production by 15.6% (167,000 units) while Renault decreased production by 34.1% (51,000 units). Although sales were driven by Nissan Terrano Datsun Go to a certain degree, the generally sluggish sales forced Renault to discontinue the production of Scala and Pulse in June and November respectively in 2014.

Honda’s new plant began operation in February 2014 with an annual capacity of 120,000 units to form a production of 240,000 units per year for an output growth of 48.4% (171,000 units) as new City and Mobilio contributed to the growth. Ford’s production grew 23.2% (151,000 units), and EcoSport realized growth in the Indian domestic market and exports also showed a growing trend. With the new plant beginning operation in the first quarter of 2015, Ford’s annual output could reach 440,000 units. Toyota cut production by 14.9 % (148,000 units) as the production of Etios series showed a decline at the end of 2014 due to a major modification and was once halted due to a labor dispute in March. VW increased production by 19.5% (103,000 units) to exceed the 0.10 million mark for the first time. VW began its presence in the Mexican market to boost the company’s production. Fig. 2 shows the comparison of outputs of India’s major automakers in 2014.

(2) The Automobile Market Overview

India’s overall car sales growth rate continued to decline by 2.0% in 2014 and showed a stabilized situation as compared with the same period of 2013 thanks to the establishment of the new government in July; the extension of the commodity tax due in July to the end of December and the drop of international crude oil prices pushed the sales to grow 3.9% compared to the second half of 2013, which still could not make up for the slide of 7.2% over the first half of 2013. In 2015, with the market rebounding from the lowest point and the cease of commodity tax cut on passenger cars at the end of 2014, all the major automakers are planning to introduce new models to stimulate car buying. The sales are expected to slightly grow 2.1% over 2014 for about 3.243 million units. Fig. 3 shows the forecast of the Indian automotive market.

In 2014, India’s passenger car sales grew by 0.7% (2.571 million units) over 2013 thanks to the impact of the application of the commodity tax to passenger cars which led to the increase of share in the passenger car market by 2.1% while

Figure 7.　Forecast of India’s Auto Parts Market

0

10,000

20,000

30,000

40,000

50,000

Million USD

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Domestic auto parts sales value 34,332 37,697 40,600 43,280 46,180

Growth rate 4.1% 9.8% 7.7% 6.6% 6.7%

2013 2014 2015(e) 2016(f) 2017(f)

Source: ACMA; IEK (2015/07)

Figure 8. Percentages of India’s Auto Parts Production in 2014

Engine system, 31.5%

Drive and steering system,18.8%

Suspension and braking system,12.1%

Interior and instrument,10.0%

Electrical system, 8.7%

Other components, 6.9%

Vehicle body and chassis,12.0%

Source: ACMA; IEK (2015/07)

Figure 9. Forecast of India’s Auto Parts Imports and Exports Values

0

5,000

10,000

15,000

20,000

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%

Auto parts imports value 12,863 13,532 14,574 18,978 18,978

Auto parts exports value 10,342 10,580 11,754 12,343 12,343

Imports value growth rate 4.5% 5.2% 7.7% 8.9% 9.1%

Exports value growth rate 8.0% 2.3% 8.0% 5.0% 5.0%

2013 2014 2015(e) 2016(f) 2017(f)

Million USD

Source: ACMA; IEK (2015/07)

Figure 10. India’s Auto Parts Exports Destination Countries and Their Exports Percentages.

Europe, 38.1%

North America,21.4%

Asia, 25.2%

Africa, 7.1%

Latin America, 7.4%

Australia & New Zealand, 0.9%

Source: ACMA; IEK (2015/07)

403Industry Focus

the sales of commercial vehicles to which the commodity tax was not applicable dropped by 11.8% (606,000 units), causing the market share to fell from 21.2% in 2013 to 19.1% in 2014. The market share of LGVs fell to 12.3% in 2014 due to the 19.4% drop in the sales of models under 3.5T; the sales of medium and heavy LGVs rebounded in the second half of the year to show an annual sales growth of 4.3% as compared with 2013, driving the annual sales up by 0.3%; the market share of buses dropped by 11.8% over 2013 for a slight decrease of the annual sales by 0.2%. Fig. 4 shows the percentages by vehicle type of India’s car sales in 2014.

India’s top 5 automakers of domestic car sales in 2014 were Maruti Suzuki, Tata, Hyundai, Mahindra and Honda. Hyundai jumped to the third place while Toyota was kicked out from the top 5 by Honda. The sales of the top one market share holder Maruti Suzuki approximated 1,152,000 units for a growth of 8.3% as compared with 2013. The overall market showed a slight decline while the automaker’s market share grew by 3.4% over 2013. Tata, the largest local commercial vehicle manufacturer, sold about 444,000 units, falling by 23.9% as compared with 2013, which led to the market share fall by 4.0%. Hyundai, the second largest passenger car manufacturer, benefiting from the successful sales strategy of i10 benefit and Grand-i10, sold 411,000 units with an increase of 8.3% as compared with 2013. In addition, Honda, benefiting from the modified Honda City and Mobilio in 2014 to enter the market, showed a sales growth of 67.0% (180,000 units) to surpass Toyota to secure a space among India’s top five automakers. Fig. 5 shows a comparison of market share of India’s domestic automakers; Fig. 6 shows the forecast of India’s production, sales and exports of cars. The county’s auto output is expected to reach 3.981 million units and sales and exports may reach 3.283 million and 726,000 units respectively.

II. Auto Parts Sales Overview

India places great emphasis on the development of auto parts industry and has an active presence in the European and U.S. markets. The country possesses strong capabilities of product development (the capabilities in materials components and development led to the launch of low-cost

vehicles such as Nano and Indigo). According to statistics of The Automotive Component Manufacturers Association of India (ACMA), the election year of 2014 powered the growth of auto parts production and domestic demand growth with the auto parts market sales reaching US$ 37.7 billion to represent a growth of 9.8% over 2013. Fig. 7 shows India’s auto parts market forecast.

Among the auto parts produced in India in 2014, engine system components took up the highest proportion (31.5%), followed by drive and steering system components (18.8%), suspension and brake systems (12.1%), body and chassis components (12.0%), interior and instrument (10.0%), electrical system components (8.7%) and other components (6.9%). Fig. 8 shows the percentages of India’s auto parts production in 2014. About 61% of the auto parts produced belonged to the original vehicle market, about 24% to after-sales service market and 15% to exports.

According to the ACMA statistics, in 2014, the value of India’s auto parts imports amounted to US$ 13.53 billion and exports value totaled US$ 10.58 billion, which grew 5.2% and 2.3% respectively as compared with 2013. The country continued a steady economic growth after the inauguration of the new government. For the forecast of 2015, auto parts imports value will reach US$ 14.57 billion and exports value will reach US$ 11.75 billion, growing 7.7% and 8.0% for imports and exports respectively as compared with 2014. The ASEAN countries are India’s largest auto parts import source. The lowering of the import duty will mitigate the auto parts production or cost pressures. Automakers such as Toyota, Honda, Suzuki, Ford and Nissan will benefit from the import tax cut on brakes, gears, airbags, fuel tanks, suspension systems, steering systems, seat belts and other major components. Under the India-ASEAN Free Trade Agreement, the implementation of zero tariff on critical imported components began in December 2013 and imported auto parts accounted for more than 30% of India’s domestic market. Fig. 9 shows the forecast of India’s auto parts imports and exports values.

Regarding the percentages of India’s auto parts (within HS code 8708) exports in 2014 by region and country, Europe was the top region sharing 38.1% of the total exports, followed by Asia (25.2%), North America (21.4%), Latin America (7.4%), Africa (7.1%), and New Zealand/Australia (0.9%); the main export destination countries were the United States (20.5%), Germany (8.1%), the UK (6.2%), Turkey (5.2%), Italy (4.9%), Brazil (4.0%), and Thailand (3.4%), other export regions or countries accounted for 38.6%. Main exported components

404 Industry Focus

were hydraulic and steering systems & steering gear systems and parts, road wheels and parts & accessories, crank shafts for engines, head lamps and other

lighting equipment. Fig. 10 shows India’s auto parts exports destination countries and their exports percentages.

Regarding the percentages of India’s auto parts (within HS Code 8708) imports in 2014 by region and country, Asia was the top region sharing 57.2% of the total imports, followed by Europe (34.0%), North America (6.4%), Latin America (1.2%), Africa (0.9%), and New Zealand/Australia (0.2%); the main import sources were China (21.0% ), Germany (15.0%), Japan (12.4%), S. Korea (12.0%), Thailand (7.5%), the United States (6.3%), Italy (3.7%); other import sources accounted for 22.1% of the imports. The auto parts exported to India are divided into two main categories: high-tech transmission mechanisms (with automatic transmission) and engine system components mainly from Germany, Japan, South Korea and Thailand; components of lower technological levels and with less added values such as rubber/plastic components imported from China. Fig. 11 shows India’s auto parts imports source countries and their imports percentages.

Figure 11. India’s Auto Parts Imports Sources and Their Imports Percentages

Europe, 34.0%

North America, 6.4%

Asia, 57.2%

Africa, 0.9%

Latin America, 1.2%

Australia & New Zealand, 0.2%

Source: ACAM; IEK(2015/07)

III. Opportunities for Taiwanese Manufacturers

Since the beginning of the 21st century, large international automakers have been facing the issues of overcapacity and slow market development in North America, Europe and Japan. Major automakers dealt with these issues through mergers and acquisitions, strategic alliances and equity

purchase, which coupled with the rise of auto markets in BRICS, ASEAN, central and eastern European countries, car sales in emerging countries have surpassed advanced countries. The future auto industry will accelerate the regional division and OEMs restructuring, and the global supply systems will dominate the development of auto parts and the landscape of the auto industry will experience major changes.

Taiwan’s auto industry is limited to the domestic market as the issues of market slowdown and excessive capacity exist in the domestic consumer market. Against the backdrop of FTAs signed mutually among various countries in the region, the impact faced by Taiwan’s auto part industry is much bigger than the OEMs as they are mostly export-oriented. In the face of low-cost and small-size cars launched by emerging countries and high-value development of the components produced by advanced countries, the diverse needs of new energy vehicles, auto parts manufacturers in Taiwan are working actively towards the development of international integration and trying to realize the strategic division of works by region in order to maintain industrial competitiveness.

Taiwan’s main auto parts manufacturing locations all have their own complete satellite supply chains and manufacturers enjoy the advantages of production quality compliant with international standards, comprehensive excellent test and inspection equipment and excellent labor quality. The auto parts makers have accumulated practical experiences in precision machinery manufacturing, precision plastic injection mold, rapid prototyping, reverse engineering, design and development and flexible manufacturing and production management, which have enable them to be good at manufacturing diverse products in small quantities with yield rates and manufacturing precision meeting the standards of the leading international auto parts makers. In addition to active participation in the regulatory certification of international OEMs, they are dedicated to sophisticated and high-quality manufacturing. India’s automobile and parts manufacturing, research and development management, logistics, parts delivery and even the supply chain, are far less advanced and complete than those of Taiwan. It is an emerging market with a population and an automobile industrial scale second only to China, providing Taiwan manufacturers with a very good opportunity for expanding sales. Precision auto parts manufacturing, rapid prototyping, metal processing components and rubber/plastic injection molding components are the items worth the investment.