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Automotive Component Manufacturers Association of India

Press Release
Auto Aftermarket in India valued at Components account for INR 248 billion

INR

330

billion;

First ever estimation of Vehicle Parc in India with primary research of 44 RTOs accounting for approx 50% of total vehicle parc; on-road vehicular population exceeded 94.7 million in 2010 Auto component counterfeiting market estimated at INR 87 billion; loss to government exchequer of INR 22 billion Industry advocates strengthening of legislative framework to tackle counterfeiting

New Delhi; February 11, 2011: ACMA, the apex body representing Indias Auto Component manufacturing industry, today announced the findings of first of its kind study on Indian Automotive Aftermarket. The aftermarket in India of the on-road vehicles was valued at INR 330 billion with 25 per cent on account of servicing (labour charges) and the remaining majority from components, putting the total components aftermarket at around INR 248 billion. Two-wheelers were the top contributors to the total aftermarket at 46 per cent. Three-wheelers contributed 3 per cent to the aftermarket, while PVs and CVs had comparable contributions at 26 per cent and 25 per cent, respectively. The industry body today also unveiled a detailed White Paper on Legislative Improvements to Combat Counterfeit Auto Components delineating the quantum of counterfeiting in the auto components in India, its adverse impact on the economy & trade and remedial measures including strengthening of legislative framework to combat the same. Commenting on the findings of the study, President ACMA, Srivats Ram said, The primary study of the Indian automotive aftermarket has revealed for the first-time information on the Indian aftermarket on the basis of vehicle parc data as on March 31, 2010. The total parc of all vehicles in India in the on-road category stood at over 94.7 million. Two wheelers constituted 76 per cent, PVs 15 per cent and the remaining 9 per cent were contributed by CVs and three-wheelers of all on-road vehicles. Among states, Gujarat with the maximum number of two-wheelers and Maharashtra with maximum number of on-road vehicles in each of other three categories topped the list. While in the case of cities, Delhi topped in vehicle parc across all segments except three-wheelers, where Mumbai had the highest numbers.

The study conducted by leading market research agency - The Nielsen Company is a timely and meaningful primary research study of the Indian automotive aftermarket undertaken by ACMA. The study also estimates the replacement frequency for key automotive components across various vehicle segments and average maintenance cost during each servicing cycle through extensive interviews and interaction with the distribution channel across the country. The study also identifies key trends and potential changes in the automotive business landscape. The first part of the study presents the findings while the latter half provides detailed granular data in the form of tables. ACMA is also publishing the complete data set collected during the field study in an interactive electronic format as well. Enumerating the findings of the study, ACMA Chairman for Committee on Consumer Affairs & After Market, Soumitra Bhattacharya, said, This is the first time in India, that we have had an extensive primary researched database with statistical extrapolation of the vehicle parc as also replacement market for over 100 major components, for the Indian Automotive Aftermarket. The Committee has worked along with our research agency The Nielsen Company for the last six months to come out with a comprehensive report and a separate drill down electronic database. The Indian aftermarket of on-road vehicles was valued at INR 330 billion in 2010 with 25 per cent on account of servicing (labour charges) and the remaining majority from components, putting the total components aftermarket at around INR 248 billion. Two-wheelers were the top contributors to the total aftermarket at 46 per cent; Three-wheelers contributed 3 per cent, while PVs and CVs had comparable contributions at 26 per cent and 25 per cent, respectively. A significantly nuanced input of this study has been provided by its component replacement frequency findings. These findings bring out typical behaviour of an Indian consumer of maximizing use while minimizing preventive maintenance. The survey finds that many components remain inuse well beyond their recommended life and the use of spurious components is high. Though there is some variability across components, only about 60 to 70 per cent of the available components are genuineOEM (original equipment manufacturer) spares, OES branded, non-OES branded or imported. It is in this context that our committee has also come out with a White Paper on Legislative Improvements to Combat Counterfeit Auto Components added Bhattacharya. Some of the salient findings of the study include: Forty-four most populous cities of the country (with million-plus population) contributed a little over half of all PVs, 34.8 per cent of two-wheelers, 32.8 per cent of three-wheelers and 34.4 per cent of CVs. Clearly indicating that vehicle ownership in India is shifting base from urban to semi-urban and rural areas. Tractors at over 3.5 million represent the largest off-road vehicle segment. Uttar Pradesh (including Uttarakhand) was the top state with a parc of over 600,000 tractors. Orissa and Kerala with disproportionately lower tractor parc compared to their populations were notable exceptions. 2

The average annual expenses on maintenance of vehicles are, INR 2,650 for two-wheelers, INR 3,450 for three-wheelers, INR 7,850 for PVs and INR 22,550 for CVs. The spending on vehicle maintenance during the initial two years is at around 35 per cent of the average spend during the peak spending period, which generally spans from the end of warranty till the vehicle is 13 years old. On the other hand, after 13 years of existence the average annual maintenance falls to around 45 per cent of the peak values as most of the interventions are aimed at keeping the vehicle just road worthy when the use of non-genuine parts goes up and regular service and maintenance cycles become much longer. Two-wheelers contributed 49.66 per cent to the total vehicle components aftermarket. Three-wheelers at 2.54 per cent, PVs with 24.68 per cent and CVs with 23.12 per cent share complete the pie for components aftermarket in 2010. The top states for two-wheeler components aftermarket were Gujarat at INR 14 billion, closely followed by Maharashtra at INR 13.9 billion and Tamil Nadu at INR 13 billion. Amongst cities, Delhi had the highest market size for two-wheeler components with an aftermarket size of INR 5.5 billion. Maharashtra (INR 1.2 billion), Gujarat (INR 0.9 billion) 0.85 billion) together constitute 47 per cent components aftermarket for three-wheelers. Among Mumbai carried the maximum potential market size components at INR 2.5 billion. and Kerala (INR of automotive surveyed cities, for aftermarket

In PVs, Maharashtra (INR 8.9 billion), Delhi (INR 7.2 billion) and Gujarat (INR 5.7 billion) contribute 36 per cent to the segment total. The leading states for components aftermarket of CVs were Maharashtra (INR 7.3 billion), Gujarat (INR 6.1 billion) and Andhra Pradesh (INR 4.3 billion), together making up for 31 per cent of the segment total. Delhi at INR 1.8 billion, Chennai at INR 1.7 billion followed by Bangalore at INR 1.5 billion were the leading contributors among surveyed cities. In terms of automotive purchase behaviour, semi-urban and rural markets demonstrated that consumer in these markets followed the urban pattern, except for the fact that a lower percentage of households owned four-wheeler PVs. In terms of automotive aftermarket, the replacement frequencies as well as preventive maintenance behaviour was very different in lower tier towns and rural markets as compared to large cities. These consumer segments are extremely cost-sensitive, spends are low, preventive maintenance outside warranty is rare and replacements are often low cost unbranded or even spurious.

The White Paper on Legislative Improvements to Combat Counterfeit Auto Components released by ACMA today highlights the increasing

concern of the industry towards the growing menace of the counterfeit components estimated at INR 87 billion in 2010. Various factors impact the increased availability of counterfeit components including ease of manufacturing, packaging and importing such products; higher margins on counterfeits; retailers and mechanics advocacy over genuine; uninformed customers; short replacement cycle of some parts and inadequacy of existing legislative framework. Increased proliferation of counterfeits results in a loss to the Government exchequer to the tune of INR 22 billion per annum; employment loss due to counterfeiting is estimated at over 1.15 million jobs, consumption of additional 109 million litres of petrol and 8 million litres of diesel per annum and an estimated 20% of total road accidents in India can be either directly or indirectly attributed to the use of counterfeit automotive parts. The use of counterfeits resulted in 25,400 deaths and more than 93,000 injuries in 2009. Sharing his thoughts on the future dynamics of the auto component aftermarket, Executive Director ACMA, Vinnie Mehta said, Going forward, the expansion of OEM authorized service stations and organized multi-brands service chains, implementation of GST and the ongoing campaign against spurious component manufacturers are key developments that will shape the Indian automotive aftermarkets. While GST will bring in substantial changes in the components distribution setup, servicing is expected to undergo a proliferation of multi brand organized chains and consolidation by large service providers, mainly on account of sophisticated and capital-intensive advanced diagnostics capabilities. Further, regulatory environment that includes emission norms, steadily advancing safety regulations and noise reduction measures, will also bring in new opportunities and challenges for component manufacturers. Commenting on the various recommendations of the White Paper to curb counterfeiting of auto components in the country, Srivats Ram said, Among others, it is essential to re-orient the Motor Vehicles Act as Automotive Components Anti Counterfeit and Product Safety Law with a comprehensive definition of counterfeit or spurious auto components; as well for what constitutes manufacturing, packaging, trading, distributing, warehousing, repacking, remanufacture, transportation, printing of packing material etc. for/of defective/ spurious automotive components. Further, the manufacture, packing, sale, stocking, distribution etc., of spurious auto components should be considered as cognizable and non-bailable offence. The Motor Vehicles Act should be intended not only to regulate completely assembled vehicles but also components used or intended for use in vehicles including in the aftermarket. Further, States should be permitted to take 'Suo motu action' to monitor and prosecute offenders engaged in the business of spurious auto components. Lastly, the automotive industry in collaboration with the Department of Consumer Affairs and other relevant government agencies should engage in consumer education and public awareness on the danger to life and property due to usage of spurious auto components .
To download the presentation on the Study and the Whitepaper, visit: www.acma.in

About ACMA: The Automotive Component Manufacturers Association of India (ACMA) is the apex body representing the interest of the Indian Auto Component Industry. Its active involvement in trade promotion, technology up-gradation, quality enhancement and collection & dissemination of information has made it a vital catalyst for this industrys development. ACMAs charter is to develop a globally competitive Indian auto component Industry and strengthen its role in national economic development as also promote business through international alliances. ACMA is an ISO 9001:2008 certified Association. About the study: The Indian Automotive Aftermarket study conducted by leading market research agency - The Nielsen Company gives in-depth information on the automotive sector and auto components industry in India, details on Vehicle Parc with estimates of the number of vehicles on Indian roads across the four key vehicle segments of two-wheelers, three-wheelers, passenger vehicles (PVs), and commercial vehicles (CVs). Information on the size estimate of the Indian automotive aftermarket is presented, as revealed by the primary survey, by segment, by age, by geography, by replacement frequency and by distribution structure. Further, the study focuses on the impact of the tax, legal and regulatory environment on the Automotive Aftermarket in India and discusses the implications of the imminent Goods and Services Tax (GST) on the components industry, regulatory environment impacting the automotive industry and most importantly, a key concern area of the automotive aftermarket industry in India spurious products. The study also presents developments and qualitative inputs for the industry alongside a sneak preview of the rural automotive aftermarket. About the White Paper: The ACMA White Paper on Legislative Improvements to Combat Counterfeit Auto Components aims to study the existing legislative framework in India, its shortcomings and proposes improvements to identify, deal and recommend penal action against those engaged in manufacture, trade, distribution, packaging, warehousing and retailing of counterfeit auto parts. The ACMA White paper has been prepared by ACMA Knowledge partner M/s Ernst & Young and Mr B S Iyer, Legal Consultant.