Market overview & trends of Asian Auto-sales market － Japan, China and ASEAN markets

Market overview & trends of Asian Auto-sales market－ Japan, China and ASEAN markets

22nd August 2012 Delhi, India

Ryohei SAKAMOTONomura Research Institute India officeAutomotive Industry Consulting Division

Nomura Research Institute Tokyo officeAutomotive I& Electronics Industry Consulting Dept.

7th Floor/Unit 2A, Tower A, Building No.5, DLF Cyber CityPhase III Gurgaon, Haryana, India 122 002

Copyright （ C ） 2012 Nomura Research Institute, Ltd. All rights reserved.

2

Agenda

I. Attractiveness of Asian auto-After MarketII. Market outlook of major markets

• Japan• China• ASEAN

III. Entry Approaches for Indian Auto Companies


I. Attractiveness of Asian auto-After Market － Automobile market projection

Worldwide, annual car sales will reach 100 mil. At 2017.Then Asian market is estimated to account for nearly half of it.

3

ASIA (%) 40%

(tho. units)

Projection of Annual Automobile sales (flow market) by region [%] Comments

Total Car Sales at 2017 will reach approximately 100 mil. units

Expected continuous growth mainly in emerging markets– India market will reach 5

mil. around 2017– Growth expected to

slow down in developed markets

44% 47%

W Europe 1%

CAGR[09-17]Region

US 6%

Brazil 7%Russia 11%

China 11%

India 15%Japan 0%Other Asia 5%

RoW 7%

*above projection contains only main countries in each region(Source) NRI estimate, only containing PV and pickup trucks



Stable and brisk growth of car sales in Asia will result in expansion of stock market (total # of cars owned)…

4

Comments

Since growth of stock market will come after continuous growth of car sales, portion of Asian market is less than that in new car sales.

However, the importance of Asian stock market will be increased by;– Market shrink started in

developed market such as Japan

– China, India starting to enjoy the bonus of market expansion also in stock market

ASIA (%) 24%

(mil. units)

W Europe 1%

26% 28%

CAGR[09-17]Region

US 0%

Brazil 7%Russia 4%China 12%India 8%Japan -2%

Other Asia 3%

RoW 3%

Projection of Automobile Stock Market by region [%]

*above projection contains only main countries in each region(Source) NRI estimate, only containing PV and pickup trucks



Major OEMs have been rapidly increasing their exposure at Asian market.Penetration of foreign majors’ cars will drive people to care more about after parts.

5

20112007 20112007 20112007 20112007 20112007 20112007

VW GM TOYOTA Renault/Nissan Hyundai Ford

Asianmarket (%):

Automobile sales of TOP 6 worldwide OEMs [07-11] and its ratio of Asian market(%):

Increased by 10%+

in million units

(Source) NRI



Asia is expected to continue balanced growth both in flow/stock markets.Especially, long-term high growth in stock market of emerging countries expected.

6

Growth of both Flow / Stock market by region [CAGR 09-17] Comments

China

India

USJapan

W EuropeRussia

Other Asia

BrazilAsia Total

Others

CAGR [09-17] of Annual Automobile sales(flow market) by region [%]

CAGR [09-17]of Stock market

by region [%]

In addition to the market size, Asia will enjoy well-balanced growth in flow and stock market.

Especially, in China, there will be remarkably rapid growth in terms of stock market.– As a result of fast

motorization since 2004– Increased demands for

used cars, after parts are expected

(Source) NRI Estimate


I. Attractiveness of Asian auto-After Market － Business stability as stock business

After market business is “Stock Business”, which is relatively stable unlike “Flow Business” such as new car sales.

7

[Reference]Historical change of Auto-sales and GDP per capita of Thailand Comments

Car sales in emerging markets usually takes place according to the increase in GDP per capita

There are, however, various risk factors such as financial crisis and political issues in short term.

After market has a merit to stabilize automotive business unlike flow businesses such as new car sales, which sometimes causes short term sharp decline of sales

Military CoupAsia Financial Crisis

Financial Crisis

(Source) UNSTATS, JAMA

Annual Auto-sales [tho. Units]

GDP per capita [tho. BAH]


I. Attractiveness of Asian auto-After Market － Free Trade Agreements with Asian Countries

FTAs which India have agreed / discussing with countries in Asian region will accelerate trading related to auto-aftermarket business.

AS

EA

NN

on-AS

EA

N

India

Thailand

Singapore

Malaysia

Other ASEAN

China

Korea

Japan

Bi-lateral Multi-lateral

Bi-lateral FTA(signed in 2010)

Existing Planning (under discussion)

Bi-lateral Multi-lateral

Bi-lateral CECA(effect in 2005)

8

Bi-lateral CECA(effect in 2011)

Multi-lateral FTA(signed in 2010)

Bi-lateral CEPA(effect in 2010)

Bi-lateral CEPA(effect in 2011)

India- IndonesiaCECA

India- ChinaFTA

Regional Comprehensive Economic Partnership(RCEP *ASEAN+6)

(Source) JETRO material


9

Agenda

I. Attractiveness of Asian auto-After Market

II. Market outlook of major markets• Japan• China• ASEAN



II. Market outlook of major markets － World wide aftermarket overview (market size projection)

Total market size of worldwide aftermarket is 249 billion USD at 2009 and expected to reach 314 billion USD at 2015.

10

Comments

Asia will account for more than 30 % of world wide market at 2015.

Especially, Asian region and Latin America will see rapid growth. – Remarkable growth of

CAGR 30% in Latin America, 21% in China, 9% in India.

– Unlike, developed markets will see slow-downed growth / market shrink

ASIA (%) 23%

(bil. USD)

Europe 2%

25% 32%

CAGR[09-17]Region

US 1%

Latin America 30%

China 21%

India 9%Japan -1%Other Asia 5%

Auto Aftermarket Market Size Projection Worldwide by Region

Middle East 6%

(Source) “AUTOMOTIVE AFTERMARKET (2008.03)”


II. Market outlook of major markets － World wide aftermarket overview (Consumer tendencies)

Consumers in China and India have tendencies to go to auto-dealers if their insurance covers, otherwise go to general repair shops if only simple repair required.

11

Consumer tendencies on afterparts/services purchase by regionUtilization of Aftermarket channels

Prefer auto-dealers to take care of below parts, even after insurance period has expired

Engine Radiator AC Meter Wipers Others

Japan

China

Indonesia

India

After parts/services in auto dealers are considered to be “high quality but expensive and frequently delayed”Opinions from FGI in China;–“Dealers don’t give

services unless I make reservations. Repair shops can do right on the spot when I visit”

–“Repair shops provide guarantee of 1.5 year on original parts. Dealers don’t.”

–“When radiators have broken down, dealers changes all of it, while repair shops can fix only part of it..”

Auto- dealers regardless of insurance periodAuto- dealers if insurance coversGarage regardless of insurance period Quotes

(Source) Questionnaire research conducted by NRI


II. Market outlook of major markets － Japan (Market size)

Auto-after market is a mature market like new car sales market.

12

Auto After-sales Market Size in Japan Comments

20082006 2010 2012 2014

CAGR:-1%

JapanChinaASEAN

Japanese Auto-aftermarket is a mature market.– According to decrease in

flow/stock market, after market is on the decrease.

OES rout used to be the majority but currently starting to decrease gradually. – On the other hand,

general sales is stable

OES route General sales route(bil. USD)



II. Market outlook of major markets － Japan (product mix)

Unique feature of Japanese market is that the audio/car navigation systemaccounts for considerable portion.

13

2010; Value basis

Sales by product category in both sales routes Comments

Tyre, audio & car navigation system and oil / Chemical products are the biggest product categories in terms of sales.

Consumables and functional parts have been more sold through general sales route.

After sales through OEM route After sales through general outlets

2010; Value basis

Audio,Car NavigationSystem

General After parts

Oil,Chemicals

Others

Audio,Car NavigationSystem

TyresFunctionalParts

Others

Consumablegoods

Oil,Chemicals

Aluminumwheels

Interior Accessories

Dress up parts

Tune up parts

JapanChinaASEAN


II. Market outlook of major markets － Japan

For auto-dealers, aftermarket can generate more profit than that of new car sales and its profit contribution highly appreciated.

14(Source)JADA

–More than 60%of the total profit coming fromAfter Sales

Management condition of typical Japanese auto dealers (2010, average of 10 dealers) Comments

It is becoming important to gain profit from after market, since new car sales has peaked out.

Not only for auto-dealers, auto-makers after parts sales is one of important profit sources.

New carsales

Used carSales

Services/Parts

Others

[21%]

[13%]

[65%]

[2%]Sales Operating Profit

[49%]

[11%]

[38%]

[1%]

JapanChinaASEAN

Million JPY



For Indian companies, producing Private Brand products and re-manufacturedproducts are considered to be potential entry approaches.

• DIY and Auto Center Chains have been important sales channel, in addition to auto-dealers.• These sales channels have entered “Private Brand” business leveraging their strong / broad sales network.• Especially, oils , cleaning liquids, filters and consumables such as wiper blades and batteries are

compatible with this “private brand” business.• Moreover, portable navigation device (PND) is also promising in that it is possible to replace existing

expensive genuine navigation system.

15

1. Providing Products for Private Brands of Car Parts Shop Chains

Possible Entry Approach to Japanese Market for Indian Companies

• Used parts such as re-manufactured products for expensive parts such as parts for engine/transmission are receiving attention recently.

• Target parts include starter, alternator, turbo charger, injection pump, transmission parts and others.

• Currently these re-man parts have been provided dominantly by Japanese makers. If possible to recycle or provide core parts of these, potentially possible to capture after parts demands of Japanese vehicles

JapanChinaASEAN

2. Providing Re-manufactured Products for Expensive Auto-Parts



(Ref.) Import of auto-parts from overseas markets has been increasing briskly.Also for Indian companies, auto-parts export to Japan is expected to grow.

16

* The above includes all the auto parts, not limited to after parts(Source) JAPIA(Source ） Trade Statistics

Recent trends of import of auto-parts Comments

Import of Auto parts have been recently increasing due to;– Intensified cost

competition among car makers

– Enhanced quality of Chinese auto-parts makers

Import from India have been increased by45 % yoy from 2010. – Value of more than 400

bil.JPY is already imported from China.

– There considered to be a lot room for expansion of import from India20032001 2005 20112007 2009

Recent Import of auto-parts Auto-parts import by country (2011)

China

Thailand

US

Korea

Vietnam

Germany

Philippines

Indonesia

Taiwan

France

India

99%

91%

103%

103%

84%

94%

94%

96%

104%

83%

…

145%

YoY

JapanChinaASEAN

Thousand ton Billion JPY; 2011


II. Market outlook of major markets － China (Market size)

China is one of the markets where huge growth takes place continuously for upcoming years.

17

Auto After-sales Market Size in China Comments

20072005 20152009 2011 2013

CAGR:21%

Rapid market growth of after-market has been expected in China for following reasons;

– Rapid growth of stock market with CAGR of 12%

– Increased consumer consciousness regarding after care for their cars

JapanChinaASEAN

(bil. USD)



II. Market outlook of major markets － China

60-70% of all the after parts (value basis) is generated throughAuto Parts City route. However, to capture this opportunity is extremely difficult.

18

Distribution network of after market in China Comments

2,800 店

OESroute

Chainsroute

Auto Parts CityRoute 60 ～ 70%

Parts maker

Wholesale

Distribution

Outlet

End-user

Auto parts makers

End users

Auto Dealers(4S)

MakerAM div.

AutoDealer

SecondaryShop

RepairGarage

Primaryshop

BCS/DensoShop

Autocentre

Distributor[Primary shop]

Bosch/Denso

2,800

200-300 k

(Source) Various material, interviews

• Secondary shops not only purchase genuine parts from AM division of parts makers but also purchase original parts via distributors.

• Since Japanese dealers have repair garage aside, there is no business flow of purchasing parts from independent repair garages.

• Generally, however, Chinese auto-dealers rarely have repair garages and they contract with independent repair shops.

• Most parts shops are located in Auto Parts City.

• Parts shops in Auto Parts City purchasing parts from exclusive agency inside of each Auto Parts city.

• Distribution flow in Auto Parts City is not well-organized. Therefore, parts makers need to do sales activities for primary shops respectively.

Parts shop[Secondary Shop]

250 k

JapanChinaASEAN

Auto Parts City

* # of outlets (estimated)


19


There are more than 240 thousand repair shops in China,most of which are small businesses.

(Source) Chinese Auto Yearbook

19

Break down of repair shops in China by license type Comments

Repair shops in China reached 220 thousands in 2003 and 240 thousands in 2005.– Only 58 thousands have

1st/2nd license which correspond those in Japan.

– While Japan has 80 thousands repair shops for 75 million car owned, China has 58 thousands repair shops for 33 million car owned.

– Density of repair shops in China (569 cars covered by one repair shop) is higher than in Japan (938 cars covered by one repair shop)

2nd Tier

Repair shop Categories

1st Tier

3rd tier

8,000

50,000

182,000

Service LineupLicenseType

• Capable of overhaul of E/G and transmission

• Capable of repair of high complexity

• Mid-sized repair shops Capable of repair related to E/G, transmission, Chassis and other driving related parts

• Small-sized repair shops only capable of minor repair related to interior/exterior which doesn’t influence driving function

# of Companies

JapanChinaASEAN


On the contrary, its actual situation is… ＿　　　 Auto Parts City has broad coverage nation wide

II. Market outlook of major markets － ChinaMajority of repair shop/auto parts shops are accumulated in auto parts cities, althoughsome of all independent shops do not sell genuine parts and many “copy parts” are in market.

20

Name CityInvestment(mil. RMB)

Area(tho. m2)

北京東方基業汽車城 Beijing 2,200 400

中汽西南汽配物流配送基地 Chengdu 120 130

江西国際汽車城 Nanchang 120 280

哈爾浜国際汽車城 Harbin 380 -

高力国際汽車文化村 Wuxi 1,500 55

江都汽配件市場 Jiandu 120 130

東莞国際汽車城 Dongguan 450 860

海奔（国際）汽車貿易消費城 Nanhai - 200

Copy parts of MAZDA detected byGuangdong Administration for Industry & CommerceBy notification by related party, Guangdong Administration for Industry & Commerce inspected parts companies and charged approximately 2,800 copy parts of MAZDA parts.Administration officers inspected 6 sales companies in a Auto Parts City in Guangzhou city. As a result of the inspection, approximately 2,000 parts have been charged as copy parts of MAZDA, such as oil filter, fuel filter, air filter, piston and valves.

In Shenzhen, 10 legal officers inspected 4 sales companies in Luohu area and detected 800 copy parts in total as a result of legal execution / inspection.

(Source) China Intellectual Property News 11th Dec. 2009

JapanChinaASEAN


II. Market outlook of major markets － China (Auto Parts City in Beijing)

Built in1994. Total area of 100 tho. m2 and 50 of building floor space.Has 1,000 shop tenants with annual 1 billion RMB.

• New building whose rent is more expensive

21

JapanChinaASEAN

Assumed low efficiency in sales activityImage of typical APC buildings (both found in the Beijing West APC)

• Old building whose rent is cheaper, only has two floors

• In a primary parts shop in the APC, there were business cards of parts makers found.

• Some of primary shops (exclusive agency in the area) still placing orders based on the contact info such as these.

(Source) pictures taken by NRI


22


Major wholesaler doesn’t exist between parts makers & APC.Therefore, parts shops in APC directly deals with auto parts makers.

• Major wholesaler doesn’t existbetween parts makers & APC

(source) hearings by NRI

Distribution network of after market in Auto Parts City (Image)

22

Parts Maker BParts Maker A Parts Maker C・・・

End users

Repairshop

Primary Shop In Auto Parts City(Regional Exclusive Agency )

APC

• Primary shops are placing orders directly parts makers or their wholesale division.

• (Each agent has a PC in their outlet for ordering, if not, they are placing orders by phone call, utilizing contact points of business cards of parts makers)

• For example, Bosch has a regional exclusive agency in APC, apart from BCS shop.

• They also sell other brand products

• Repair shops in town or individual users come to APC to buy auto parts.

• APC functions both as a retailer and as a wholesaler.

• For example, parts shops usually purchase parts via regional exclusive agency in APC but can also directly purchase parts from parts makers

• Sold prices are assumed to be adjusted so that they can be homogeneous regardless of distribution channel

• Inside of APC is not well-organized

• Real-estate companies are in charge of operating APCs and they attract parts hops and charge tenant fee

JapanChinaASEAN

Repairshop

Secondary ShopIn Auto Parts City





Key points on China Auto-Aftermarket

In China, new car sales has rapidly increased recently. Stock market and after market are also considered to greatly expand continuously.

In terms of sales channel, general sales route, most through “Auto Parts City (APC)” , accounts for approximately 70% of total turnover.

Distribution flow of general sales route has not been well-organized.– Its most unique feature is that a lot of business takes place in APC, where many repair

shop/parts shops are accumulated.– For enlarging business in China aftermarket, time consuming visiting primary shops in

each APC will be required.

23

JapanChinaASEAN

Key Points on China Auto-Aftermarket

1

2

3


II. Market outlook of major markets － ASEAN (Market size)

Although not as high as China, ASEAN market is expected to seestable growth in Auto-Aftermarket.

24

Auto After-sales Market Size in South-East Asia and Australia Comments

20072005 20152009 2011 2013

CAGR:5%

Stable annual growth of 5% is expected to continue in ASEAN & Australia region.

Its market size will be around half of Chinese market (3.)

JapanChinaASEAN

(bil. USD)



II. Market outlook of major markets － Indonesia While general sales route is not yet organized, OES route is established mainly byAuthorized Distributors of conglomerate groups, which are into both manufacturingand sales and a major player in auto-parts business.

25

Distribution network of after market in Indonesia Comments

OES route General Sales route

Parts maker

Wholesale

Distribution

Outlet

End-user

GenuinePartsMakers

End users

SpecializedService

Used CarDealerSS Auto-parts

RetailerSubDealer

Repairshop

APTM

(Source) Interview, NRI

• OES ： Auto-parts makers of local conglomerate group manufactures after parts and sell them to auto-dealers

• OES ： Genuine auto-parts makers sell some of those parts to general sales route.

• OES ： Main dealers such as Auto2000 centrically purchase after parts from same conglomerate group and distribute to sub-dealers under the same group

• OES ： Procures after parts from main dealers directly. No direct business is going on between parts makers.

• General sales route: Retailers of mid-high quality procures some genuine parts as well.

Domestic PartsMakers (2nd Tier)

OverseasParts Makers

Recycle FactoryRepair garage

MainDealer

Trading house(e.g. Chinese Partsmakers)

Importers

High Quality Original Parts Foreign PartsInc. Copy parts

Re-man Parts

Mid~HighQuality Outlets

1,300 1,700 6,600 900+4,400

Low Quality Outlets(pasar mobil)

JapanChinaASEAN

* # of outlets (estimated)


II. Market outlook of major markets － Indonesia

Authorized Distributors are sole players which have both broad product line-up and broad coverage in terms of distribution flow.

26

Conglomerate Authorized Distributors

Indomobil • Garuda Mataram Motor Company (VW)• Hino Mortors Sales Indonesia (Hino)• Indomobil Suzuki International (Suzuki)• Nissan Motor Indonesia (Nissan)• Central Sole Agency

Astra • Astra Daihatsu Motor (Dihatsu)• Isuzu Astra Motor Indonesia (Isuzu)• Astra Nissan Diesel Indonesia (UD truck)• Tjahja Sakti Motor (BMW, PSA)• TOYOTA Astra Motor (Toyota)

KramaYudha

• Krama Yudha Tiga Berlian Mortors (Mitsubushi)

• Having broad whole sale network not only with OES route but also general sales route.

Domestic PartsMakers (2nd Tier)

Modern retailers

Auto2000(Astra Group)

Car dealer

OverseasParts Makers

Astra Otoparts(Wholesale division)

AOP Australia Pty. Ltd

Astra Otoparts

Domestic/OverseasParts Makers

RepairShops

Engine Parts • Engine Oil, Oil Filter, Drive Belt, Engine Fluid, Air Filter, AT Fluid, Spark Plug

Driving Related Parts

• Blake Pad• Blake Fluid

Safety / Comfort

• Cabin Filter• Wiper Blade• Valves

Main Authorized Distributors in Indonesia

MainPlayers

ProductLineup

Network of Authorized Distributors

JapanChinaASEAN



Supply of original after-parts have been limited to simple parts such as consumables. As to electric parts, only genuine parts are available choice.

27(Source) Various Interviews, NRI

Actual situation of original after-parts distribution in Indonesia Quotes

O2 Censor/A/F Censor

Korean Dealer

Japanese Dealer A

Japanese Dealer B

Local Main Dealer

Injector

Ignition Coil

ElectricThrottle

Alternator

Starter

OCV for VCT

AC compressor

HID Lamp

* Imported Parts from Korea

• “As far as I am aware of, original parts of these parts (left cited) are impossible to purchase from general sales route, other than from auto-dealers.”

• “Although I haven’t checked, original parts of these parts cannot be purchased from general sales route.”

• “Although some imported parts from Korea are available in the market, these are hard to consider as original parts. Therefore, there are little original parts supplied, if limited to electric parts.”

JapanChinaASEAN


28


Recently, many after parts, most of which are low-price and quality, havebeen imported to Indonesia and mainly sold in low-end channel such as pasar mobil.

Typical Example of Original Parts sold in Indonesia

• Foreign auto parts maker such as Japanese used to dominate the market, by selling high-quality parts.

• After 1998 financial crisis, other foreign makers such as Chinese, Taiwanese, Thai and Vietnamese introduced original, low-price and low-quality parts

Recent Imports of Auto-parts in Indonesia

(Source) 　 AUTOMOTIVE COMPONENT VALUE CHAIN OVERVIEW, NRI 28

Category Products Origin Sales

Re-manufactured parts

• Spark plug• Engine oil• Drive shaft• Blake disk• Blake drum

Domestic • Repair shop• Auto market

High-quality parts(almost same asOE parts)

• Front glass• Spark plug• Oil filter• Air filter• Timing belt• Blake pad

Importedfrom China, Thai and others

• Repair shop• Mid-High

level Parts shop

Low-qualitycopy parts(know asQuality 2 locally)

• Oil filter• Air filter• Rubber belt• Blake pad

Importedfrom China &India5 % from domestically

• Low-Mid level Parts shop/ Repair shop

Compatible parts • Consumables (Filters, Blake pad, Belts, Trims, Panels, Bumper…)

Imported mainly from China & IndiaSome from India & Taiwan

• General Repair shop/ Parts shop

(million USD)

• Local suppliers are limited to producing consumables such as filters

JapanChinaASEAN


29

II. Market outlook of major markets － Indonesia (Entry approach)

Despite strong demands for mid-end parts, the market is lack of major suppliers. Enriching mid-range product can be successful entry approach.

High qualityHigh price range

Genuine parts makers already have broad product lineup

Strong demand for mid-range after parts– 43%, Secondary to the

consumer group “looking for high quality parts/ services”

Indian companies should enter the market through enriching mid-end product lineup– Local manufactures also

trying to develop their aftermarket business in the same segment.

– Partner ship with local players should be also taken into account

Looking for highquality parts/services

Business environment and opportunities for Indian companies

29

1

2

3

Utilizing differentchannels based on needs

*cost performance conscious

OK withlow qualityParts/services

51%

43%

6%

Mid qualityMid price range

Lack of major players–Currently, local makers

are planning to develop

Low qualityLow price range

Increasing imports from Chinese makers–Including considerable

amounts of copy parts

SuppliersConsumer needs ratio Opportunities

JapanChinaASEAN



Key points on Indonesia Auto-Aftermarket

In Indonesia, cars are luxury products and people have tendency to use car dealers frequently than other areas (a study shows 51% uses car dealers regardless of insurance period)

Especially, parts makers of authorized dealer group are a major player in Indonesian auto-after market business, who produces genuine after parts and procures original parts from domestic and overseas markers. The national network of their dealers is estimated to be 4,000+.

On the contrary, original parts supply is limited. Local makers only produces simple products such as filters and their quality is not high enough to satisfy local demands.

Supply of afterparts have been polarized to high quality parts sold through auto dealers and low quality parts provided by local / import makers and is lack of affordable mid-range products.

Enriching mid-range product also through partnering local suppliers can be successful entry approach for Indian auto-parts makers.

30

Key Points on Indonesia Auto-Aftermarket

1

2

3

JapanChinaASEAN

4

5


II. Market outlook of major markets － ASEAN (Thailand)Japanese OEMs are much involved in various levels of value chain with commitmentfrom production to aftermarket, which is making their market position firm.To seize larger potential of ASEAN aftermarket, alliance with Japanese OEMs will be a key.

31

2011; # of units basis

Isuzu

ToyotaMitsubishi

Others(2%)

Honda

RenaultNissan

ProtonTATA(1%)

Ford

Mazda

Market share of PV, SUV, LCV by maker

CV OEM’s involvement in each value chain level(representative OEMs)

JapaneseOEM “A”

JapaneseOEM “B”

EuropeanOEM

ForeignOEM

DevelopmentProduction

SalesPromotion Finance After

service

• Complete Knock Down

• Complete Knock Down

• Complete Knock Down+Import

• Import only

• Sales / Networking activities to local leaders

• Presents for clients, party invitation

• Has an affiliate

• Taking risk aggressively

• Has an affiliate

• Relying on local partners

• OEM not committing

• Focusing on enlarging clients in rural areas

• Not a specific activity

• Relying on dealers about after service

• OEM leads providing genuine parts to dealers

• Trying to enhance variety of genuine parts

• Trying to enhance variety of genuine parts

• Has an affiliate Risk takingnot aggressive

JapanChinaASEAN

GM

88%Japanese OEMs:


32

Agenda

I. Attractiveness of Asian auto-After Market

II. Market outlook of major markets• Japan• China• ASEAN



Targeted Segment

• Imported low-cost / copy products are dominating .• Better to enter this segment because it only leads to a war of attrition.

Re-manufacturing business model

Contract Manufacturing ServiceFor Taiwanese Makers

Contract Manufacturing ServiceFor Japanese Makers

2W / 3W PassengerVehicles

Commercial Vehicles


Below 3 approaches will be possible entry approaches to Asian Aftermarket,leveraging the positioning of Indian companies.

33

1

2

3

ProductQuality

+

-

Possible entry approaches to Asian Auto-after market business

• Price competition only leads to a war of attrition with Chinese / other companies with price competitiveness.

• Value add other than low price should be added as a differentiation factor to compete in Asian market


III. Entry Approaches for Indian Auto Companies Contract Manufacturing Service For Japanese Makers

Through partnering with Japanese parts-makers, supply after parts for Japanese cars, which are well penetrated in ASEAN region.

34

Japanese makers have high MS in ASEAN market and has broad sales channels, which makes sense to ally with them in ASEAN aftermarket.

Possible to increase competitiveness by building a cooperative partnership between Indian and Japanese companies.

Implementation Scheme Image

Comments

Biz opportunities for Indian Companies

Competition Environment

Biz opportunities

• Japanese makers is not being competitive against Chinese companies in terms of cost competitiveness, making it difficult to enlarge its market share in ASEAN market

• They tend to incur much cost /time for product design, due to their tendency to design from scratch for external clients, apart from OES products

• By merging cost-competitiveness in production of Indian companies and brand and sales channel of Japanese makers, possible to develop effective supply scheme for ASEAN aftermarket.

• Design• Production

outsourcing• Sales in ASEAN

• Production

• Delivery

• MS of Japanese maker is high and they have secured their own sales network

ASEAN Market

1


III. Entry Approaches for Indian Auto Companies Re-manufacturing business model

Collecting used durable parts and position India as a centric production site ofre-manufactured parts to supply mainly to Asian market.

35

Re-manufactured products (only replacing consumable parts and washing to recycle for further use) for expensive durable parts are frequently used world widely.

– e.g.) engine parts, turbo charger, starter, alternator, compressor, transmission parts, etc…

Develop parts collection scheme from Europe and North America, and include Europe and North America as target markets in addition to ASEAN

Implementation Scheme ImageBiz opportunities for Indian Companies

Biz opportunities

• For commercial vehicles and high displacement cars, remanufactured parts are often used.

• However, re-manufacturing is a labour intensive process and cannot be profitable in a country where labour cost is expensive, because it decreases the gap between re-man parts and new parts.

• Leveraging cost competitiveness in India, provide re-manufactured parts to world market.

• By building optimal supply chain from used parts collection and product supply, possible to dominate world re-manufactured parts market.

Comments

• Re-manufacturing

• Used parts collection

• Used parts collection


2


III. Entry Approaches for Indian Auto Companies Contract Manufacturing Service For Taiwanese Makers

Partnering with Taiwanese companies which operate throughout the world can expand possibilities to enlarge after market business world-widely

36

Implementation Scheme Image

Comments

Taiwanese companies have built strong position, with supply chain of low cost production in MoC and supply to RoW

Since Taiwanese companies are strong esp. in developed markets such as NA and EU, partnering with them can expand possibilities to operate business more broadly.

– Developed markets like EU have severe cost requirement and weak preference for genuine parts, 3rd party can have high MS.

– In some countries such as Indonesia where Indian makers have high MS, ,Indian parts makers can leverage its experience of application development

Biz opportunities for Indian Companies

Biz opportunities

• Taiwanese companies are well positioned in low-end after parts market, with optimal cost in production and product design

• Utilizing low production cost and application development capabilities developed through businesses with Indian 4w/2w

• develop and supply low-end after parts to world-wide market.

North AmericaMarket

EuropeMarket

ASEAN Market*Especially where Indian auto-bike makers have high MS


3


Contacts

37

Michael CHANDY

Nomura Research Institute. Delhi OfficeDivision Head – Automotive Industry Consulting DivisionE-mail: [email protected]: +91-8130-791678

Nomura Research Institute. Delhi OfficeSenior Consultant– Automotive Industry Consulting DivisionE-mail: [email protected]: +91-8130-791681

Ryohei SAKAMOTO

Noriyuki KOBAYASHI

Nomura Research Institute, Tokyo officeGroup Manager– Automotive & Electronics Industry Consulting DepartmentE-mail: [email protected]

Nomura Research Institute, Tokyo officeSenior Consultant– Automotive & Electronics Industry Consulting DepartmentE-mail: [email protected]

Masayuki AOKI

Nomura Research Institute, Tokyo officeChief, Consultant– Automotive & Electronics Industry Consulting DepartmentE-mail: [email protected]

Keiichi ISHIGAKI


Documents

Market overview & trends of Asian Auto-sales market － Japan, China and ASEAN markets