India Autos Report Q3 2012

BMI held the view that that one of the key factors in the Indian new vehicle market''s growth in the
previous financial year would serve as a threat in FY2011/12, ending March 2012, as rising interest rates
would threaten the credit-fuelled boom in sales. This played out as total vehicle sales registered growth of
7.5%.
A combination of several rate hikes throughout the year, which increased the cost of auto loans, coupled
with soaring fuel prices after subsidies on gasoline were removed, contributed to muted growth,
particularly in the passenger vehicle segment. Sales for the latter months of the financial year showed
some resilience and suggest the market is returning to health, while sales in April 2012, the first month of
the new year, showed all four-wheeled vehicle segment achieve positive growth. We believe that as
changes in buying habits, such as switching to diesel, take hold and the cost of credit is reduced in line
with our assumptions, sales momentum will build, albeit at a steady rate relative to earlier years, but will
be sustainable for the remainder of the forecast period.
Our view on the outperformance of India''s commercial vehicle segment relative to the rest of the fourwheeled
market also played out, as sales ended the year in line with BMI''s forecast for growth of 18.0%
compared with 2.0% for passenger cars. Much of this has been down to the cheaper cost of diesel, as
subsidies, originally aimed at supporting business fleets, were kept in place. With the Union Budget for
2012/13 holding these subsidies in place, the conditions are supportive for further growth. We believe
spending on infrastructure projects will also generate demand for heavier vehicles throughout the forecast
period, enabling the segment to sustain its growth trajectory.
In line with BMI''s view that India''s CV segment will continue to outperform the overall vehicle market
over our five-year forecast period, to 2016/17, German manufacturer Daimler has announced plans for a
new plant. Daimler is the latest in a number of international truck producers looking to erode the
dominance of domestic brands such as Tata Motors, which holds over 50% of India''s commercial
vehicle market. Daimler has allocated INR44bn (US$853mn) to its Indian operations, which will include
setting up the new plant near Chennai and an expansion of its dealership network. Similarly, Scania has
announced investment in a new Regional Product Centre, to expand on its existing partnerships within the
mining sector and introduce new products for other CV segments, including heavy trucks for the
construction sector.