Auto Components Industry in India Last Updated: July 2013 Introduction The Indian market conditions are acting

as a catalyst for luxury and premium carmakers, which receive a boost from new launches and numerous offers from carmakers, thereby giving impetus to the auto components industry. The industry is expected to invest around Rs 70 billion (US$ 1.17 billion) over the next three years on new projects, as per rating agency ICRAs estimates. The investments are foreseen on back of auto manufacturers, such as Maruti Suzuki, Hero MotoCorp and Ford, planning to establish greenfield facilities in Gujarat, prompting component makers to invest around these facilities. In addition, the automotive aftermarket is poised for robust growth, as per a McKinsey & Co report titled, Scaling the Indian Automotive Aftermarket: Path to Profitable Growth. The report highlighted that the growth outlook continues to be positive, driven by sustained increase in vehicle population and a shift towards higher-end vehicles. Market Structure The Indian auto component industrys turnover is reported to be US$ 40.6 billion in 2012-13 and is projected to touch US$ 115 billion by 2020-21, according to data provided by Automotive Component Manufactures Association (ACMA). The industry is estimated to grow at a compound annual growth rate (CAGR) of 14 per cent during 2013-21. Moreover, the industrys exports were recorded at US$ 9.3 billion in 2012-13 and are projected to touch US$ 30 billion by 2020-21, as per ACMA. Moreso, the tyre production in India is anticipated to reach 191 million units by the end of FY 2016, highlighted an RNCOS research report titled, 'Indian Tyre Industry Forecast to 2015'. The manufacturers are expected to invest huge amount into the industry over the next few years, with a major proportion of this investment directed towards the radial tyre capacity expansion. India: The Global Auto Hub Indicative of growing relevance of Indian technological expertise; Pratt & Whitney, the USbased aerospace engine manufacturer, is exploring opportunities to source components for its global operations from India.

Wheels India entered into a 10 year technical agreement with Turkish manufacturing and engineering company EGE Endustri, one of the major suppliers to original equipment market (OEM) in Europe. As per the agreement, Wheels India would get technology access in the Lift axle market Honda Cars India Ltd (HCIL) plans to export diesel engine components to Asian and European markets from India Apollo Tyres has opened a sales office in Bangkok, Thailand, making it the hub for Association of Southeast Asian Nations (ASEAN) operations. This is the second hub outside the company's operations in India

Furthermore, the amount of cumulative FDI inflow into the Indian automobile industry

during April 2000 to April 2013 was worth US$ 8.32 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce, Government of India. Key Developments & Investments

Valvoline Cummins will begin production of automotive lubricants at its new manufacturing and packaging plant at Ambernath, near Thane district. Western India is a manufacturing hub that has the largest consumption of industrial lubricants among all regions, according to Mr Sam Mitchell, President of Ashland Consumer Markets, a unit of Ashland Inc Italian auto component maker Streparava Holding SPA announced that it has bought out its Indian partner Sansera Engineering from the joint venture (JV) that makes engine parts Hyundai Motor India Foundation has opened an automobile servicing training centre at the Government Industrial Training Institute (ITI), Ulundurpet, Tamil Nadu (TN). The firm plans to set up 10 more such centres at various ITI's in the state this year Robert Bosch GmbH is to set up a joint venture (JV) with two Japanese companies to develop lithium-ion batteries to double the range of electric vehicles, the companies. The plan is to boost the capacity of lithium-ion batteries to enable electric vehicles to travel about 400 km per charge from the current range of 180 to 240 km, while reducing weight and volume JSW Steel will complete its new plant in Bellary, Karnataka by December 2013. The 2.3 million tonne (MT) capacity plant, being set up at an investment of US$ 1 billion, is specially designed to make products for the Indian automotive industry The Mangalore-based Arvind Motors Pvt Ltd (dealers of Tata Motors) will launch its new 3S (sales, service, spares) facility in Mangalore

Government Initiatives The Union Budget 2013-14 presented by Mr P Chidambaram, the Union Finance Minister, Government of India, in the Parliament on February 28, 2013, had a few add-ons for the industry. The analysis by Deloitte on the Union Budget highlighted the following:

The period of concession available for specified part of electric and hybrid vehicles till April 2013 has been extended upto March 31, 2015 The basic customs duty (BCD) on imported luxury goods such as high-end motor vehicles, motor cycles, yachts and similar vessels was increased. The duty was raised from 75 percent to 100 percent on cars/ motor vehicles (irrespective of engine capacity) with CIF value more than US$ 40,000; from 60 percent to 75 percent on motorcycles with engine capacity of 800 cc or more and on yachts and similar vessels from 10 percent to 25 percent An increase in excise duty from 27 to 30 per cent has been allowed for SUVs with engine capacity exceeding 1,500 cc, while excise duty was decreased from 80 to 72 per cent, in case of SUVs registered solely for taxi purposes An exemption from BCD on lithium ion automotive battery for manufacture of lithium ion battery packs for supply to manufacturers of hybrid and electric vehicles The excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14 per cent to 13 per cent

Additionally, the Automotive Mission Plan (AMP) 2006-2016, highlighted that the contribution of automotive sector in the gross domestic product (GDP) is expected to double, reaching to touch a turnover worth US$ 145 billion in 2016, with special focus on export of small cars, multi-utility vehicles (MUV), two & three wheelers and auto components. Road Ahead Global and Indian manufacturers are focussing their efforts to develop innovative products, technologies and supply chains in the industry. With an ever-increasing influx of car makers, Mr Srivats Ram, MD, Wheels India, observed that this is an opportunity for us to build our internal strength. Over the medium term, factors such as growing thrust on localisation and expanding businesses in new geographies should allow the components industry to grow at a relatively faster pace than the auto OEM segment, according to a study by ICRA. Overall, the market foresees better demand for times to come.

Auto component makers trim costs

Aug 10, 2013, 01.26AM IST CHENNAI: Pinched by the worst slowdown in the automobile industry since liberalisation, Indian auto component companies are cutting back on investments, laying off casual labour and reducing production to cut costs. According to sources in the automobile industry, the slowdown has hit tier-2 and 3 suppliers really hard, particularly those that do not have an overseas partner or did not make intelligent overseas acquisitions during the boom years. "Most auto component companies in India have the resilience to manage a slowdown for a quarter or two but the current scenario is now beginning to pinch them really hard," said the vendor development head of a mass market big volume car manufacturer. "Many component partners are looking to reduce working shifts in keeping with production cuts by the vehicle makers and lay off casual labour. Investment cuts and other cost saving initiatives are also on the rise," he said. Surinder Kapur, chairman, Sona group, agreed. "Right now it has become common practice in the industry to work fewer shifts depending on the customer and more or less we are now down to working five days a week rather than six or seven days in an effort to control costs and inventory. The focus is to cut material and overhead costs as well as connected costs like travel costs and even postpone investments," he said. The situation is understandable given that top vehicle makers have been cutting production and freezing or reducing capex to tide over the slowdown. Market leader Maruti took a production cut in June while analysts like Angel have predicted M&M's July production cuts will continue in August. Ashok Leyland has announced capex reduction and cutting material costs and others in the industry are tightening their belts too. Apex body Society for Indian Automobile Manufacturers (SIAM) has already indicated that lack of fresh investments may lead to a hiring freeze in Motown. Experts say the situation is slightly better for tier-1 component makers, which are subsidiaries of global companies or Indian component makers that have made 'intelligent' acquisitions abroad. "These acquisitions have given them entre into more vibrant OEM businesses," said the vendor development head for the mass car maker. For example, Samvardhana Motherson group's overseas acquisitions have earned it significant business from Volkswagen which is among the few European car makers to be doing well. Agreed Vivek Chaand Sehgal, chairman, Samvardhana Motherson Group: "The situation is difficult for the component industry but it doesn't hurt us too much because our business is 82% outside India right now. Of course we're following the OEMs and if they reduce their numbers, we match their requirements." India's component industry - which clocked a turnover of $40 billion in 2010-11 and is tipped to hit $113 billion by 2020 according to the National Electric Mobility Mission Plan - has three tiers to it. The first tier comprises Indian subsidiaries of global component companies like Denso, Bosch or Magneti Marelli. These are typically world class tier one suppliers to the multinational car majors and work through their subsidiaries in India. The second tier comprises joint ventures between Indian and global companies. The third category are Indian

companies with no foreign collaboration or acquisitions and therefore without a large nonIndian footprint.

Government considers sops to boost export of auto components

11 Aug, 2013, 11.30AM IST NEW DELHI: The government is considering giving incentives to the auto component industry to boost exports, with the Ministry of Commerce and the Department of Heavy Industry conducting a joint assessment of the sector. "The automobile components industry, particularly exports, has been facing a tough time. Both the Ministry of Commerce and Department of Heavy Industry are doing an assessment of the sector with a view to give a push to exports," an official told PTI. The auto component sector has been hurt by the slump in automobile demand, in both the domestic and export markets. "Once the assessment is completed, both the ministries will see if incentives could be given to the sector," the official added. The Automotive Component Manufacturers' Association of India (ACMA) has approached the Department of Heavy Industry to take steps to support the industry and address issues such as the high cost of borrowing and export incentives in the wake of rupee depreciation. "The outlook (auto components exports) remains uncertain for the current fiscal as there is a weak demand globally," the official said. The component industry has felt the hit of the drop in car sales, which fell for a record eighth month in a row in June. In the first quarter of this fiscal, passenger vehicles sales have dropped 7.24 per cent from 6,54,858 units in the same period in the previous fiscal.

Auto components industry may invest Rs 7K Cr on projects: ICRA

By PTI | 23 Jul, 2013, 05.36PM IST NEW DELHI: The auto components industry may invest around Rs 7,000 crore over the next three years on new projects, although its revenue growth will remain weak in the absence of domestic demand and an uncertain global economic environment, rating agency ICRA said today. Auto manufacturers such as Maruti Suzuki, Hero MotoCorp and Ford, are planning to establish greenfield facilities in Gujarat, prompting component makers to invest around these facilities. "The above greenfield investments may entail total investments of Rs 70 billion to be incurred by auto component manufacturers over the next three years," ICRA said. Besides, in the near term, uncertain global economic environment would exert pressure on export volumes thereby affecting revenue growth, according to ICRA's latest study on 35 publically-listed auto component manufacturing companies. "Over the near term, the trepidation of auto part makers arising from dull automobile demand is likely to remain...the profitability of auto component manufacturers may be hit harder due to their smaller scale of operations and limited operational and financial flexibility," the study said. Over the medium term, however, factors such as growing thrust on localisation and expand business in new geographies should allow the components industry to grow at a relatively faster pace than the auto OEM segment, the study added. It said the industry's revenue growth in 2012-13 was the slowest in last five years as suppliers battled weak demand from domestic OEMs, sluggish export volumes starting Q2 2012-13 and tepid replacement market sales. It added that the aggregate net profit of auto component manufacturers in the study sample declined by around 7 per cent in 2012-13 over the previous year. "One of the primary reasons for this decline was depreciation of the rupee against the dollar, besides earnings weakness due to weak demand and increase in operating costs," the study said.

Industrial park for Auto Components Sought

By PTI | 17 Jul, 2013, 07.07PM IST CHANDIGARH: Punjab's auto parts makers today appealed the state government to set up an industrial park for auto parts in Ludhiana to boost this sector. Industry also sought fiscal incentives from the government on the lines of sops offered to state's textile sector in new industrial policy in order to attract new investments. "In order to provide impetus to auto components sector, the state government should step up its efforts to attract new investments. And this can be possible if special industrial park entailing fiscal incentives for auto parts can be set up especially in Ludhiana. "Moreover, a separate policy for automotive parts can also be thought of to propel its growth and development," said a Ludhiana based auto component maker Avtar Singh. Chamber of Industrial and Commercial Undertaking, General Secretary Upkar Singh said the state government should also offer similar incentives like exemption in VAT, stamp duty, CST, property tax etc as being offered to integrated textile units. "This support is indeed required to beat the challenge and maintain growth trajectory which will enable automotive components industry to survive in the local and global market in the present hostile economic scenario. This measure will accelerate flow of funds, output, employment and exports for this sector," he said. Ludhiana in Punjab is a major hub of auto parts components catering to several big automobile companies with annual production of about Rs 5,000 crore, he said.