perspective on automotive...

Perspective on Automotive Steel

S.D. ChhabraAstt. General Manager (Supply Chain)

Maruti Suzuki India Limited

Nov 4th, 2009

Contents

Domestic Automotive Space

Update on Maruti Suzuki India Ltd.

Maruti Suzuki’s Steel Sourcing

Expectations from Indian Steel Mills

Indian Automotive Industry

Indian position worldwide in automobile manufacturing

Two wheelers 2nd

Small cars 3rd

Overall car production 9th

Commercial vehicles 11th

India’s share in world car production in the year

2008 was 3.44%.

Sources : OICA, SIAM etc

NORTH

EAST

WEST

MAN

New Hub : Uttaranchal

SOUTH

Automotive Mission Plan 2016

$ 35 Billion to

$145 billion

$ 4.1 Billion to

$35 billion+ 25 million

From 5% of the Country’s GDP to 10%From 17% of the Industry GDP to 35%

Automotive Mission Plan2006 - 2016

Full Government support for all-round development of the automobile industry

Turnover Export Employment

Auto Growth Drivers- Tariff Reduction

Supportive Trend of Duty Structure

Net Custom Duty

0.00

10.00

20.00

30.00

40.00

50.00

Mar-01

Mar-02

Mar-03

Mar-04

Mar-05

Mar-06

Mar'07

Mar'08

Mar'09

Auto-Components Steel

Excise Duty on Cars

0

10

20

30

40

50

2001

2002

2003

2004

2005

2006

2007

2008

2009

%Big Car Small Car

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

Industry Total 8,467,853 9,743,503 11,087,997 10,853,930 11,175,479 32,334,315

Passenger Vehicles 1,209,876 1,309,300 1,545,223 1,777,583 1,838,697 3,000,000

Commercial Vehicles 353,703 391,083 519,982 549,006 417,126 1,416,079

Three Wheelers 374,445 434,423 556,126 500,660 501,030 1,514,713

Two Wheelers 6,529,829 7,608,697 8,466,666 8,026,681 8,418,626 26,403,523

04-05 05-06 06-07 07-08 08-09 14-15

Indian Automotive Industry: Projections14.35 % CAGR

Source: SIAM Data, ACMA Projections

Steep Growth of Automotive and Auto Component Industry

Update on Maruti Suzuki India Ltd.

Maruti Suzuki India Ltd. - Products

1. 13 Basic models. 7 Engine Types : 796cc, 1061cc, 1067cc, 1197cc 1298cc, 1590cc - all gasoline, 1248 cc – Diesel.

2. Latest addition to portfolio – KB10 (1067cc), KB12 (1197cc) engines

Maruti Suzuki India Ltd - Facts>7,500,000 Satisfied

Customers

25 years of Sustained Leadership

ALTO- Only car in India to cross 1

Million Mark

Greenest Indian Car:

CO2 @109 gm/ km

No. 1 In JD Power CSI-

10 Times in a row

No. 1 In JD Power SSI –

3 Times

22 106 158333 360 473 540 586 667

775~1000

777

0200400600800

10001200

1984

-8519

88-89

1993

-9419

98-99

2002

-0320

03-04

2004

-0520

05-06

2006

-0720

07-08

2008

-0920

09-10

Year (Apr-Mar)

Nos

('00

0)

117 24 32 35 39

5370

~140

020406080

100120140160

1988-89

1993-94

1998-99

2002-03

2005-06

2006-07

2007-08

2008-09

2009-10

Year (Apr-Mar)

Nos

('00

0)

ProductionVolumes have

grown with CAGR > 15%

ProductionTotal Production (in ‘000)

ExportsTotal Export (in ‘000)

Exports have grown with

CAGR > 30%

Maruti Suzuki’s Steel Sourcing

Maruti Suzuki’s Auto Grade Steel Sheet Consumption Pattern

111

120 132 140

195210

106 120150 170

0

100

200

300

400

500

600

FY2004-05 FY2005-06 FY2006-07 FY2007-08 FY2008-09 FY2009-10

Qua

ntit

y, '0

00 M

T

In-house Vendor's

226 243

345

~ 450

260

380

•Values are indicative

•# Projections for FY09-10

Auto Grade Steel Consumption to outpace Passenger Vehicle Industry growth

50

90

50

10

0

20

40

60

80

100

120

Vendor In-house

Local Imports

Maruti Suzuki’s Sheet Metal Sourcing Pattern

•Values are indicative for 2008-09

As against this the component level localization percentage is above 94% for most MSIL Models

Challenges for Passenger Car IndustryExpected to offer:

Improved Acceleration, Braking and CorneringComfortMore Fuel EfficientLess PollutingFrequent Launches of New Models

Key factors:StyleLighter vehicleEnvironmental and Safety norms Minimum Tooling CostAffordability

Typical Material Weight in Cars

Steel: Biggest component of the Material weightAluminium: Due to light weight the consumption has increased Plastics: Due to light weight, appearance and better formability, its consumption has increased

STEEL ~ 70%

OTHERS~30%

Steel is a major raw material for a car, constituting almost 70% of the Material Weight

Expectations from Indian Steel Mills

Expectations from Indian Steel Mills - Quality

PRODUCT:Defect Free Supplies

Consistency in Surface Quality for Skin Panel Applications

Higher Strike rates at Steel makers for manufacturing of Auto Grade Steel, especially Skin panels.

Close dimensional tolerances to be maintained

LOGISTICS:

Packaging Improvements

Expectations from Indian Steel Mills - Cost

PRODUCT:

Automotive Quality Local Steel should be available at competitive prices

Productivity Improvement to reduce cost

Supplies in lower tolerance zone of nominal thickness

LOGISTICS:

Avoiding logistics related losses

Expectations from Indian Steel Mills - DeliveryPLANNING:

Continuous availability with long term commitments

Short order processing lead time

Supplies in lower tolerance zone of nominal thickness

Flexibility in systems to manage abrupt, large fluctuations in market requirements

LOGISTICS:Low inventories at our plant

100% Conformity to delivery schedules

Coming closer to our plant through service centres/ warehouses

2%

10%

-8%

4%

21% 23%

-3%-4%

-32%

-13%

-3%

4%

-40.00%

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Production : variation wrt yearly average vehicle production per day

Production systems under pressure….. …suppliers need to support

Expectations from Indian Steel Mills- Demand Fluctuation in 08-09

• High Tensile Steel

• Galvannealed Steel

• Fuel Tank Material

• Development Lead times

Expectations from Indian Steel Mills - Development

High Tensile Strength Material

Normal Steel HT <=440 Mpa HT > 440 Mpa

HT Usage in Domestic Models HT Usage in EU Export Models

Normal Steel 55% - 65%HT <= 440 MPa 25% - 30%HT > 440 MPa 10% - 15%

Normal Steel HT <=440 Mpa HT > 440 Mpa

Normal Steel 96.5%HT <= 440 MPa 3.5%HT > 440 MPa 0%

Government Regulations

The following safety regulations are in progress and are yet to be implemented

Subject Standard Tentative Implementation Date

Off Set Impact AIS:098AIS:099AIS:100

Lateral ImpactRear Impact

~ Oct 2012

With the implementation of above safety regulations, the focus will shift more towards the usage of Ultra High Strength steels.

Increase in usage of High Tensile Steels in Future. Local Steelmanufacturer to upgrade to cater for High Tensile Steel

Good Corrosion Resistance properties

GA usage in India will go up as India is becoming a Export hub for major auto manufacturers

GA material is used in Export vehicles to meet the stringent corrosion resistance requirements of Europe

Currently all GA requirement is being imported, as the same has not been approved from local mills

Galvannealed Steel

Local Steel mills to gear up for enhanced Galvannealed Steel usage

In the early 1970s all fuel tanks were of Steel

Now both Steel & plastic fuel tanks are in use

MSIL is Currently using Terne coated & Eco-coat steel sheets used for Fuel Tanks of all models

The same is completely being imported to meet our requirement as the same is not available with local mills

Fuel Tank Material

Need for technology introduction by Local Steel Manufacturers






Shorter development cycles in view of frequent new model launches

Investment in Latest Technology

Investment in R&D

Integrated Solutions

Automotive Application Engineering Capabilities

Capacity Planning

Expectations from Indian Steel Mills - Management

Capacity & Technology is to be reviewed and to be aligned with market requirement

Conclusions

Medium Term:

Investment in Latest Technology

Investment in R&D

Capacity Planning

Short Term:

100% Conformity to delivery schedules

Defect Free Supplies

Consistency in Surface Quality for Skin Panel Applications

Competitive Cost; avoiding logistics related losses

Thanks to all the Stake holders present here for their contribution in our

growth

However we continue to expect ….. More and Higher…to be able to deliver more

value to our customers

THANK YOU ALL

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