AUTO COMPONENTS JUNE 2017 (As of 16 June 2017) For updated information, please visit www.ibef.org 1 AUTO COMPONENTS ❖ Executive Summary…………………….…… 3 ❖ Advantage India………………………...…... 4 ❖ Market Overview and Trends………..….…. 6 ❖ Porter Five Forces Analysis….…………….14 ❖ Strategies Adopted………………….………16 ❖ Growth Drivers………….………………….. 18 ❖ Opportunities………………………………..31 ❖ Success Stories ………………………..…. 37 ❖ Useful Information………………………….42 JUNE 2017 For updated information, please visit www.ibef.org 2 AUTO COMPONENTS EXECUTIVE SUMMARY Robust growth in Auto • Turnover of the Indian auto component sector stood at USD39 billion in FY15-16; the industry is component expected to reach USD115 billion by FY20-21 • The growth of global OEM sourcing from India & the increased indigenisation of global OEMs is Rising Indigenisation turning the country into a preferable designing and manufacturing base rd Growing automobile • The Indian automobile market is estimated to become the 3 largest in the world by 2016 & will account for more than 5 per cent of the global vehicle sales; India is expected to become the 4th industry largest automobiles producer globally by 2020 after China, US & Japan Demographic advantage • The total working population (between ages 15–64) in India was around 825 million in 2015; it is expected to increase to nearly 900 million by 2030 • The middle class population in India will increase from 160 million people (over 50 per cent of the Expanding middle class total US population) in 2011 to 267 million by 2016, equivalent to more than 3 times the population of Germany, the largest economy in Europe Among top steel • In 2016, India overtook Japan to become the 2nd largest producer of steel in the world & among the producers lowest-cost ones as well. Source: ACMA, Make in India, TechSci Research Note: OEM: Original Equipment Manufacturer JUNE 2017 For updated information, please visit www.ibef.org 3 AUTO COMPONENTS ADVANTAGE INDIA AUTO COMPONENTS ADVANTAGE INDIA Robust demand FY16 Growing demand Export opportunities FY21E • Growing working population & expanding Market middle class are expected to remain key • India is emerging as global hub for auto Market size: demand drivers component sourcing size: USD39 • India is set to break into the league of top 5 • Relative to competitors, India is USD115 billion vehicle producing nations geographically closer to key automotive billion • Reduction in excise duties in motor vehicles markets like the Middle East & Europe sector to spur the demand for auto components Advantage Competitive advantages India Policy support • Continued policy support in the form of Auto • A cost-effective manufacturing base keeps costs lower by 10-25 per cent Policy 2002 In September 2015, Automotive relative to operations in Europe & Latin Mission Plan 2016-26 was unveiled which America targets a fourfold growth for the sector • Strong support for R&D & product • Presence of a large pool of skilled & semi-skilled workforce amidst a strong development by establishing NATRiP educational system centers • 100 per cent FDI allowed under automatic • 3rd largest steel producer globally hence a 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 JUNE 2017 For updated information, please visit www.ibef.org 5 AUTO COMPONENTS MARKET OVERVIEW AND TRENDS AUTO COMPONENTS THE AUTO COMPONENTS MARKET IS SPLIT INTO SIX PRODUCT SEGMENTS Auto Components Drive Suspension & Engine Parts Transmission & Body & Chassis Equipments Electrical Parts Braking Parts Others Steering Parts Brake & Sheet Pistons & Starter Gears brake metal piston rings Headlights motors assemblies parts Engine valves Wheels Brake Halogen Spark plugs Hydraulic & parts linings bulbs pneumatic instruments Fuel-injection Electric Steering Shock systems & Wiper Ignition systems absorbers carburettors motors Systems (EIS) Fan belts Cooling Dashboard Flywheel systems & Axles Leaf springs instruments magnetos parts Pressure die Power train Other panel Other castings Clutches components instruments equipment Source: ACMA, TechSci Research JUNE 2017 For updated information, please visit www.ibef.org 7 AUTO COMPONENTS 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 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. Number of players: Turnover breakup: organised vs. unorganised (FY15) organised vs. unorganised (FY15) 10000 15% Organised Unorganised 700 85% Organized Unorganized Source: ACMA, TechSci Research Source: ACMA, TechSci Research JUNE 2017 For updated information, please visit www.ibef.org 8 AUTO COMPONENTS PRODUCTION BREAKUP ‘Engine parts’ accounts for 31 per cent of the entire product Production volumes by product range (FY16) range of the auto components sector followed by ‘drive transmission & steering parts’ (19 per cent) Engine Parts ‘2 wheelers’ is the largest domestic customer segment for the 7% Drive Transmission auto components industry 9% and Steering Parts 31% Original Equipment Manufacturers (OEMs) dominate production Body and Chassis volumes by market range; encouragingly, exports account for a 10% round 28 per cent. Suspension and Braking Parts 12% Equipments Domestic market share by segment Electrical Parts 19% (FY17) 12% 3.20% 3.09% Others 14.98% Source: ACMA, TechSci Research Two Wheelers Passenger Vehicle Commercial Vehicle Three Wheelers 78.73% JUNE 2017 For updated information, please visit www.ibef.org 9 AUTO COMPONENTS THE AUTO COMPONENTS SECTOR HAS RECORDED ROBUST GROWTH OVER THE YEARS Revenues have risen from USD26.5 billion in FY08 to Aggregate turnover* (USD billion) USD39 billion in FY16 at a CAGR of 4.95 per cent during FY08-16. The market size for auto component sector increased by 8.8 per cent reaching to USD39 billion in FY16 from CAGR: 4.95% USD38.5 billion in FY15. 41.3 42.2 As per Automobile Component Manufacturers 39.7 38.5 39 Association (ACMA) forecasts, automobile component 35.1 30.8 exports from India are expected to reach US$70-billion 26.5 by 2026 from US$10.8-billion in FY15-16. The Indian 24.1 auto component industry aims to achieve US$200 billion in revenues by 2026. FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Source: ACMA, TechSci Research Notes: CAGR – Compound Annual Growth Rate, *Turnover data covers supplies to OEMs , aftermarket sales and exports JUNE 2017 For updated information, please visit www.ibef.org 10 AUTO COMPONENTS INVESTMENTS HAVE BEEN RISING AT A FAST PACE Investments in the auto components sector reached Investments in the auto component sector USD0.5 billion in FY16 in comparison with USD0.4 (USD billion) billion in FY15. Capital investments into the auto component sector 2.3 have seen a downward trend despite of its improved market conditions mainly because of the moderations 1.8 1.8 made in the vehicle sales & depressed market 1.7 sentiments. 1.5 With the launch of “Make in India” initiative, the government is expected to vitalise a substantial 1 investment in the auto component sector. 0.7 0.7 0.5 CEAT Ltd. is planning to invest around USD413.50 0.4 million to expand its tire production during 2017-22. The company plans to reach at a production level of 0.1 17 million 2 wheeler tires, annually, 1 million Truck & Bus Radial (TBR) tires & 6 million passenger car radial FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 tires, annually. Source: ACMA, TechSci Research Auto component sector is expected to invest around US$4.5 billion for upgradation of products & keeping up with the new industry regulations. JUNE 2017 For updated information, please visit www.ibef.org 11 AUTO COMPONENTS EXPORTS HAVE AIDED OVERALL GROWTH IN THE SECTOR India’s exports of auto components increased at a CAGR of 11.31 per cent, during FY09-FY16, with the value of auto component exports increasing from USD5.1 billion in FY09 to USD10.8 billion in FY16. Europe accounted for a volume share of 36 per cent during FY16 in Indian auto component exports followed by Asia & North America with 25 per cent each in same year. Value of auto component exports Shares in export volumes by geography (USD billion) (FY16) 3% 1% 4% Europe 11.2 10.8 10.2 6% 9.7 Asia 8.8 36% North America 6.6 25% 5.1 Africa 4.2 South America Central America FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 New Zealand & Australia 25% Source: ACMA, TechSci Research JUNE 2017 For updated information, please visit www.ibef.org 12 AUTO COMPONENTS NOTABLE TRENDS IN THE INDIAN AUTO COMPONENTS SECTOR • Major global OEMs have made India a component sourcing hub for their global operations • India is also emerging as a sourcing hub for engine components, with OEMs increasingly setting up Global components engine manufacturing units in the country sourcing hub • For companies like Ford, Fiat, Suzuki & General Motors, India has established itself as a global hub for small engines • Increased investments in R&D operations & laboratories, which are being set up to conduct activities such as analysis, simulation & engineering animations Improving product-