Feb 4, 2016 - Improving rural and semi-urban infrastructure. â ..... Ratings Division / CRISIL Risk and Infrastructure
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Automobiles sector entering a sweet spot?
February 4, 2016
1
Demand recovery across segments in 2016-17; monsoon remains key monitorable 20 18 14-16
14 10-12
9-11 7-9
growth in per cent
5-7
7 5
4
-2
8 2-4
3
1
11
-2
-3 -5
(7)-(9)
-20
Commercial Vehicles (0.62 mn units)
Cars and UVs (2.6 mn units)
Two Wheelers (15.9 mn units)
Tractors (0.55 mn units)
2016-17 P
2015-16 P
2014-15
2013-14
2012-13
2011-12
2016-17 P
2015-16 P
2014-15
2013-14
2012-13
2011-12
2016-17 P
2015-16 P
2014-15
2013-14
2012-13
2011-12
2016-17 P
2015-16 P
2014-15
2013-14
2012-13
2011-12
-13
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11-13
P: Projected Notes: 1) All numbers pertain to domestic market. 2) 2012-13 and later year numbers for cars exclude sales of Audi, BMW and Daimler 3) Yellow denotes forecast 4) Numbers in brackets denote unit sales for 2014-15 Source: CRISIL Research 2
Regulatory landscape (1/2) Cars and UVs
BS-IV norms applicable in 63 cities.
April 1, 2017 deadline for applicability for entire country
BS-VI norms applicable from April 2020
Intermediate BS-V to be skipped
Impact
Diesel vehicle prices to increase more steeply compared with petrol vehicles; price hike based on engine capacity
No new capacities required, only technology to be upgraded for existing platforms
Multinational companies have technology but will have to incur cost for implementing across platforms; homegrown players to invest in R&D or borrow technology
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Current Scenario Emission norms
3
Regulatory landscape (2/2) Commercial Vehicles
2015-16: Bus Body Code, Mandatory ABS and speed arresters, BS-IV implementation in North India, NGT ban on diesel vehicles > 10 years in NCR
Future: –
BS-IV applicable in the south and a few states in the west in April 2016 with pan India applicability in April 2017
–
Skipping BS-V and adopting BS-VI by April 2020
Impact:
2015-16: MHCV sales preponed to Sep 2015 which saw a 60% y-o-y increase; Bus sales rose by 50% in July 2015
Future: –
Preponement of MHCV replacement demand to March-April 2017
–
No new capacities required; few powertrains, however, may not able to support BS-VI
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Current Scenario
4
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Cars & UVs
5
Small cars to drive PV growth in 2016-17 Rise in disposable income, stable cost of ownership and pay commission to drive sales in 2016-17 32 20 7-9
13
8-10
6-8
1
0 (1)
3-5
5
4
1
9-11
11-13
(34)
(1)
(6)
(9)
Small Cars (1.62 mn units)
Sedans (0.26 mn units)
Uvs & Vans (0.73 mn units)
2016-17P
2015-16 E
2014-15
2013-14
2012-13
2011-12
2016-17P
2015-16 E
2014-15 E
2013-14
2012-13
2011-12
2016-17P
2015-16 E
2014-15
2013-14
2012-13
2011-12
2016-17P
2015-16 E
2014-15
2013-14
2012-13
(25)
Cars& Uvs (2.60 mn units)
E: Estimated ; P :Projected Notes: 1) All numbers pertain to domestic market. 2012-13 and later year numbers exclude sales of Audi, BMW and Daimler. 2) Yellow denotes forecast. 3) Numbers in brackets denote unit sales for 2014-15. Source: SIAM, CRISIL Research
Growth momentum to accelerate in 2016-17 backed by an improvement in economic growth, rural demand and lower cost of ownership; Implementation of the seventh pay commission will provide an additional kicker to growth
Sedan growth to moderate due to stiff competition from compact utility vehicles (UVs)
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14
12-14
4
2011-12
growth in per cent
11-13
6
9%
9%
9%
8%
7%
6%
13% 0%
14% 0% 10%
19%
19%
15%
21%
7%
0% 9% 3%
2% 7% 2%
2% 8% 2%
5% 7% 3%
33%
36%
39%
41%
44%
27%
23%
24%
21%
20%
2011-12
2012-13
2013-14
2014-15
2015-16YTD
6%
33%
30%
2010-11
Micro & Mini
Compact
Compact sedans
Sedans
Compact Uvs
Other Uvs
Vans
Notes: 1) YTD: April-November 2) Compact sedan includes Hyundai Xcent, Honda Amaze and Maruti Swift Dzire. 3) Compact UV includes Ford Ecosport, Renault Duster, Hyundai Creta, Maruti S cross and Mahindra TUV300. Source: SIAM, CRISIL Research
Premium hatchbacks (positioned between hatchbacks and entry-level sedans) have seen strong growth, thereby expanding the share of the compact segment
Compact UVs have attracted sedan customers with aggressive pricing, premium features and petrol variants
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Compact cars and UVs garner consumer interest
7
Rising competition and shortening model life impacting costs of car & UV players Player interest, model launches rise across segments Segments
Best selling Models
Share in overall sales
62 44
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16YTD
7
Small cars
21
20 14
Sedans
No. of players
Uvs
Small Cars 2009-10
Alto
WagonR
I-10
42%
2012-13
Alto
Swift
Wagon R
41%
2015-16 YTD
Alto
Dzire
Swift
38%
2009-10
Dzire
Honda City
Verna
53%
2012-13
Dzire
Verna
Etios
46%
Honda City
Ciaz
Dzire Tour
62%
2009-10
Bolero
Innova
Scorpio
60%
2012-13
Bolero
Ertiga
Innova
49%
2015-16 YTD
Bolero
Ertiga
Innova
33%
Sedans
No of models
Source: CRISIL Research
Reducing life of models and shortening model refreshment cycles impacting costs
R&D spends of leading Indian players now average closer to global players at 4-6 per cent of total revenues
UV segment has seen maximum action in terms of player interest and new model launches
2015-16 YTD
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13 14
15 17 14 13
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16YTD
14
33
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16YTD
31
Utility Vehicles
8
Growth to remain healthy in the long-term Higher real GDP and stable cost of ownership to drive long term PV sales
Addressable households to jump by over 50 million 285
262 238
FY15-20
11-13%
6%
64 31
FY 05-10
13%
2009-10E
2014-15E
Total Households (mn) Total passenger vehicle population (mn)
P: Projected Numbers represent 5-year CAGRs Source: SIAM, CRISIL Research
35
22
12
2019-20P Addressable households (mn)
HH: Household, E: Estimated; P: Projected Source: CRISIL Research
Passenger vehicles growth potential remains high given low PV penetration (18 per 1,000 people as of FY15)
Manifold expansion in addressable market with rising incomes and low cost of ownership
Rising rural penetration to support growth in small car sales
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115
FY10-15
9
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Two-wheelers
10
Gradual recovery in two-wheeler sales projected in 2016-17 24
23
25 17-19
14
12
growth in per cent
4 0
12-14
11
6-8 3
3-5
3
2
0-(2)
(2)-(4)
2016-17P
2015-16 E
2014-15
2013-14
2012-13
2011-12
2016-17P
2015-16 E
2014-15
2013-14
Scooters (4.5 mn units)
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Motorcycles (10.7 mn units)
2012-13
2011-12
2016-17P
2015-16 E
2014-15
2013-14
2012-13
2011-12
-8
Mopeds (0.74 mn units)
E: Estimated ; P :Projected Note: Figures in bracket indicate domestic sales volume in 2014-15. Source: SIAM, CRISIL Research
Weakness in rural income hurting motorcycle sales; pick-up seen only in H2 2016-17 if monsoon is normal
Scooter sales, though moderating, is expected to improve due to:
–
Improving rural and semi-urban infrastructure
–
Rising proportion of women in the workforce
–
Improving mileage
Income boost provided by Seventh Pay Commission to buoy demand; scooters could benefit more
11
Rural market and scooters segment to drive to two-wheeler industry long-term growth Urban markets: Limited scope for growth 120
90
80
80 100
67
70 60
49 50 60 40 40
Long term demand growth to remain stable
30 20
20 73
67
85
82
97
96
0
2019-20 P Segment
10
Volumes ('000s)
5 yr CAGR
15,067
6-8%
0 2009-10
2014-15
Urban Total HH (millions)
Add. HH (millions)
2019-20P
Motorcycles
TW penetration (per cent of add. HH) (excl. mopeds) (RHS)
Scooters
9285
14-16%
Mopeds
954
4-6%
25306
8-10%
Rural markets: Good potential for further growth 200
60 50
180
50
160
Total two-wheelers
39
140
40
120
Source: SIAM, CRISIL Research
29
100
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80
30
80 20
60 40 20
10 161
73
173
103
183
142
0
0 2009-10 Rural Total HH (millions)
2014-15 Add. HH (millions)
2019-20P TW penetration (per cent of add. HH) (excl. mopeds) (RHS)
P: Projected; HH: Household; TW: Two-wheeler Source: SIAM, CRISIL Research 12
Competition heating up as players jostle for market share
16%
18%
5% 20% 0%
22% 1%
61%
72%
12%
46%
56%
37%
24%
14%
2013-14
2015-16YTD
4% 2015-16YTD
2013-14
Economy
18%
24% 2%
8% 11%
13% 7%
37%
38%
2013-14
2015-16YTD
Executive Bajaj
Hero
Tvs
Yamaha
Honda
Premium Royal Enfeild
Suzuki
Others
YTD: Year-to-date Source: SIAM, CRISIL Research
Shift from executive motorcycles to economy at the lower-end and to premium motorcycles at the higherend Success of Bajaj’s CT 100 (launched in latter part of 2014-15) brings it closer to Hero in economy segment Hero has further consolidated its share in high-volume executive segment, backed by its flagship Splendor, Passion and Glamour brands; Bajaj’s market share declining as Discover’s relatively weak performance continues Competition heating up in premium segment with Royal Enfield and Yamaha outperforming peers; Bajaj remained market leader with Pulsar and KTM series but its share is declining due to stiff competition
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Change in market share of players in motorcycle segment
13
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Commercial vehicles
14
Overall CV sales to accelerate in 2016-17 40
30
30
21
16
20
4-6
10
22-24 18 10-12
9
11-13
6
5-7 7-9
7-9
0
0 (3)-(5)
-20
-18
-2
-4
-13
-3
-14 -20
-30
-26 -27
LCVs (0.34 mn units)
MHCVs (0.20 mn units)
Buses (0.08 mn units)
2016-17P
2015-16E
2014-15
2013-14
2012-13
2011-12
2016-17P
2015-16E
2014-15
2013-14
2012-13
2011-12
2016-17P
2015-16E
2014-15
2013-14
2012-13
2011-12
2016-17P
2015-16E
2014-15
2013-14
2012-13
2011-12
-40
CV domestic volumes in 2014-15 (0.62 mn units)
E: Estimated; P: Projected Source: SIAM, CRISIL Research
Despite lower growth trajectory, MHCV sales to sustain at healthy levels in 2016-17 –
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-10
Growth forecast to moderate over a high base due to slowdown in replacement demand by LFOs despite modest improvement in macro economic signals (industrial growth, infrastructure projects, mining activity & agricultural output)
LCV sales to recover slightly in 2016-17 on higher consumption spends and improved financing availability –
Subdued rural income and high NPAs of financiers to limit the recovery over a low base 15
Moderate growth expected in long term Long term demand Segment
2014-15 over 2009-10 (5-year CAGR in %)
2019-20P over 2014-15 (5-year CAGR in %)
2011-12 (volumes in 000s)*
2019-20 (volumes in 000s)
LCV (goods)
6.2%
11-14%
411
608
MHCV (goods)
-0.4%
10-12%
299
330
Buses
0.7%
8-10%
99
126
Total (growth / units)
2.9%
10-13%
809
1064
P: Projected * 2011-12 was peak in terms of CV sales volumes Source: CRISIL Research
CV sales to rise 10-13% CAGR over a low base in 2014-15 on gradual revival in economic growth
Competition from Railways to increase in long-term, post commissioning of DFCs
Key long term trends to watch out for are: GST implementation, dedicated freight corridors’ (DFCs) project progress, and changes in emission and scrappage norms
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Commercial vehicles (domestic)
16
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Tractors
17
Sales growth to pick up modestly across regions in 2016-17; South and West to outperform Sales units - High tractor penetration
4,00,000
- UP and Punjab to drive the revival in FY17
3,50,000
- Replacement demand in this highly penetrated region will also be a driving factor
3,00,000
- Sales volumes to be stable in Rajasthan
2,50,000
- Maharashtra and MP to be laggards due to deficient rainfall and poor irrigation infrastructure
- To show resiliance in FY16 as compared with other regions
- Lower base will help propel FY17 growth rates - Low tractor penetration
15.6% 11-14%
(10)%
28.9%
(9)% 2,00,000
16-19%
(20)% (15.5)%
1,50,000
- Increased focus of government on agri development to support sales volume in FY16
- Andhra Pradesh to lead on the back of better rabi expectations in FY16. Better irrigation also to improve sentiments - Tamil Nadu to lead, most of which will be replacement sales
- Better impetus given by financiers to boost demand
15-17% 1,00,000
17%
10%
11-13%
(15.5)%
(7)%
(2)%
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4,50,000
(5)%
50,000
0 North
West 2013-14
2014-15
East 2015-16 P
South
2016-17P
Source: TMA, CRISIL Research
18
Increasing mechanisation needs to drive growth over next 5 years
12%
13% 11%
12%
10%
Rolling 5 year CAGR (RHS)
2019-20P
Tractor Domestic sales
2014-15
2013-14
2012-13
2011-12
2010-11
6%
Key growth drivers between FY09 & FY14 (16 per cent CAGR)
Key growth drivers between FY15 & FY20 (8-10 per cent CAGR)
10-15 per cent growth in MSPs
High growth in MSPs not sustainable
NREGA scheme led to limited availability of farm labour
Purchase of better seeds leading to better farming methods and increasing use of implements
Increasing land prices leading to purchase of commercial assets with extra income
Predominant use in land preparation and haulage; tractors extending to other farming activities
Increasing availability of finance & more private financers
Gradual evolution of agriculture practices in India such as lease farming, contract farming, cooperatives and producer companies to support gradual penetration in fragmented lands
Financing for used tractors, especially in the North, leading to shortening of replacement cycles
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18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
16%
2009-10
900 800 700 600 500 400 300 200 100 0
2008-09
Units in '000s
(in '000s)
19
Key messages Structurally in a sweet spot, but monsoons the key for some segments Automobile sector structurally in a sweet spot with real income growth expected to accelerate and cost of ownership* of automobiles expected to remain more or less flat
−
Better economic growth, rural demand, stable cost of ownership and model launches to drive offtake
−
Implementation of Seventh Pay Commission seen as additional growth driver; small cars to benefit
MHCV growth momentum to decelerate in fiscal 2017 −
Strong growth in MHCV sales to moderate over a high base (as regulatory changes preponed demand to fiscal 2016) despite improvement in macro economic parameters
−
LCV sales to gradually revive in H2 2016-17 assuming normal monsoon and improvement in financing scenario
Two-wheeler demand to gradually recover in fiscal 2017 −
Motorcycle sales pick up seen only in H2 2016-17 and that too, only if monsoons are normal
−
Scooter sales propelled by structural factors (improving rural/semi-urban road infrastructure & consumer preference); Seventh Pay Commission implementation to further boost sales
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Passenger vehicle sales growth to further accelerate in fiscal 2017
* Includes all costs incurred for purchasing an automobile and running it regularly 20
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Last updated: August, 2014
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21