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INDIAN AUTO COMPONENT INDUSTRY

AN OVERVIEW

1
Contents

1 About ACMA

2 Indian Economy

3 Automotive Industry

4 Auto Component Industry of India

5 Vision 2020

6 Capabilities & Challenges of Component Suppliers

7 The Way Forward

2
Introduction

Automotive Component Manufacturers


Association of India

Role An apex agency of the Indian Automotive Industry

600+ companies forming majority of the


Members
auto component output in the organized sector

ACMA operates on Quality System based


Quality System on ISO 9001:2000

As Automotive Component Manufacturers


Re-Christened
Association of India in the year 1982

Inception

In the year 1959 as The All India Automobile & Ancillary Industries
Association (AIA & AIA)
3
ACMA and Its Services

Promotes Indian
Automotive Component Industry

Collection &
Technology Quality
Trade Promotion Dissemination of
Up-gradation Enhancement
Information

Vital Catalyst for Industrial


Development

4
International Business Development

Organize
Organize Business
Business
Promote
Promote India
India Development
Development Delegation
Delegation
as a Brand
as a Brand Overseas
Overseas

Organize
Organize Participation
Participation
Undertake
Undertake Export
Export in Overseas
in Overseas
Promotional
Promotional Automobile
Automobile
Projects
Projects Exhibitions
Exhibitions &
& Fairs
Fairs

Global
Global Interaction
Interaction Facilitate
Facilitate potential
potential
through
through Business
Business Partnership of
Partnership of
Counterpart
Counterpart Association
Association JV / Strategic Alliance
JV / Strategic Alliance

Organize
Organize Private
Private Providing
Providing Working
Working closely
closely Dissemination
Dissemination of
of
Exhibitions
Exhibitions &
& International
International with
with IPOs in
IPOs in India
India Export Enquiries
Export Enquiries
Suppliers Conference
Suppliers Conference Sourcing
Sourcing Forums
Forums

5
Contents

1 About ACMA

2 Indian Economy

3 Automotive Industry

4 Auto Component Industry of India

5 Vision 2020

6 Capabilities & Challenges of Component Suppliers

7 The Way Forward

6
The Indian economy poised for Growth...
Real GDP growth rate: India vs. World
9.2 9.8 9.3
10 India
7.9
World 8.2
8
5.6 7.2
5.2 6.7
6 4.0
3.6 5.1
Growth (%)

5.7 5.9 5.8


4 5.4
4.3
2.9 2.7
2

0
1950's 1960's 1970's 1980's 1990's 2001-03 2004 2005 2006 2007 2008 2009 2010
-2 -2.2 Estimated

-4

Slow growing closed economy Fast growing open economy

Composition of GDP Transformation


Services
Agriculture ¾Average Real GDP growth in last 5 year was 8.5%
21%
52%

Manufacturing ¾GDP Per Capita is US $ 1018


27%

¾Projected GDP growth in 2010-11 is 8.2%


7
Source: IMF Apr’09, Economic Survey 2008-09 & RBI Bulletin
Growing trade, Investments & Forex reserves…
Imports (In US $ bln) Exports (In US $ bln)
350 50% 200 35%
31% 182.6 177
43% 40% 291 180 31%
300 279 40% 163 30%
253 160
34% 23% 21% 25%
250
22% 30% 140
In US $ bn

27% 21%

In US $ bn
200 120 124.6 20%
181.3 103.1
149.2 20%
100 83.5 15%
150 15%
111.5 80 12%
10% 63.8 10%
100 78.2 60 52.7
61.4 5%
50 -4% 0% 40
20 0%
-3%
0 -10%
0 -5%
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Imports(US $ bln) Growth rate(%) Exports(US $ Bln) Growth rate(%)

FDI (In US $ bln) FE Reserve (In US $ bln)


185%
35 33 200% 300 281 70%
274
62% 252 60%
30 27.3 250
150% 50%
24.57 42%
25 112%
200 173.1 40%
In US $ bn
In US $ bn

100% 27%
20 30%
142
56% 150
15 15.7 22% 20%
50% 107 136
9%
21% 100 75.4 10%
10 4%
11% 0%
-16% 5.5 0%
4.2 50
5 3.1 2.6 -10% -10%
-26%
0 -50% 0 -20%
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

FDI(US $ bln)# Growth rate(%) FE Reserves* ( US $ bln) Growth rate(%)

# Partly Estimated * As on May 19, 2010 8


Exchange Rate & Import Tariff
Exchange Rate is Market Driven & Continued Import Tariff Reduction

Exchange rate (Rs. Vs. USD)


60 30%
49
Exchange rate (Rs.)

50 45.5 24% 47
44.9 44.3 44.4 20%
39.5
40
10%
30 -1% 3%
0%
20
-6%
-4%
-10%
10
-13%
0 -20%
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11(E)

Exchange Rate Growth rate(%)

Import Tariff
16 15 0% 0%
0%
14 12.5
Import Tariff (%)

-5%
12
10 *
7.5 * *
10 8.5 7.5 -10%
7.5
8 -12%
-17% -15%
6 -15%
4 -20%
-20%
2
* Peak rate 10% 0 -25%
* As on April 20, 2010
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11(E)

Import Tariff Growth rate(%)


9
Source: Economic Survey 2007-08
Demand Drivers and their Impact…

Short Term Long Term


Infrastructure development ($500 According to McKinsey, the middle
billion in the next 5-6 years) class will grow from 50 million to
550 million by 2025

Low penetration rate of Cars (8/1000) Continuously Improving Quality


resulting in Export of Automobiles
and Auto components

Easy access to capital although Low cost of Skilled Manpower &


interest rate is high Rapidly growing Design Capability

10
Contents

1 About ACMA

2 Indian Economy

3 Automotive Industry

4 Auto Component Industry of India

5 Vision 2020

6 Capabilities & Challenges of Component Suppliers

7 The Way Forward

11
Auto Investments & Their Spread
New Hub : NORTH
WEST Uttaranchal

EAST

SOUTH

Large
Largenumber
numberof
ofIndian
Indian&&Global
GlobalOEMs
OEMsacross
acrossthe
thecountry
country 12
Vehicle production in India

30,000 –
33,500
3,000 22,100
8,700 –
9,700 10,230
2,500
5,100
2,200
2,000
In ‘000 units

1,500 1,100–
1,220 940 –
1,050
1,000 710
540 –
670 470 –
600 170 –
530
500 360 420 190

150 200 390


120 40 100
0
Passenger SCVs LCVs M&HCVs Two- & Three- Tractors Construction
vehicles wheelers equipments*

2009 2015 (E) 2020 (E)

*Includes backhoes, track excavators, wheeled loading shovels, vibratory rollers and lif tall

Source: SIAM – EY study

13
Vehicle production in India – Segment wise market share
Market share: 2009
SCVs
Passenger Vehicle 1%
Const. Equip. 17%
Tractors
0%
3% LCVs
1%
M&HCV
2%

Two & Three


wheelers
76%

Market share: 2015(E) Market share: 2020(E)


Passenger Passenger
Vehicle Vehicle
Tractors Const. Equip. Tractors Const. Equip.
18% SCVs 21%
2% 0% 2% 0% SCVs
2%
LCVs 3%
1% LCVs
M&HCV 1%
1%
M&HCV
Two & Three Two & Three 1%
wheelers wheelers
76% 72%

Source: SIAM – EY study 14


“INDIA” – A Global hub for Compact Cars
New Plant Addition in the Last 1 Year
Maruti General Motors
¾ Capacity 250K ¾ Capacity 140K
¾ Investment US $ 380 mln ¾ Investment $650 mln

Hyundai Nissan-Renault
¾ Capacity Increased to 600K cars ¾ Capacity 400K
¾ Investment US $ 1 billion ¾ Investment USD 1 billion

Tata Motors VW
¾ Capacity 500K ¾ Capacity 110K

¾ Investment US $ 240 mln ¾ Investment US $ 750 mln

Toyota Honda
¾ Capacity 200K ¾ Capacity 60K

¾ Investment US $ 310 mln ¾ Investment $ 250 mln

Ford
¾ Capacity 200K
¾ Investment US$ 500 mln

Increased
Increasedlocal
localcontent
content--Creating
CreatingGlobal
GlobalCompetence
Competence 15
Indian Automobile Industry-High Growth in
all Segments
April-July 2010
(Unit in Nos.)
Category Production Exports Sales (Domestic+Exports)
Segm/Subsgmt April-July April-July April-July
2009-10 2010-11 % Gr. 2009-10 2010-11 % Gr. 2009-10 2010-11 % Gr.
Passenger Vehicles ( PVs ) 682,287 898,429 32% 131,308 143,136 9% 696,890 899,795 29%

M&HCVs 57,324 105,446 84% 5,329 7,492 41% 60,318 103,276 71%
LCVs 88,484 118,484 34% 4,858 12,404 155% 84,316 117,976 40%
Commercial Vehicles (CVs) 145,808 223,930 54% 10,187 19,896 95% 144,634 221,252 53%

Three Wheelers 162,721 234,581 44% 37,044 89,637 142% 164,517 240,163 46%

Two wheelers 3,209,740 4,213,454 31% 327,381 528,794 62% 3,182,891 4,192,634 32%

Grand Total 4,200,556 5,570,394 33% 505,920 781,463 54% 4,188,932 5,553,844 33%

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Contents

1 About ACMA

2 Indian Economy

3 Automotive Industry

4 Auto Component Industry of India

5 Vision 2020

6 Capabilities & Challenges of Component Suppliers

7 The Way Forward

17
Indian Auto Component Industry Focus: Global
Best Practices
Significant number of companies
with Quality certifications &
recognition:
Industry fast embracing modern
• ISO 9000 : 552 shop-floor practices:
• TS 16949 : 438 • 5-S; 7-W
• QS 9000 : 33
• Kaizen
• ISO 14001 : 204
• TQM
• OHSAS 18001: 95
• TPM
• JIPM: 3
• 6 Sigma
• Deming Award : 11
• Lean Manufacturing
• TPM Award : 15
• Japan Quality Medal : 1
• Shingo Silver Medallion : 1 Annual Turnover
in Million US $
ACMA membership

245 < 1 ~ 5 Million US $


(More than 600
members)

179 > 5 ~ 25 Million US $

82 > 25 ~ 50 Million US $

51 > 50 ~ 100 Million US $

46 > 100 Million US $


18
Auto Component Industry - Statistics
(Value in US $ Billion)
E -> Estimated

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11(E)

Turnover 8.70 12.00 15.00 18.00 18.40 22.00 26.00


Growth rate(%) 29% 38% 25% 20% 2% 20% 18%

Export 1.69 2.47 2.67 3.52 3.80 3.80 5.00


Growth rate(%) 34% 46% 8% 32% 8% - 32%

Imports 1.90 2.48 3.60 5.22 6.80 8.16 -


Growth rate(%) 33% 30% 45% 45% 30% 20% -

Investment 3.75 4.40 5.40 7.20 7.30 9.00 12.00


Growth rate 21% 17% 23% 33% 1% 23% 33%
Imports as % of 22 21 24 29 37 37 -
Turnover
Exports as % of 20 21 18 20 21 13 18
Turnover
(Turnover includes supplies to OEMs, aftermarket sales and exports but sans imports. It does not take into account production for captive
consumption by OEMs, components manufactured by non ACMA members whose majority supplies are non-automotive and the
unorganized sector )
19
Auto Component Industry: Size

Turnover (In US $ bln)

30 40%
38% CAGR: 21% 26
Turnover (US $ bn)

25
22
29% 30%
20 25% 18 18.4

15
15 20% 20% 20%
12 18%

10 8.7
6.7
10%
5
2%
0 0%
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Growth rate(%)

Source: ACMA - EY Vision 2020

20
Auto Component Industry: Product Range
Product Range- 2009
Transm ission &
Steering
Suspension & 10%
Braking
10% Body & structural
40%

Interior
10%

Engine & Exhaust


Electronics &
20%
electrical
10%

Product Range- 2015(E) Product Range- 2020(E)


Transmission & Transmission &
Steering Steering
Body &
13% 16%
Suspension & Body & structural structural
Suspension &
Braking 35% 31%
Braking
13%
11%

Interior Interior
9% 8%
Electronics & Engine & Electronics &
Engine & Exhaust
electrical Exhaust electrical
17%
13% 18% 16%

21
Source: ACMA - EY Vision 2020
Auto Component Industry – Exports & Exports Markets
Exports market size (In US $ bln)
6.0 50%
42% 47% CAGR: 21% 5
Exports (US $ bn)

5.0 40%
3.8 3.8
4.0 3.5 32%
30% 30%
3.0 2.5 2.7

1.7 20%
2.0
1.2
1.0 8% 9% 10%
0%
0.0 0%
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11(E)

Exports Growth rate(%)

Exports market
S.America Africa
2.5% 7.4%
Profile of Exports N.America
24.0%
Asia
¾ OEM/Trier-1: 80% 28.1%

¾ Aftermarket: 20%

Australia
Source: ACMA - EY Vision 2020 Europe 1.1%
36.9% 22
Auto Component Industry – Imports & Imports Markets
Imports market size (In US $ bln)
10.0 50%
45%
Imports (US $ bn)

CAGR: 34% 45% 8.2


8.0 40%
33% 6.8
31%
6.0 5.2 30% 30%
20%
3.6
4.0 20%
2.5
1.9
2.0 1.4 10%

0.0 0%
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Imports Growth rate(% )
Imports market
S.America
0.92% Africa
N.America 0.20%
8.28%

Europe Asia
36.03% 54.34%

Australia
0.22%
23
Auto Component Industry Investments

Investment (In US $ bln)


14.0 40%
12.0
12.0
CAGR: 20%
33% 33%
Investment (US $ bn)

30%
10.0 9.0
21% 7.2 7.3 23%
8.0 23%
4.4
17% 20%
17% 5.4
6.0
3.8
4.0 3.1
2.7 10%
2.0 1%

0.0 0%
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11(E)

Investm ents Grow th rate(%)

Source: ACMA - EY Vision 2020 24


Increased Component Outsourcing
from India

Indian
IndianComponents
Componentsalready
alreadyDriving
Drivingon
onyour
yourRoads…
Roads… 25
Contents

1 About ACMA

2 Indian Economy

3 Automotive Industry

4 Auto Component Industry of India

5 Vision 2020

6 Capabilities & Challenges of Component Suppliers

7 The Way Forward

26
Vision 2020: Domestic Auto Component demand

$ 108 -119 bn
120.0
Component wise Category wise
100.0
4.3
17.1 6.4
80.0
$ 69 bn 10.7 21.3
In $ bn

6.4
60.0 100.2
12.8
25.6 4.3
$ 30 bn 4.3
40.0 60.6
17.1
20.0 25.7 46.9

12.8 23.5
4.3 8.4
0.0
2009 2015(E) 2020(E) 2020(E) 2020(E)
Transm ission & Steering
Aftermarket OE Construction Equipments
Suspension & Braking
Farm Equipments
Interior
2 & 3 Wheelers
Engine & Exhaust
HCV
Electronics & electrical
Body & structural LCV
SCV
Passengers cars
27
Source: ACMA - EY Vision 2020
Vision 2020: Domestic market potential for Indian
Component Manufacturer

OE vs. Aftermarket Component category wise


100.00
100.0
$ 76 - 84 bn $ 76 - 84 bn
80.00
80.0
12.63

8.42

In US $ bn
60.0 60.00
$ 49 bn $ 49 bn
In US $ bn

6.32

69.7 6.39 14.74


40.0 40.00 6.39
$ 22 bn $ 22 bn 4.26
42.9 12.63
8.52
20.0 2.20
20.00 2.20 6.39
18.0 2.20
4.40 2.20 25.26
6.1 10.3 17.04
0.0 4.0 8.80
0.00
2009 2015(E) 2020(E) 2009 2015(E) 2020(E)

Aftermarket OE Body & structural Electronics & electrical


Engine & Exhaust Interior
Suspension & Braking Transmission & Steering

28
Source: ACMA - EY Vision 2020
Vision 2020: India’s Exports Potential

Geography wise Component wise


30.00 $ 26 - 29 bn
30.00 $ 26 - 29 bn

25.00 4.02
25.00 5.21

0.00
20.00 2.71
20.00

12.90
In $ bn

In $ bn
15.00 15.00
12.50
$ 9.4 bn $ 9.4 bn
10.00 10.00 1.92
1.7 $ 3.8 bn 0.00
0.85
$ 3.8 bn 4.2 5.00
5.00 10.58 0.80 4.27 5.00
0.42 0.40 0.00
2.32 1.60 1.50
3.6 0.60 2.08
0.00 0.40 0.85
0.00 1.06
2009 2015(E) 2020(E)
2009 2015(E) 2020(E)
Body & structural Electronics & electrical
North America Western Europe Other markets
Engine & Exhaust Interior
Suspension & Braking Transmission & Steering

29
Source: ACMA - EY Vision 2020
India’s Auto Component Exports potential to North
America and Western Europe in 2020

30
Source: ACMA - EY Vision 2020
Auto Component Industry’s contribution to employment
generation and to India’s GDP
Employment in Auto-Component industry
Auto-Component industry contribution to GDP
2500
4.00%
1 to 1.2 million 1,950 – 2,160
additional jobs
2000
3.00%
1,460
1500
‘000 persons

1470
2.00%
920 3.60%
1000
1040 2.90%

1.00% 2.10%
660
500
590
420
260
0 0.00%
2009 2015(E) 2020(E) 2009 2015(E) 2020(E)

Direct Indirect

31
Source: ACMA - EY Vision 2020
Contents

1 About ACMA

2 Indian Economy

3 Automotive Industry

4 Auto Component Industry of India

5 Vision 2020

6 Capabilities & Challenges of Component Suppliers

7 The Way Forward

32
Indian Component Industry Development Capability

During the development process, Tata


Motors asked suppliers to think out of the “Hyundai i20, Made in India with
box and innovate products and process European Design feel”
design.
Hyundai exported 286K cars last year
This approach has resulted in 37 patents with a focus on Europe
being filed to cover innovations in the car
and has given Indian Engineers a canvas to
showcase their skills and capabilities.

Indigenization levels for high volume cars are at 80-90%


33
Some Design & Research Centers in India

34
Challenges India is Committed to Address

1 Infrastructure Deficit

2 Talent Crunch

3 Scaling-Up the industry

4 Access to World-class Technology and Quality Practices

5 Remaining cost competitive

6 Access to and availability of cost-effective capital

7 Trade Policy

35
Capabilities of successful niche Component
Manufacturers
Design, engineering & validation Manufacturing Sales & marketing
Core Capabilities

‰Strong R&D focus on specific ‰Domestic manufacturing ‰Customer acquisition


pdts./technology footprints ‰Customer loyalty
‰Customized solution ‰Operating smaller plants management
‰Innovation management efficiently

Information technology, Capital management, Risk management

‰IT systems focused mainly at product design and development


Enabling Capabilities

‰Raising risk capital


‰Cash flow management Managing risk of launching innovative products

People and organization

‰Innovative recruitment techniques to attract talent


‰Talent retention

36
Source: ACMA - EY Vision 2020
Contents

1 About ACMA

2 Indian Economy

3 Automotive Industry

4 Auto Component Industry of India

5 Vision 2020

6 Capabilities & Challenges of Component Suppliers

7 The Way Forward

37
Areas of Cooperation

• Manufacturing

• Technology

• Research & Development

• Quality

• Environment

38
Areas of Cooperation

1. Global SMEs can invest in green-field manufacturing in India to meet


growing domestic demand for auto-components.

2. Opportunities for Partnerships with Indian SMEs at Tier 2/3 level – the
Next Wave - covering the entire automotive supply chain to address
not only product technology, but also “Process Technology”.

3. Opportunity for supply base discovery.

4. Opportunity for Strategic Alliance to cover Global customers

5. Joint R&D with Indian companies for new product development and
designing is also an attractive proposition.

39
The Addressable Opportunity…

• Establish Partners/JV in India for


- Engine & Exhaust parts
- Auto Electronics & Electrical
- Transmission & Steering
- Informatics & Telematics
- New Material
- Simulation Technology
• Collaboration for Manufacturing Excellence and Process Design
• Production Sharing in India & Europe for a Holistic Service Capability
• Partnering for Global Requirements
• Merger & Acquisition
40
Conclusion

• Vibrant Indian Economy

• Automotive Industry showing double digit growth in all segments

• India becoming Global and Regional hub or lead country for vehicle
programmes

• Vision 2020

• Growing engineering and IT capability for manufacturing

• Auto Component Industry :Culturally compatible-Quality, Experience


and Values

• Opportunity to partner in product & process innovation

India
India::AAGateway
Gatewayto
toGrowth
Growth 41
ACMA Head Office
The Capital Court, 6th Floor, Olof Palme Marg, Munirka,
New Delhi – 110 067
Tel: 011-26160315, 26175873, 74
Fax: 011-26160317
E-mail: acma@acma.in
Website: www.acmainfo.com

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