logic controller is used in conjunction with positional sensors and transducers to give commands to the actuating
elements. Sometimes, different special motors such as stepper and servo motors are used as actuating elements.

Since SPM manufacturers are mostly machine tool manufacturers, SPMs are considered a part of the machine
tools industry. However, not all machine tool manufacturers possess the capability to produce SPMs since these
require strong design expertise, technical know-how, and industry knowledge. Demand for SPMs is cyclical in
nature and, hence, standalone players are very few.

Initially, the life of SPM machines used to be around five years, which demanded better quality raw materials as
well as design with high technical standards. But in recent years, the automobile industry has witnessed several
changes to meet increasing consumer expectations in terms of model designs, features, etc., thus making SPMs
non-usable in two-three years. Due to the faster replacement cycle, buyers look for low-cost machines that come
with less optimal design standards. Critical components for SPMs are mostly from imported from the United
States, Japan and Germany, where high quality standards are maintained. However, there has been a trend of
increasing imports from Taiwan and Korea, wherein various components based on design are imported and
assembled to make SPMs.

Major growth drivers for SPMs

Automobiles

Two-wheelers

CRISIL Research expects domestic two-wheeler sales to record a compound annual growth rate (CAGR) of 3-5%
from fiscal 2020 to 2024, dragged down by the decline in growth in fiscal 2021. The two-wheeler industry clocked
2% CAGR from fiscal 2015 to 2020. In the near term, CRISIL Research expect the two-wheeler industry to be
negatively impacted by the disruption caused by Covid-19 and the high cost of ownership owing to BS VI
emission norms, resulting in higher vehicles prices in fiscal 2021. Hence, in the long term, CRISIL Research
expect the industry to grow by low single-digit CAGR between fiscals 2020 and 2024. It is expected that growth
will pick up for the two-wheeler industry post fiscal 2021 and it will clock 8-10% CAGR between fiscals 2021
and 2024.

Two-wheeler production growth (7000 volume terms)

30,000 16% 20%
25,000 10% 15%
6% 10%
20,000 5%
15,000 0%
5Y
10,000 S26
-10%
5,000 14% -15%
- -20%

Fyis FY16 FY17 FY18 FY19 FY20 FY24P.
mmm Production - two wheelers ('000s) —#—% growth y-o-y

Source: SIAM, CRISIL Research

Three-wheelers

After a sharp drop of (50) to (45) % in FY21 the production of three wheelers in India is expected to grow at 25
to 30% in FY22 over a low base as passenger movement improves with the Indian as well as global economy
opening up gradually leading to improvement in domestic sales as well as exports. Following which, production
of three-wheelers is expected to recover to slightly over 2020 levels by fiscal 2024.

Growth in the passenger three-wheeler sub-segment will largely come from increasing mobility demand for last-
mile connectivity in metros and major cities with increasing urbanization. Further, the penetration could also be
influenced by the issuance of permits by the government. Demand for CNG three-wheelers is also expected to
grow because of the changing regulatory framework. Moreover, based on cost dynamics as well as usage patterns,

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