Auto Components: Industry Report ,March 2013

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The Indian auto component industry is expected to reach a turnover worth US$ 113 billion by 2020-21 from US$ 43.4 billion in 2011-12, according to Automotive Component Manufactures' Association (ACMA) report titled, 'Auto Component Industry in India: Growing Capabilities & Strengths'. The exports from the industry are expected to grow at a compound annual growth rate (CAGR) of 17 per cent during 2012-21, the ACMA report highlighted.The small and medium enterprise (SME) dominated automotive sector is among the top three sectors attracting heavy online traffic on the site, IndiaMART.com, in terms of the number of buyers who visited from other countries, both developed and developing, as per a report by IndiaMART.com. In addition, among the Indian suppliers registered on IndiaMART.com, the auto component sector features in the top five categories, contributing 11.8 per cent to the whole segment. Product categories such as pumps and pumping equipments took the top position with 8.1 per cent buy leads posted, followed by products such as nuts and bolts, and lights and accessories in second and third position, respectively."India is a growing market for us and we are pleased to partner with Uno Minda to bring best practices to Indian original equipment manufacturers (OEMs) and to explore and expand the markets within Asia," as per Mr S M Park, President, AMS.

Transcript

Auto Components

MARCH

2013

For updated information, please visit www.ibef.org

1

Auto ComponentsContents Advantage India

MARCH

2013

Market overview and trends Growth drivers Success stories: Amtek, Bharat Forge Opportunities Useful information

For updated information, please visit www.ibef.org

2

Auto ComponentsAdvantage India

MARCH

2013

FY21E

Robust demand

Export opportunities

India is set to break into the league of top five vehicle producing nations Total turnover of Indias auto components sector is expected to almost treble in size to USD113 billion in FY21 from USD43.5 billion in FY12

India is emerging as global hub for auto component sourcing

Relative to competitors, India is geographically closer to key automotive markets like the Middle East and Europe

Market size: USD113 billion

Advantage IndiaCompetitive advantages

Policy support

A cost-effective manufacturing base keeps costs lower by 10-25 per cent relative to operations in Europe and Latin America Presence of a large pool of skilled and semi-skilled workforce amidst a strong educational system

Continued policy support in the form of Auto Policy 2002 and National Automotive Mission Plan 2002-16; Strong support to R&D through establishment of NATRiP centres

FY12Market size: USD43.5 billion

Notes: NATRiP - National Automotive Testing and R&D Infrastructure Project, FY - Indian financial year (April to March), FY21E - estimated figure for the financial year 2021, Estimates are from Automotive Component Manufacturers Association of India (ACMA), R&D - Research and developmentADVANTAGE INDIA

For updated information, please visit www.ibef.org

3

Auto ComponentsContents Advantage India

MARCH

2013

Market overview and trends Growth drivers Success stories: Amtek, Bharat Forge Opportunities Useful information

For updated information, please visit www.ibef.org

4

Auto Components

MARCH

2013

The Auto components market is split into six product segmentsAuto components

Engine & engine parts

Transmission & steering parts

Suspension & braking parts

Equipment

Electrical parts

Others

Pistons and piston rings Engine valves and parts Fuel-injection systems and carburettors Cooling systems and parts Power train components

Gears

Brake and brake assemblies Brake linings

Headlights

Starter motors

Sheet metal parts Body and chassis

Wheels

Halogen bulbs

Spark plugs Electric ignition systems (EIS) Flywheel magnetos Other equipment

Steering systems

Shock absorbers

Wiper motors

Fan belts

Axles

Leaf springs

Dashboard instruments Other panel instruments

Pressure die castings Hydraulic pneumatic instruments

Clutches

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

5

Auto Components

MARCH

2013

Organised sector dominates production despite large number of unorganised players

The number of manufacturing units in the unorganised sector are far higher than those in the organised one Although lesser in number, the organised sector accounts for 77 per cent of total production (FY10)

Number of players: organised vs. unorganised (FY10)

Production breakup: organised vs. unorganised (FY10)

5,800 23% Organised

Unorganised

60077% Organised Unorganised

Source: ACMA, Aranca Research

Source: ACMA, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

6

Auto Components

MARCH

2013

Within the organised sector, large players play a key role

Large firms are a key presence in the organised sector; of total production in the sector in FY10, large Indian firms account for a major share (at 43 per cent); MNCs make up 15 per cent From a sales perspective, about 30 per cent of firms have revenues higher than USD25 million (FY10)Number of players by revenue in the organised sector (FY10)Production breakup in the organised sector (FY10)

245 179 42% 82 46 51 Others > USD100mn Between Between USD50 and USD25 and USD100mn USD50mn Between USD5 and USD25mn < USD 1mn 43% Large Indian Players MNCs

15%

Source: ACMA, Aranca Research

Source: ACMA, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

7

Auto ComponentsProduction breakup (1/2)

MARCH

2013

Engine parts account for 31 per cent of the entire product range of the auto components sector followed by drive transmission and steering parts (19 per cent) Two wheelers is the largest domestic customer segment for the auto components industry Original Equipment Manufacturers (OEMs) dominate production volumes by market range; encouragingly, exports account for a healthy 15 per cent

Production volumes by product range (FY12)Engine Parts 7% 9% 31% 10% Suspension and Braking Parts Equipments Electrical Parts 12% 19% Others Drive Transmission and Stearing Parts Body and Chassis

12%

Source: ACMA, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

8

Auto ComponentsProduction breakup (2/2)

MARCH

2013

Domestic market share by segment (FY12)

Production volumes by market range (FY11)

4.7%15.1%

3.0% Two Wheelers 15%

Passenger Vehicles Commercial Vehicles 77.3% Three Wheelers 25% 60%

OEM Replacement Exports

Source: SIAM, Aranca Research

Source: ACMA, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

9

Auto Components

MARCH

2013

The auto components sector has recorded robust growth over the years

Revenues have risen from USD22.9 billion in FY07 to USD43.5 billion in FY12 - a CAGR of 13.7 per centNotes: CAGR - Compound Annual Growth Rate

Aggregate turnover* (USD billion)43.5 39.9 30.1 23.0

26.5 22.9

FY07

FY08

FY09

FY10

FY11

FY12

Source: ACMA, Aranca Research * Turnover data covers the entire supply from the auto components industry to on-road and off-road vehicle manufacturers, and the aftermarket in India and overseas from both ACMA members as well as non-member firms (including component suppliers captive to the OEMs, unorganised and small players)

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

10

Auto Components

MARCH

2013

Investments have been rising at a fast pace

Investments in the sector have risen from USD0.7 billion in FY06 to USD2.1 billion in FY11 - a CAGR of 26.3 per cent Investments in FY12 are estimated to have increased to USD2.5 billion

Investments in the auto components sector (USD billion)

2.5 2.3 1.8 1.7

1.0 0.7 0.1 FY06 FY07 FY08 FY09 FY10 FY11 FY12*

Source: ACMA, Aranca Research* ACMA estimates

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

11

Auto ComponentsExports have aided overall growth in the sector

MARCH

2013

Indias exports of auto components increased at a CAGR of 17.0 per cent over FY07-12 to USD6.8 billion Europe accounts for the largest share of Indian auto components exports (36.0 per cent) followed by Asia (28.0 per cent) and North America (23.0 per cent)

Value of auto components exports (USD billion)

Shares in export volumes by geography (FY12)7%

6.8

Europe North America 36% Asia

1% 5%5.2 3.8 3.1 4.0 3.4 28%

South America Australia 23% Africa

FY07

FY08

FY09

FY10

FY11

FY12

Source: ACMA, Aranca Research

Source: ACMA, Aranca Research

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

12

Auto ComponentsNotable trends in the Indian auto components sector

MARCH

2013

Major global OEMs are planning to make India a component sourcing hub for their global operations

Global components sourcing hub

Several global Tier-I suppliers have also announced plans to increase procurement from their Indian subsidiaries

India is also emerging as a sourcing hub for engine components, with OEMs increasingly setting up engine

manufacturing units in the country

Increased investments in R&D operations and laboratories, which are being set up to conduct activities such as

Improving product-development capabilities

analysis and simulation, and engineering animations

The growth of global OEM sourcing from India and the increased indigenisation of global OEMs is turning the

country into a preferred designing and manufacturing base

Domestic players are acquiring global companies to gain access to latest technology, expand their client base and

Inorganic route to expansion

diversify revenue streams

Players such as Amtek Auto and Bharat Forge have adopted a dual-shore manufacturing model

Notes: OEM means Original Equipment Manufacturer

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

13

Auto ComponentsContents Advantage India

MARCH

2013

Market overview and trends Growth drivers Success stories: Amtek, Bharat Forge Opportunities Useful information

For updated information, please visit www.ibef.org

14

Auto ComponentsGrowth drivers of the Indian auto components market

MARCH

2013

Robust growth in domestic automotive industry

Demand-side drivers

Growth drivers

Competitive advantages facilitating emergence of outsourcing hub Supply-side drivers Policy support Technological shift; focus on R&D

Market liberalisation Establishing special auto parks and virtual SEZs for auto components Lower excise duties

For updated information, please visit www.ibef.org

GROWTH DRIVERS

15

Auto ComponentsRobust growth in domestic automotives industry

MARCH

2013

Vehicle production in India* (thousand units)

Favourable government policies

30,231 16,330

Launch of the Automotive Mission Plan that allows FDI and gives favourable for the industry

Union Budget for FY13 has prescribed a concessional excise duty battery manufacturers supplying to makers of electrically operated3,124

9,700 912 2,350 2&3 Wheelers

Passenger Vehicles

Commercial Vehicles

FY12

FY21(E)*ACMA Estimates; E - Expected

Easy auto financingIndia Vehicle Loan Outstanding * (USD billion**)

Capacity addition in FY10 (thousand units)19.8 600

16.513.3 12.9

500 400 250 200 200

FY09

FY10

FY11

FY12

Source: Reserve Bank of India, Aranca Research Notes: * - loan outstanding at the end of financial year; ** - figures converted to USD at the exchange rate of USD1 = INR48

Hyundai

Tata Motors Nissan-Renault

Maruti

Toyota

Ford

For updated information, please visit www.ibef.org

GROWTH DRIVERS

16

Auto Components

MARCH

2013

Favourable policy measures aiding growth

Auto Policy 2002

Automatic approval for 100 per cent foreign equity investment in auto component manufacturing facilities Manufacturing and imports in this sector exempt from licensing and approvals

Automotive Mission Plan 2006-16

Setting up of a technology modernisation fund focusing on small and medium enterprises Establishment of automotive training institutes and auto design centres, special auto parks and auto component virtual SEZs

NATRiPs

Set up at a total cost of USD 388.5 million to enable the industry to adopt and implement global performance standards Focus on providing low-cost manufacturing and product development solutions

Dept. of Heavy Industries & Public Enterprises

Created a USD 200 million fund to modernise the auto components industry by providing an interest subsidy on loans and investment in new plants and equipment Provided export benefits to intermediate suppliers of auto components against the Duty Free Replenishment Certificate (DFRC)

Union Budget 2012-13

Prescribed a concessional excise duty of 6 per cent for manufacturers of batteries supplying to makers of electrically operated vehicles Five year extension of 200 per cent weighted deduction of R&D expenditure under the Income Tax Act Introduced weighted deduction of 150 per cent for expenditure on skills developmentSource: News Articles, Government Websites, Aranca Research Notes: NATRiP - National Automotive Testing and R&D Infrastructure Project

For updated information, please visit www.ibef.org

GROWTH DRIVERS

17

Auto ComponentsExports driven by Indias competitive advantage over peers

MARCH

2013

Design and Engineering skillsKorea China

Manufacturing skills

Manpower costs

Supplier base

Raw materials

East Asia

Thailand Indonesia Vietnam Czech Republic Romania Poland

Central & Eastern Europe

Slovakia Russia Hungary Turkey Brazil

Latin America

MexicoIn competition with India

Less competitive than India

Source: ACMA, Aranca ResearchGROWTH DRIVERS

For updated information, please visit www.ibef.org

18

Auto Components

MARCH

2013

India is poised to emerge as an outsourcing hub

Global auto component players are increasingly adopting a dual-shore manufacturing model, using overseas facilities to manufacture few types of components and Indian facilities to manufacture the others

Hyundai

Hyundai plans to source gasoline and diesel engines from its Indian manufacturing operations for its domestic and global operations The company is also planning to invest USD300 million for a new engine plant and metal pressing shop in India Ford is investing USD72 million to expand its power-train facility in Chennai to further support its sales and export growth plans in India. Plans to make India its manufacturing hub for engines for the Asia-Pacific region and Africa Honda intends to set up a power-train facility in Rajasthan with an investment of USD115 million The company has an export base for certain key engine components in India Volkswagen plans to increase sourcing from India to 70 per cent of its total global sourcing Plans to build engine assembly plant in India by 2015 and additional investment of USD84* million on component manufacturingSource: Respective company websites, news articles, Aranca Research, (* figure converted from EUR to USD at EUR/USD = 1.4)

Ford

Honda

Volkswagen

For updated information, please visit www.ibef.org

GROWTH DRIVERS

19

Auto ComponentsTechnological shift; focus on R&D

MARCH

2013

Indian manufacturers are embracing best shop floor practices such as 5-S, 7-W, Kaizen, TQM, TPM, 6 Sigma and Lean Manufacturing Most players in the organised sector are certified ISO 9000, ISO 14001 and TS 16949 companies

Awards received by Indian players AwardsTotal Productive Maintenance (TPM) Award Deming Award Japan Institute of Plant Maintenance (JIPM) Award

Number15 12 3 2 1

Modern shop floor practices NATRiP centres are being set up by the government Focus on R&D Private players are keen to set up their R&D base in India

Japan Quality Medal Sh...

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