March 27th, 2017 I Industry Research

Automobile Components:
Structure and Prospects Overview:

The Indian auto industry is expected to be the world’s third

largest by 2016 only behind China and the US and will
account for more than 5% of the global vehicle sales as per
IBEF. It is also expected to become the fourth largest
automobiles producer globally by 2020 after China, US and
Japan (India is currently world’s second largest two-wheeler
manufacturer).
Contact:
Madan Sabnavis The Indian auto components industry is ancillary to the
Chief Economist
[email protected] automobile industry. Demand swings in any of the auto
91-22-67543489 segments (Commercial vehicles, cars, two-wheelers) have an
impact on the auto ancillary demand. Indian Auto
Darshini Kansara
Component Industry is transforming itself from a low-volume,
Research Analyst highly fragmented one into a competitive industry backed by
[email protected] strengths like technology, efficiency and evolving value chain.
91-22-67543679
The industry mainly caters to 2 segments – (1) Original
Equipment manufacturers (OEM) and (2) Replacement
Mradul Mishra (Media Contact) market (Aftermarket). OEM dominates the auto component
[email protected]
91-22-67543515
market contributing around 80 per cent while the
replacement market share is around 20 per cent.

The auto component sector is largely unorganized with about

10,000 players operating in the unorganized market. There
are about 700 players in the organized market as of 2015.
The demand from replacement market is low, owing to the
high cost of genuine component parts. Unorganized players
mainly dominated the replacement market, which were
mostly Tier 3/4 component manufacturers.

However, in terms of turnover, organized market holds about

85% share. The Indian auto component industry is a highly
Disclaimer: This report is prepared by Credit Analysis &
fragmented industry and was estimated to be valued at
Research Limited [CARE Ratings]. CARE Ratings has taken utmost around Rs.2.6 trillion (USD 39 billion) in FY16. This industry
care to ensure accuracy and objectivity while developing this has witnessed growth of 8.6% on y-o-y basis and contributes
report based on information available in public domain.
However, neither the accuracy nor completeness of information to 2.3% to India’s Gross Domestic Product (GDP). The industry
contained in this report is guaranteed. CARE Ratings is not is in a stage of transformation and the entry of new players
responsible for any errors or omissions in
in last few years has led to surge in the auto component
analysis/inferences/views or for results obtained from the use of
information contained in this report and especially states that industry.
CARE (including all divisions) has no financial liability whatsoever
to the user of this report
Industry Research I Automobile Industry Update

Automotive Component in India is split under various segments as follows:

Chart 1: Auto Component Segment

Auto
Components

Drive
Transmission Body & Suspension & Electrical
Engine Parts & Equipments Others
Chassis Braking Parts Parts
Steering Parts

Brake and
Pistons and Sheet matal
Gears brake Headlights Starter motors
Piston rings parts
assemblies

Hydraulic
Engine valves
Wheels Break linings Halogen bulbs Spark plugs pneumatic
and parts
instruments

Fuel-injection
Steering Shock Electric ignition
systems and Wiper motors Fan belts
systems absorbers systems (EIS)
carburettors

Cooling
Dashboard Flywheel Pressure die
systems and Axles Leaf springs
instruments magnetos castings
parts

Power train Other panel Other

Clutches
components instruments equipments

Source: ACMA

Automobiles production
Chart 2: Category wise Production of Automobiles (000 units)

20,000
18,000
18,830
18,489

16,000
16,883

16,651
15,744

14,000
15,428

12,000
13,349

10,000
8,000
6,000
2,983

3,146

3,231

3,088

3,221

3,414

3,102

4,000
949

934
929
879

840
833

830
800

783
761

699

698

676
654

2,000
-
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 (Apr-
Jan)

Passenger Vehicles Commercial Vehiles Three-wheelers Two-wheelers

Source: SIAM

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Industry Research I Automobile Industry Update

Segment wise domestic market share of automobile industry

Table 1: Segment wise domestic market share (2015-16)

%
Two-wheelers 79
Passenger Vehicles 14
Three-wheelers 4
Commercial Vehicles 3
Source: SIAM

In 2015-16, India’s annual production stood at 23,960,940 vehicles (including passenger vehicles, commercial
vehicles, three wheelers, two wheelers and quadricycle) as against 23,358,047 in 2014-15, registering a sluggish
growth of 2.6% y-o-y. Two-wheelers have dominated the production volumes of the automobile industry over the
years. Over the past 4 years, two-wheeler production share in the overall automobile production has remained stable
at around 80%. This is followed by passenger vehicles having a share of 14%. Productions of commercial vehicles and
three-wheelers have about 3% share each in the automobile industry.

Passenger vehicles comprising 14% in the overall automobile production in 2015-16, accounts for about 45% of the
total auto component production volumes, followed by two-wheelers segment which accounts for about 22% share
of the total auto component production volumes.

Auto component consumption by OEM

Chart 3: Consumption by OEM (%)

Backhoe Loaders, SCV, 1 Others, 2

2
Three wheelers, 4
LCV, 4

MCV, 5

HCV, 8 PV, 45

Tractors, 8

Two wheelers, 22

Source: ACMA

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Industry Research I Automobile Industry Update

Auto Component Aggregate Turnover

Chart 5: Aggregate turnover (Rs Billion)

3,000

2,500

2,556
2,348
2,000

2,160

2,117
2,046
1,883

1,847
1,500

1,663
1,633
1,619
1,580

1,502
1,000

709
500

685
615
303

427

527
-
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Aggregate Turnover Domestic Turnover Exports Turnover

Note: The aggregate turnover includes the domestic supplies to OEMs, aftermarket sales and exports for the period
Source: ACMA

It can be seen from the chart that after marginally declining in 2013-14 the auto components turnover increased by
over 11% in 2014-15 on the back of a pick-up in demand from the automobile industry. The turnover increased,
however, at a slower pace in 2015-16. Automobile production increased only marginally by 2.6% in 2015-16 leading
to slower y-o-y auto comp turnover increase of 8.6% in 2015-16.

Export destinations – Top 10 countries (2015-16)

Chart 6: Country wise Exports – Top 10 countries (Per cent)

USA 24
Germany 7
Turkey 6
UK 5
Italy 4
Thailand 3
UAE 3
France 3
Brazil 3
Mexico 3

Source: ACMA

The size of Indian exports of auto components stood approximate at Rs 709 billion (USD 10.8 billion) in FY16 and has
increased at a CAGR of about 18.5 per cent from Rs 303 billion (USD 6.7 billion) in FY11. Exports share in turnover
increased from 16% in 2010-11 to 28% in 2015-16 in value terms registering a CAGR of 18.3% during the period.

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Industry Research I Automobile Industry Update

Currently industry exports to more than 160 countries. Key auto components exported from India include gear boxes
and parts, hydraulic power steering systems and steering gear systems and parts, parts of diesel engines, drive-axles
and parts, suspension systems and parts, brakes and servo-brakes, spark ignition and parts, among others.

The top 10 export destination countries accounted for about 60% of total auto components exports from India in
2015-16. USA is the largest importer of auto components from India. Region wise, Europe is the largest importer of
auto components with a share of about 36%. This is followed by North America and Asia which account for about 25%
each of the overall exports of auto comp from India. Africa and South America account for about 6% and 4% of the
overall exports respectively, while New Zealand and Australia have minute share of just about 1%.

Aggregate Turnover – Imports

Chart 7: Aggregate turnover - Imports (Rs Billion)

1,000 906
900 829
744 771
800
700 667

600
497
500
400
300
200
100
-
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Source: ACMA

Imports country wise – Top 10 countries (2015-16)

Chart 8: Country wise Imports – Top 10 countries (Per cent)

China 23
Germany 14
South Korea 11
Japan 11
Thailand 8
USA 8
Italy 3
UK 3
France 2
Sweden 1

Source: ACMA

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Industry Research I Automobile Industry Update

Nearly 30-35 per cent of the auto components used by OEMs are imported. The share of imported consumption has
significantly increased over the last one decade with the entry of new global manufacturers. China has been a major
exporting country for auto components to India.
India is estimated to have imported Rs 906 billion (USD 13.8 billion) worth auto components in FY16 as against the
aggregate turnover of around Rs 2,556 billion (USD 39 billion). Thus, imports form almost 35 per cent of the
aggregate turnover. During the last five years the auto component imports to India have increased at a CAGR of
around 12.8% per cent from Rs 497 billion (USD 10.9 billion) in FY11 to around Rs 906 billion (USD 13.8 billion) in
FY16. The major components imported into India include piston rings, brake assembly, bimetal bearings, transmission
shafts, wheel rims, motor cycle parts etc.
In 2015-16, imports from top 10 countries comprised over 80% of India’s imports of auto components. Region wise,
share of Asia was the highest at 58.6%. This was followed by Europe comprising about 31% of India’s imports. About
8% imports of auto components came from North America. Central and South America, Africa, New Zealand and
Australia formed the remaining share of the Indian imports of auto components.
Component wise market segmentation
Chart 9: Component wise market segmentation

(per cent) Others, 7

Electrical parts, 9
Engine Parts, 31

Equipment, 10

Body & Chassis,

12
Drive & Steering
Suspension & Transmission
braking parts, 12 parts, 19
Source: IBEF

The Indian auto component industry can broadly be classified into the organized and unorganized sectors. The
organized sector caters more to demand for high value precision instruments, while the unorganized sector caters to
the aftermarket with low valued products.

The industry over the years has integrated capability of manufacturing the entire range of auto components required
to manufacture vehicles. Engine and drive transmission parts together contribute about 50% of the auto component
industry production. Engine parts, which constitute 31% of the production, mainly comprise pistons, engine valves,
carburetors, fuel injection systems, camshafts, crankshafts and cooling systems. Drive transmission parts, which
constitute 19% of the total production, include axle assembly, steering parts and clutch assembly. Component wise
market shares have remained stable over the past few years.

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Industry Research I Automobile Industry Update

Engine component segment

Engine components fall into three broad categories — core engine components, fuel delivery system and others. This
segment accounts for 31 per cent of the auto component market (by value). The turnover of this segment in 2015-16
is estimated at around Rs 792 billion as compared to Rs 584 billion in 2010-11.
This segment includes products such as pistons, piston rings, engine valves, carburetors, crank shafts, sump
connecting rods etc. These are the most critical components and require high level of precision and quality
adherence. Accordingly, there is high level of co-ordination between component manufacturers and Original
Equipment Manufacturers (OEMs). The engine components are largely assembled by the OEMs themselves.
Chart 10: Trend in turnover of Engine components (Rs Billion)

1000
792
800 728
634 670 656
584
600

400

200

0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Source: ACMA

Drive transmission and steering component segment

The drive transmission and steering component segment accounts for around 19 per cent of the auto component
market. This segment consists of products like gears, wheels, steering systems, axles and clutches. Clutch discs, cover
assemblies and kits components are the key sub-categories in clutch sub-segment. The turnover of this segment
increased to Rs 486 billion in 2015-16, from Rs 358 billion in 2010-11.
Chart 11: Trend in turnover of drive transmission and steering segment (Rs Billion)

600
486
500 446
389 410 402
400 358

300
200
100
0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Source: ACMA

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Industry Research I Automobile Industry Update

The steering system industry is technology and capital-intensive in nature that acts as an entry barrier, especially for
smaller players and the unorganized segment. With power steering reducing the driving efforts, these are
increasingly becoming popular and consequently, the players are shifting their product mix towards power steering
over manual steering system. Manufacturing axles too is capital and technology-intensive business, with axle being
one of the critical components. Designing and offering axles to meet exact engine specifications is one of the key
success factors of axle manufacturers. On the other hand, braking system is not very technology-intensive.
Body and Chassis segment
The body and chassis segment accounts for 12 per cent of the auto component market, with the turnover of around
Rs.307 billion in 2015-16 from Rs.226 billion in 2010-11. This segment is not very technology and capital intensive and
is thus relatively more fragmented and dominated by the unorganized sector. Automobile Corporation of Goa is one
of the major players in the organized segment having presence across different products in this segment.
Chart 12: Trend in turnover of body and chassis segment (Rs Billion)

350 307
300 282
246 259 254
250 226
200
150
100
50
0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Source: ACMA

Suspension and braking component segment

The suspension and braking component segment includes components like brakes, brake linings, leaf springs and
shock absorbers, which accounts for around 12 per cent of the domestic auto component market. The turnover of
this segment was Rs.307 billion in 2015-16, which grew from Rs.226 billion in 2010-11.

Chart 13: Trend in turnover of suspension and braking component segment (Rs Billion)
350 307
282
300 246 259 254
250 226
200
150
100
50
0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Source: ACMA

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Industry Research I Automobile Industry Update

Equipment segment
The equipment segment, accounts for around 10 per cent share in the auto component market, which includes
components like headlights, dashboard instruments, wiper motors, electric horns etc. The turnover of this segment
has grown from Rs.107 billion in 2007-2008 to Rs.2108 billion in 2012-13. The manufacturers of headlights, which are
not directly related to automotive technology, are increasingly innovating new designs for making the appearance of
personal vehicles like cars and two-wheelers more and more stylish and vibrant.
Chart 14: Trend in turnover of Equipment segment (Rs Billion)

300
256
250 235
216 212
205
200 188

150

100

50

0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Source: ACMA

Electrical component segment

The electrical component segment comprises of products such as starter motors, generators, spark plugs, ignition
coil, flywheel magnet, voltage regulator, electric ignition and distributors. This segment is one of the most dynamic
because of constant evolution of technology. The new cars have increasingly higher proportion of electrical parts.
Secondly, there have been changes in the ignition technology for two-wheelers that have moved from kick-start to
electric start. The electric component segment currently forms around 9 per cent of the Indian component industry.
The turnover of this segment has increased from Rs 169 billion in 2010-11 to Rs 230 billion in 2015-16.
Chart 15: Trend in turnover of Electrical component segment (Rs Billion)

250 230
211
184 194 191
200 169
150
100
50
0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Source: ACMA

Residual Segment (Others)

Sheet Metal Components (SMC) and Plastic Moulded Components (PMC) are the two key products in the residual
‘other components’ segment. Around 7 per cent of the market is accounted for by this residual segment or such

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Industry Research I Automobile Industry Update

other components not included in any of the specific component segments. The turnover of the residual segment has
grown from Rs 132 billion in 2010-11 to Rs 179 billion in 2015-16.
Chart 16: Trend in turnover of Residual segment (Rs Billion)

200 179
164
143 151 148
150 132

100

50

0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Source: ACMA

SMC and PMC are not very technology-intensive and thus dominated by the unorganised segment. The key SMC
producers include Automotive Stampings and Assemblies, Autoline Industries, Jay Bharat Maruti, JBM Auto, Omax
Auto, etc. Similarly, Mahindra Components and Motherson Auto are the key players in the organized segment
involved in manufacturing PMC.

Component wise key players

• Pistons – Goetze, Shriram Pistons & Rings, India Pistons, Anand I-Power Limited
Engine & • Engine Valves – Rane Engine Valves, Shriram Pistons & Rings, SSV Valves
engine parts • Carburetors – Ucal Fuel Systems and Spaco Carburetors & Escorts Auto Components
• Diesel-based fuel-injection systems – Mico, Delphi-TVS Diesel System and Tata Cummins
• Steering Systems – Sona Koyo Steering Systems, Rane NSK Steering Systems and Rane
TRW systems
Transmission • Gears – Bharat Gears, Gajra Bevel Gears, ZF Steering Gear (India) Limited, Eicher, Graziano
& steering Trasmissioni and SlAP Gears India
Parts • Clutch – Clutch Auto, Ceekay Daikin, Amalgamations Repco, Luk Clutches
• Driveshafts – GKN Driveshafts, Spicer India Private Limited, Delphi and Sona Koyo Steering
Systems

Electrical • Lucas TVS, Denso, Delco Remy Electricals and Nippon Electricals are key players in this
segment
• Brake Systems – Brakes India, Kalyani Brakes, Mando India Limited and Automotive Axles
Suspension • Brake Lining – Rane Brake Lining, Sundaram Brake Lining, Hindustan Composites and
& braking Allied Nippon
parts • Leaf Springs – Jamna Auto and Jai Parabolic
• Shock Absorbers – Gabriel India, Delphi, Mando India Limited and Munjal Showa
• Headlights – Lumax, Autolite and Phoenix Lamps
Equipment • Dashboard – Premiere Instruments & Controls
• Sheet metal parts – Jay Bharat Maruti, Omax Auto and JBM Tools

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Industry Research I Automobile Industry Update

The other major players in the industry include Exide Industries, Standard, Tudor, Chloride International and Amara
Raja (batteries), Harita Seating Systems and Toyota Boshoku (Seats), Motherson Sumi (wiring harnesses), Banco
Products (radiators), Subros (auto air-conditioning systems), Munjal Auto (exhaust systems and mufflers), Minda
Corporation (automobile locks, electronic security systems, window regulators, etc), Asahi India automobile glass and
wind-shield), Indian IDe-casting Industries (aluminum die-casts and precision components), Sundaram Brake Linings,
Rane Brakes and Hindustan Composites (automotive friction material), Amtek Auto (castings and forgings), Sundaram
Fasteners, Universal Wire Forms and Spring India (fasteners), etc.
Financial performance of Auto ancillary players

Chart 17: Margins of Auto Ancillary players

16.0
13.6 13.5 13.3 13.4 13.6
14.0 12.7

12.0
10.0
8.0
6.0
4.0 5.5 5.4
4.6 4.2
2.0 3.8
3.2
0.0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Operating Margins Net Margins

Note: The industry margins are based on the financial results of 70 listed auto ancillary companies
Source: AceEquity
Auto component manufacturer’s profitability is sensitive to the changes in raw material cost as it forms the bulk
(about 60%) of net sales. In 2015-16, India’s annual automobile production stood at 23.96 mn vehicles as against
23.36 mn in 2014-15, registering a sluggish growth of 2.6% y-o-y. In line, auto comp production slowed down and
declined by over 3% y-o-y after increasing by about 6% in the previous year. This decline was on account of muted
demand from the automobiles industry.

In 2016-17, with increase in steel, aluminum and plastics costs, overall raw material costs are expected to increase.
Operating margins are expected to be range bound in 2016-17 after rising marginally in 2015-16, while higher raw
material costs will restrict the margin expansion.

Regulations

India has various cost advantages and has evolved as a cost-effective manufacturing base that keeps costs lower by
10-25 per cent relative to operations in Europe and Latin America. Also, India is the third largest steel producer
globally after China and Japan hence it has the cost advantage.

Also, various policies have been announced to support the auto industry.

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Industry Research I Automobile Industry Update

 Auto Policy 2002:

- The policy aims to promote integrated, phased, enduring and self-sustained growth of the Indian
automotive industry
- Manufacturing and imports in this sector are exempt from licensing and approvals.

 National Automotive Testing and R&D Infrastructure Project (NATRiP)

- It is the largest and one of the most significant initiatives in Automotive sector so far, represents a unique
joining of hands between the Government of India, a number of State Governments and Indian Automotive
Industry to create a state of the art Testing, Validation and R&D infrastructure in the country.
- The Project aims at creating core global competencies in Automotive sector in India and facilitate seamless
integration of Indian Automotive industry with the world as also to position the country prominently on the
global automotive map

 FDI Policy:
- 100% Foreign Direct Investment (FDI) is allowed under the automatic route in the auto components sector,
subject to all the applicable regulations and laws.
Investments

The cumulative Foreign Direct Investment (FDI) inflows into the Indian automobile industry during the period April
2000 – September 2016 were recorded at US$ 15.80 billion, as per data by the Department of Industrial Policy and
Promotion (DIPP).
Some of the major investments made into the Indian auto components sector are as follows:

- Gestamp, a Spanish automobile component manufacturing company, has invested Rs 260 crore (US$ 38.63
million) in a new hot stamping plant in Pune, in order to cater to the increasing demand for lighter vehicles in
India.
- Exide Industries, India’s biggest automotive battery maker, plans to invest around Rs 300 crore (US$ 45
million) in West Bengal to expand its capacity for advanced motorcycle batteries over a period of 18 months.
- Motherson Sumi Systems Ltd, an automobile components manufacturer, has acquired Finland-based truck
wire maker PKC Group Pic for € 571 million (US$ 609.57 million), which will help the company expand its
presence in the global wiring harness business for commercial vehicles.
- Sundaram Clayton, part of the TVS group, plans to invest US$ 50 million in US and Rs 400 crore (US$ 59.76
million) in India over the next three years.
- Mercedes Benz India Private Limited has set up India’s largest spare parts warehouse in Pune, with an area of
16,500 square meters which can stock up to 44,000 parts. It will also include a vehicle preparation centre that
can stock up to 5,700 cars to customise them before delivery.
- JK Tyre and Industries Ltd, India's leading tyre manufacturer, has acquired Cavendish Industries Ltd (CIL) for
Rs 2,200 crore (US$ 329.2 million), which will enable JK’s entry into the fast-growing two-wheeler and three-
wheeler tyre market.
- Japanese auto major Honda is planning to step up supply and target exporting of auto components worth Rs
1,500 crore (US$ 224.45 million) from India to it various international operations.

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Industry Research I Automobile Industry Update

- Auto components maker Bharat Forge Ltd (BFL), the flagship company of the US$ 3 billion Kalyani Group, has
formalised agreement with Rolls-Royce Plc which will supply BFL with critical and high integrity forged and
machined components
- Canada’s Magna International Incorporated has started production at two facilities in Gujarat’s Sanand,
which will supply auto parts to Ford Motor Co in India
- Everstone Capital, a Singapore-based private equity (PE) firm, has purchased 51 per cent in Indian auto
components maker SJS Enterprises for an estimated Rs 350 crore (US$ 51.35 million).
- ArcelorMittal signed a joint venture agreement with Steel Authority of India Ltd (SAIL) to establish an
automotive steel manufacturing facility in India.
- German auto components maker Bosch Ltd opened its new factory at Bidadi, near Bengaluru, which is its fifth
manufacturing plant in Karnataka. The company has also signed a memorandum of understanding (MoU)
with Indian Institute of Science (IISc), Bengaluru with a view to strengthen Bosch’s research and development
in areas including mobility and healthcare thereby driving innovation for India-centric requirements.
- French tyre manufacturer Michelin announced plans to produce 16,000 tonnes of truck and bus tyres from its
Indian facility this year, a 45 per cent rise from last year.
- Amtek Auto Ltd acquired Germany-based Scholz Edelstahl GmbH through its 100 per cent Singapore-based
subsidiary Amtek Precision Engineering Pte Ltd.
- MRF Ltd plans to invest Rs 4,500 crore (US$ 660.231 million) in its two factories in Tamil Nadu as part of its
expansion plan.
- Hero MotoCorp is investing Rs 5,000 crore (US$ 733.59 million) in five manufacturing facilities across India,
Colombia and Bangladesh, to increase its annual production capacity to 12 million units by 2020.

Source: IBEF

Outlook: -

Performance of the automobile industry in FY17 and FY18

Table 2: Growth in automobile sales

Category Apr-Dec FY17 (Actual) FY17 E* FY18 E*

CVs 4.5% 5-7% 12-13%
PVs 10.3% 10-12% 12-13%
Two & Three wheelers 6.2% 8-10% 10-12%
Tractors 16.8% 16-18% 18-20%
E – Estimated

Auto component OEM segment is expected to witness growth in 2016-17 largely driven by the buoyancy witnessed in
automobile sales. Post demonetisation, growth estimation of two-wheelers and small cars has been hit slightly.
However, lower cost of ownership of auto vehicles triggered by series of interest rate cuts, push on manufacturing
and infrastructure segment by the government combined with lower fuel prices have resulted in recovery of auto
sector. Auto component industry stands to benefit from this turnaround in OEM demand and stable replacement
demand. However, auto component manufacturers supplying to CV, PV and tractors segment are expected to benefit
the most in the near term as the outlook for these auto segments in the Indian market is relatively more positive than
TW.

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Industry Research I Automobile Industry Update

The life of the two-wheelers and LCVs is considered to be about 5-7 years while that of the passenger cars and
MHCVs is about 8-10 years (or about 1 – 1.5 lakh kilometers) -post which the replacement demand is expected to
increase i.e., 2 years after any new vehicle is purchased and prior to the life of the vehicle. Currently, a vehicle, both
commercial and private is registered for a period of 15 years in India. However, the road transport ministry wants to
modify the motor vehicles rules and reduce the registration of commercial vehicles to 10 years.
Over the past decade, OEM market demand of auto components (80% of the overall demand) has been 1.5 times that
of the automobile sales, whereas, replacement market (20%) has moved by about 1.2 times of the automobile
market. Therefore, with expectations of the automobile industry to grow by about 10-20% across various categories,
CARE expects the demand for overall auto components to improve by about 15-18% between FY17 and FY18.
Capacity utilisations are also estimated to improve over the previous period which shall impact operating efficiencies
favourably with most of the key input costs expected to remain largely stable or increase marginally.
Both, domestic and export demand for auto components is expected to remain robust during this period on the back
of strong growth prospects for Auto OEMs. The margins of auto-component manufacturers will be challenged as long
as raw materials (metals and plastics) prices increase. However, this rise in raw material prices will be marginally
offset by the higher utilization rates and softening finance costs going ahead.
As per the Automotive Mission Plan 2016-26 (AMP), the Indian auto component industry may attain an impressive
USD 200 billion in revenue by 2026, with exports of USD 80 billion. The Indian Automotive Industry will be among the
top three of the world in the area of engineering, manufacturing export of vehicles and components. It is estimated
that the demand of vehicles will reach 66.3 to 75.8 million units in the same year. Contribution of Auto component
industry in India’s GDP will account to as much as 5% to 7% by 2026. Exports of auto components grew at a CAGR of
14% to USD 10.8 billion in 2015-16 from USD 3 billion in 2005-06.

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