AUTO COMPONENTS For updated information, please visit www.ibef.org November 2017 Table of Content Executive Summary……………….….…….3 Advantage India…………………..….……..4 Market Overview…………………………....6 Porters Five Forces Framework…...….….12 Recent Trends and Strategies……....……13 Growth Drivers...………………………......16 Opportunities…………….……….......……19 Investments and Developments........….…23 Policies and Initiatives………….........……27 Key Players…………..………….........……29 Case Studies……….……….......………....32 ACMA Award Winners……….……….......37 Useful Information……….……….......…...40 EXECUTIVE SUMMARY . Over the last decade, the automotive components industry has registered a CAGR of 14 per cent and has Robust growth scaled three times to US$ 43.5 billion in 2016-17 while exports have grown at a CAGR of 14 per cent to US$ 10.9 billion. The growth of global OEM sourcing from India & the increased indigenisation of global OEMs is turning the Rising indigenisation country into a preferable designing and manufacturing base. The Indian auto-components industry is expected to register a turnover of US$ 100 billion by 2020 backed by Increasing turnover strong exports ranging between US$ 80-100 billion by 2026. Contribution to GDP and . The auto-components industry accounts for almost seven per cent of India’s Gross Domestic Product (GDP) employment and employs as many as 19 million people. Growing automobile . India is expected to become the 4th largest automobiles producer globally by 2020 after China, US & Japan. industry The auto components industry is also expected to become the 3rd largest in the world by 2025. Among top steel . In 2016, India overtook Japan to become the 2nd largest producer of stainless steel in the world. Also, it is one producers of the lowest cost stainless steel producers in the world. Note: OEM: Original Equipment Manufacturer Source: ACMA, Make in India 3 Auto components For updated information, please visit www.ibef.org Auto components ADVANTAGE INDIA ADVANTAGE INDIA . Growing working population & expanding . India is emerging as global hub for auto middle class are expected to remain key component sourcing demand drivers . Relative to competitors, India is . India is set to break into the league of top geographically closer to key automotive 5 vehicle producing nations markets like the Middle East & Europe . Reduction in excise duties in motor vehicles sector to spur the demand for auto components ADVANTAGE INDIA . A cost-effective manufacturing base keeps . In September 2015, Automotive Mission costs lower by 10-25 per cent relative to Plan 2016-26 was unveiled which targets operations in Europe & Latin America a fourfold growth for the sector . Presence of a large pool of skilled & . Strong support for R&D & product semi-skilled workforce amidst a strong development by establishing NATRiP educational system centres . 3rd largest steel producer globally hence a . 100 per cent FDI allowed under automatic cost advantage route for auto component sector 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 Development 5 Auto components For updated information, please visit www.ibef.org Auto components MARKET OVERVIEW PRODUCT SEGMENTS Auto components Drive Body and Suspension & Engine Parts transmission & Equipment Electrical parts Others chassis braking parts steering parts Brake & Pistons & Starter Sheet metal Gears brake Headlights piston rings motors parts assemblies Engine Hydraulic Halogen valves & Wheels Brake linings Spark plugs pneumatic bulbs parts instruments Fuel-injection Electric Steering Shock Wiper systems & Ignition Fan belts systems absorbers motors carburetors Systems Cooling Dashboard Flywheel Pressure die systems & Axles Leaf springs instruments magnetos castings parts Power train Other panel Other Clutches components instruments equipment Source: ACMA 7 Auto components For updated information, please visit www.ibef.org ORGANISED AND UNORGANISED SECTOR Number of Players: Organised vs. Unorganised (FY15) Turnover Breakup: Organised vs. Unorganised (FY15) 12000 10000 10000 15% 8000 Organised 6000 Unorganised 4000 85% 2000 700 0 Organized Unorganized . 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 85 per cent of total industry turnover (FY15) . India auto component aftermarket is expected to grow at 10.5 per cent to touch US$ 13 billion by 2019-20, as compared to US$ 8.4 billion in 2016-17. Source: ACMA 8 Auto components For updated information, please visit www.ibef.org PRODUCTION Domestic market share by segment (FY17) (No. of units) Auto component supply to OEMs (FY17) 3.09% 3.20% Passenger Vehicle 6% 2% Two wheelers Two Wheelers 8.00% 14.98% Medium and heavy Passenger Vehicle 49.00% 11.00% commercial vehicles Light commercial vehicles Commercial Vehicle Tractors 78.73% Three Wheelers 22.00% Three wheelers . ‘Engine parts’ accounts for 31 per cent of the entire product range of the auto components sector followed by ‘drive transmission & steering parts’ (19 per cent) . ‘2 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 around 28 per cent. Source: ACMA 9 Auto components For updated information, please visit www.ibef.org ROBUST GROWTH . Revenues have risen from US$ 26.5 billion in FY08 to US$ 43.5 Aggregate turnover* (US$ billion) billion in FY17 at a CAGR of 5.66 per cent during FY08-17. CAGR: 5.66% 50 . The market size for auto component sector increased by 11.5 per cent reaching to US$ 43.5 billion in FY17 from US$ 39 billion in 45 FY16. As per Automobile Component Manufacturers Association 40 43.5 42.2 (ACMA) forecasts, automobile component exports from India are 41.3 39 39.7 expected to reach US$ 70-billion by 2026 from US$ 10.8-billion in 35 38.5 FY15-16. The Indian auto component industry aims to achieve US$ 35.1 200 billion in revenues by 2026. 30 30.8 25 26.5 20 24.1 15 10 5 0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 Note: CAGR – Compound Annual Growth Rate, *Turnover data covers supplies to OEMs , aftermarket sales and exports Source: ACMA 10 Auto components For updated information, please visit www.ibef.org EXPORT GROWTH Value of auto component exports (US$ billion) Shares in export volumes by geography (FY17) 12 11.2 1% Europe 10 10.8 10.9 4% 10.2 9.7 6% Asia 8 8.8 North America 35% 6 6.6 26% Africa 5.1 4 4.2 Latin America 27% 2 CIS and Baltics 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 . India’s exports of auto components increased at a CAGR of 9.96 per cent, during FY09-FY17, with the value of auto component exports increasing from US$ 5.1 billion in FY09 to US$ 10.9 billion in FY17. Europe accounted for a volume share of 35 per cent during FY17 in Indian auto component exports followed by Asia and North America with 27 and 26 per cent respectively in the same year. Source: ACMA 11 Auto components For updated information, please visit www.ibef.org Porter’s Five Force Framework Analysis Threat of Substitutes . Low – As public transportation is underdeveloped even in most cities . Rapid growth in Indian economy has changed travel patterns Bargaining Power of Suppliers Competitive Rivalry Bargaining Power of Buyers . Moderate – As there are a large . High – As government has already . Low – High demand from car number of steel and aluminium deregulated the sector manufacturers give them lesser manufacturers (key raw material) . Increasing number of foreign firms bargaining power . Some of them have their own units (Ford, Volkswagen, etc.) are . Product differentiation is low which give them linkage power increasing their presence . Cheaper imports of components from China is increasing Threat of New Entrants . Moderate – Given the concentration of industry clusters in specific Positive Impact strategic centres Neutral Impact . Foreign firms are increasing their Negative Impact footprints in India Source: Aranca Research, Media Sources 12 Auto components For updated information, please visit www.ibef.org Auto components RECENT TRENDS AND STRATEGIES NOTABLE TRENDS Improving product-development Global components sourcing hub Inorganic route to expansion capabilities . Major global OEMs have . Increased investments in R&D . Mahindra Group agreed to form a 60:40 joint venture by made India a component operations & laboratories, acquiring Italy based car designer firm, Pininfarina SpA sourcing hub for their global which are being set up to . In September 2017, Auto component maker Spark Minda operations conduct activities such as acquired EI Labs India at a cost of US$ 1.01 million to help . Several global Tier-I suppliers analysis, simulation & integrate technology into its existing range of products. engineering animations have also announced plans to . Ansysco Anand collaborated with Japan’s Seiken Chemical increase procurement from . The growth of global OEM to sell coolant & brake fluids in Japan their Indian subsidiaries sourcing from India & the . At a cost of US$14 million, Bharat Forge acquired US increased indigenisation of . India is also emerging as a based - WFT & PMT Holding Inc., for expanding their global OEMs is turning the sourcing hub for engine product portfolio in automotive and other industrial country into a preferred components, with OEMs segments increasingly setting up engine designing & manufacturing . In May 2017, Pricol announced its plans to acquire PMP manufacturing units in the base Auto Components as the brand is focusing on expanding in country . ACT established to offer North American & European markets. Pricol has inked an technical services to ACMA . For companies like Ford, Fiat, exclusive agreement to acquire the entire ownership in members for enhancing Suzuki & General Motors, wiping systems business, including PMP’s manufacturing process & quality abilities India has established itself as facilities.