CRISIL s Auto Sector Credentials

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Key Assignments: Automotive

For OEMs

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Demand forecasting (quarterly and annual) for trucks and buses, light trucks, and tippers

for strategic and production planning

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Demand forecasting for cars and utility vehicles (quarterly, annual and India/state-wise),

for strategic planning and sales targets

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Demand forecasting for 2-wheelers (annual and India/state-wise) for strategic planning

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Research partnership with a leading OEM for monitoring developments, and their impact

in areas such as regulatory developments, economic indicators, auto finance, auto fuels

and raw material prices

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Demand potential for alternative fuel vehicles

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Demand potential for ambulances

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State-wise HP-wise monthly demand forecasting of tractors

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Competitive benchmarking between OEMs

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Rolling four-quarter price forecasts for metals, rubber and polymer inputs

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Assessment of credit quality of vendors for OEMs

(3)

Key Assignments: Automotive

For associations

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Demand forecasts, quarterly and annual, across automobile categories (trucks, light trucks, buses,

3-wheelers, cars, utility vehicles and 2-wheelers)

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Cost index for raw materials used for corrugated boxes

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Natural rubber stock estimation and validation

For component and tyre players

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Auto production forecasts for monthly/quarterly production planning of engine components and

steering components

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Demand forecasts for strategic/capacity planning of tyres, auto castings and engine components

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Market and opportunity sizing for clutches and segment attractiveness study for each vehicle

segment for investment planning

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Short term and medium term demand forecasts for various auto components segments (Moulded

plastic parts, Seating systems, Sheet moulding compound & Bulk moulding compound, Engine

cooling systems, Wiring harness, and Batteries)

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Market assessment and outlook of truck and tyre business in India and radialisation trends until 2025

for annual production planning

For financial sector and others

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Daily/Monthly information on auto market developments, based on primary interactions with auto

dealers and transporters across the country for a leading fund house

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Study of used commercial vehicles for a private equity firm interested in taking a stake in a financier

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Assessment of credit quality of an OEM for a foreign machinery supplier

(4)

Title:

Short-term and long term demand forecast models across vehicle segments

Objective:

• The objective of the study was to provide technical assistance to the client for demand forecasting across vehicle segments

Approach:

• CRISIL Research developed separate demand forecast models for each of the vehicle segments. CRISIL Research developed demand forecast models, which considered new vehicle as well as replacement demand .

• For new vehicle demand forecasts ,CRISIL Research analysed various parameters such as income distribution, cost of ownership and supply variables (new launches, capacities, used car availability, price points). For short term demand assessment, we analysed economic factors (GDP, corporate profit, etc.), financial variables (int. rate, EMI, finance penetration), supply factors (vehicle cost, fuel cost, model launches), demographics and infrastructure. • For replacement demand forecasts, CRISIL Research analysed demand variables (avg. holding period, purchase

transition matrix, propensity to own multiple cars) and supply variables (new launches, capacities, used car availability, price points).

• Commercial vehicle demand model analysed factors such as redistribution freight availability, impact of competing products and structural changes in the redistribution factor.

Value to Client:

• CRISIL Research assisted client to decide on the investment planning strategy based on demand forecasts and scenario analysis carried out with the help of the models developed.

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The approach framework for the study is formulated and discussed with client

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This outlines broadly the process and tentative timelines for the study

Analytical Framework for the Engagement

Analytical Framework for Demand Estimation

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To assess the demand for each of the vehicle segments, we take into account both macro and micro level factors

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We assess the relationship between sales and each of the demand drivers

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We classify these factors into issues impacting demand for vehicles

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Illustrative output for Long-term forecast of Cars

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_{We analyse the relative favourability} of factors driving the demand for each of the vehicle segments

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We analyse the relative impact on both short-term and long-term basis to arrive at the projections

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We develop econometric models and club judgmental factors to finalise projections

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Post final projections, we back-test to evaluate the robustness of the framework and methodology

Illustrative output for Short-term forecasts of Cars

(7)

Title:

Benchmarking for a leading automobile manufacturer

Objective:

• The client wanted a peer group comparative analysis on financial as well as non-financial parameters and assessment of their relative performance with reasons for differences thereof

Approach:

• CRISIL Research provided the study in three modules as follows:

• Benchmarking on performance based on financial parameters, growth trends, export potential etc. • Relative analysis of cost-structures and operations efficiency.

• Competitive position based on product portfolio, distribution network and marketing strategies for new and existing products.

• CRISIL Research assisted the client to understand its current market position based on comparables and helped to strengthen its competitive position by identifying areas for improvement and focusing on strengths

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The framework involved measurement of business performance of peers based on assessment of underlying drivers of business performance

Illustrative output for benchmarking

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To assess the overall business performance, the assessment framework is divided into benchmarking of business performance and benchmarking the drivers of business performance

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Business performance of players is measured in three areas, viz. financial performance, domestic market performance and quality performance

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The drivers of business performance are categorised into 4 factors: product development capability, vendor management, operating efficiency and sales & service

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These parameters are measured using various metrics and assigned scores on 1-5 scale, wherein a score of 1 indicates poor performance and 5 indicates strong performance

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Subsequently, scores of relevant parameters are aggregated into four factors and finally into overall competitive score for each player

(9)

Title:

State-wise monthly forecasting for tractor demand

Objective:

• The client intended to build a robust methodology for forecasting demand for tractors in Indian market

Approach:

• Short term forecasting of tractor demand was based upon a weighted average score on key factors that can drive tractor demand in the short term. The scores was estimated based on information updated monthly. Based on the scores the rate of demand growth was qualitatively estimated by suitably adjusting the recent growth trend

• Interactions with dealers of client and its major competitors at various locations were done to assess various factors contributing to the movement in demand overtime. An in-house designed questionnaire was shared with the

regional/zonal sales managers of the client on a monthly basis to garner feedback/validation on the regional analysis

• A framework was prepared for scoring assessment categorising factors that influence tractor demand into those related to economics of tractor operation and those related to affordability of tractors

• CRISIL Research assisted the client to plan their production and in turn sales based on the forecasted numbers and accordingly bring focus towards respective state-wise sales

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This outlines broadly the process and tentative timelines for the study

Analytical Framework for Demand Estimation

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State wise rolling forecast

begins with analysis of long term trends using the structural and cyclical parameters over the next one year

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To estimate the short-term forecast, weighted average score on key factors that can drive tractor demand in the short term, further adjusted for seasonal factors, is taken

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Primary interactions with dealers, farmers and financiers are done

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Illustrative output for one state in one particular month

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We analyse the relative favourability of factors driving the demand for each of the HP segments

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We analyse the relative impact on both short-term and long-term basis to arrive at the projections

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We develop statistical models and club judgmental factors to finalise projections

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Post final projections, we back-test to evaluate the robustness of the framework and methodology

Illustrative coverage for the engagement