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CONTENTS • The Automotive Aftermarket

Scope, Size & Composition

Peak into the Past

Crisis Impact

Analyzing growth trends

Key growth drivers

Key challenges

Strengths & Threats

Global Advantage

Future Prospects

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CII’s AUTO CARE 2013

among others. The aftermarket does not include gasoline sales or convenience store retail sales. and manufacturer-authorized dealers. maintenance and service spectrum from parts supply to fitment and servicing. the automotive aftermarket comprises accessories. robust and highly competitive market that provides the support network for cars. The automotive aftermarket’s versatile and diverse segments cover the whole repair. The aftermarket industry helps keep vehicles on the road by providing customers the choice of where they want their vehicles serviced. The Indian Auto Component Industry manufactures a wide range of products and Chart 1 displays the share under each of these categories. The automotive after sales sector is a complex. It is also home for the largest motor cycle manufacturer and the fifth largest commercial vehicle manufacturer. Most of India’s automotive consumption is satisfied by vehicles produced in India with a high level of localization of sub-assemblies and components. e. The effervescent domestic automotive market is companioned by a similarly lively domestic automotive manufacturing industry.AUTOMOTIVE AFTERMARKET IN INDIA The Indian automotive industry has emerged as a 'sunrise sector' in the Indian economy. appearance products. b. nodal agency for the Indian Auto Component Industry. repair franchises and a mix of original and non-original parts suppliers. vans. d. the automotive aftermarket is made up of various aggressively competitive parties that provide different levels of service. Players in the marketplace include independent companies. trucks and buses. To meet the wide range of consumer needs. appearance and performance enhancement. and lubricants. f. Body and Structural parts Engine and Exhaust Electronics and Electrical Interior Suspension and Braking Drive Transmission and steering parts. Size & Composition: The automotive aftermarket is defined as the secondary market available after the sales of the original equipment. Automotive aftermarket: India’s automotive industry is one of the larger markets in the world and has been one of the fastest growing global markets. the automotive components aftermarket was dominated by original equipment suppliers (OES) with a 76 % share. ranging from the authorized networks of the vehicle manufacturers. maintained or customized. c. manufacturer/OEM owned dealers. . replacement parts. It provides a wide variety of parts of varying qualities and prices for nearly all vehicle makes and models on the road. The Indian automobile industry is capital and technology intensive with a high level of economy of scale and diverse linkages with down – stream industries leading to making a strategic industry to the Industrial Economy as a whole. The remaining 12–13% constituted the Indian automotive aftermarket. It covers: a. more aptly it is the ___________________________________________________________________________ 2 CII’s AUTO CARE 2013 . thus completing the picture. The Automotive Component Manufacturers Association of India (ACMA) is the apex body representing the interest of the Indian Auto Component Industry. Scope.8 bn to the total turnover. It encompasses parts for replacement. independent repairers. In 2009. whereas exports contributed US $ 3. India is being deemed as one of the world's fastest growing passenger car markets and second biggest two wheeler manufacturer.

1%. radiators. while PVs and CVs had comparable contributions at 26 % and 25 %. lamps and bulbs. major districts roads. sheet metal fabrication. It is true that this miniscule proportion carries 40 % of the road traffic. PVs and CVs. and poor fuel quality have ensured rapid wear and tear of steering. Some recent studies and reports put the estimated size of the automotive aftermarket in India between Rs 190 billion and Rs 240 billion. respectively. national highways constitute less than 5 % of India’s total road network. Unlike in the triad markets (US – Western Europe – Japan) where features and reliability outscore affordability and value perception (value-for money). fabrication tools. spring manufacturers – it covers basic industry and white goods. And the next category. The road transport industry too has received a strong boost with improvements in interstate roads and better linkages through new as well as renewed national highways. more than 20 million MUVs. Local and arterial road networks all over India are in appalling condition. adds up to 468. The aftermarket has experienced phenomenal growth in recent years both for auto components as well as the servicing of vehicles. Finally. India has a higher preference for perceived value than even vehicle The Indian aftermarket is likely to ___________________________________________________________________________ 3 CII’s AUTO CARE 2013 . putting the components aftermarket at around Rs 248 billion. rubber. rural roads stand at 2. electrical fittings. interior furnishings. the total size of the parts aftermarket is estimated at approximately INR 280 bn. plastic. Unlike China. and two-wheelers have been sold in the last seven years but bad roads.000 km and constitutes 14 % of the network. This has brought about dramatic improvements in the turnaround. oils and grease. For India. while service (excluding parts) is pegged at approximately INR 100 bn.Chart 1: Composition of the Auto component industry Source: ACMA Indian Auto – Component Industry covers a wide spectrum of industries. consistently and unfailingly assaulting the vehicles that run on them. music system.000 km. On the whole. safety gadgets.000 km and make-up 80 % of the total network.11% until FY 15 to reach the INR 370 bn mark while service is likely to reach approximately INR 130 bn mark. According to the SIAM. This growth is strongly correlated with and follows close at the heels of the spurt in sales growth of automobiles in the country. that is. the Indian aftermarket of on-road vehicles is valued at Rs 330 billion with 25 % on account of servicing (labour charges) and the remaining majority from components. This sector has a bearing on Power consumption and skilled labour availability and has a considerable contribution in GDP (Manufacturing) – for FY 12 GDP at factor cost is 2. The parts market is expected to grow between 9% .time of interstate CVs. mould making.650. This coupled with growing vehicle parc and poor culture of preventive maintenance among vehicle owners in general has led to a significant opportunity for an undistinguished aftermarket industry. various estimates of the components aftermarket have been derived from time to time based on diverse methodologies and assumptions.000 km. irregular servicing. iron and alloy steel. This growth is not just limited to PVs. but the state highways network is double the length at 132. air conditioning. India is more value conscious. As disposable income is rising and more and more vehicles are rolling out with attractive price tags. At the same time. with coverage of 67. maintain its robust growth trajectory over the next several years. battery industry. vehicle sales are fast breaking the ‘metro’ barrier to penetrate Tier 1 and Tier 2 towns as well as rural India. Two-wheelers again were the top contributors to the total aftermarket at 46% Three-wheelers contributed 3 % to the aftermarket. Currently.

Safer driving in India mainly revolves around vehicle security and passenger safety. automotive component manufacturers from India fared better than many of their global counterparts from the triad markets or those with greater exposure to the high income markets ___________________________________________________________________________ 4 CII’s AUTO CARE 2013 . China went on to become world’s second largest economy displacing Japan from that position Emerging economies attained significance beyond their existing market size. Accordingly automobile manufacturers (OEMs) and Auto component manufacturers have made a significant contribution to the Indian Economy as per the policy objectives. Through FY 10. It would be very difficult to find a single company dealing in automotive components that remained entirely unaffected by the global financial crisis. Consumers are gradually shifting towards safer and more relaxed driving. There is a need for chauffeur-driven cars even in the B+ segment. However. As a result. The crisis and the way in which it exposed the structural weaknesses of the triad (US–Western Europe–Japan) markets. as the world gradually recovered from the global financial crisis. competent and quality conscious components. higher levels of personalization and driving for pleasure. as demand from traditional markets dwindled. Peak into the past: In 1980s it has followed a planned growth process and has given a major fillip to the development of Indian Auto – Component sector. Phased Manufacturing Programme (PMP) for new projects in New Industrial Policy 1991 and for existing projects in 1994 has been abolished. The Dragon and Tiger economies of China and India with GDPs at US $ 5. led to developing and creating highly capable. which was substantially greater than the pre-meltdown focus of businesses on these markets. pushed the world economy to become multi-polar in many ways. new products with a higher level of quality in their operations enabling them to be swift and effectively localize the component base. many OEMs are going beyond the standard definition of a service station to meet consumer convenience expectations by offering on-road breakdown assistance. To fulfill the need for relaxed driving consumers are increasingly demanding features that reduce fatigue including seats. More inclusive warranties for longer duration or run. consumers largely are ignorant or indifferent towards these issues. Commercial vehicle owners on the other hand mostly take their decision based on statutory requirements and also in keeping with commercial considerations.price. Crisis impact: The Indian economy which underwent a high growth experience between FY 04 and FY 08 was impacted by the global financial crisis. In this emerging milieu. It has reflected in the growth of Indian Auto Component Industry ever since in terms of earnings (domestic and export) and encouraging capital investments. growing concern from environmentalists and NGOs and increasing focus on air quality in cities by government. there was a significant change in the world economic order. which has now become important due to higher permitted speed limits on highways. There is greater consumer preference for latest style and design. which add to perceived value of vehicle. This followed by Auto Policy 2002 enactment with a Vision: To establish a globally competitive automotive industry in India and to double its contribution to the economy by 2010. parking assist. brand perception and resale value are also important contributors in vehicle choice decision. However. Personalization and possibility of using the car for leisure activities is also adding to the demands being made of OEMs. climate control. Hence.6 trn and US $ 1. Despite rising pollution levels in cities. The initial part of development of Indian Auto Component Industry is primarily due to the implementation of Phased Manufacturing Programme (PMP) as per the GOI policy enabling the auto component industry to induct new technologies. etc.3 trn respectively have undoubtedly been driving growth and investment in the world. are therefore being increasingly offered by OEMs nowadays. with infusion of new technology even cost conscious consumers are opting for more environment-friendly options.

players across the aftermarket industry have faced margin pressures in the last few years. which is Rs 464 bn and least being in the negative of Rs 7 bn in FY 09. CII TF Research Chart 3 is the 10 year estimate Five year plan of production turnover from the FY 02 to FY 07 and FY 07 to FY12 and comparing with actual production turnover for the same period. Chart 4 depicts the changes in percentage terms i. In a bid to remain competitive and to produce high quality product range for export. 08 it was Rs. This trend is likely to continue. jointly with SIAM and ATMA (Association of Technical Market Analyst) commissioned a study by NCAER (National Council for Applied Economic Research) to work out the projected growth rates in Auto Component Industry over two 5 year periods from 2002 to 2012. component manufacturers are increasingly focusing on maintaining high quality standards and are ___________________________________________________________________________ 5 CII’s AUTO CARE 2013 . Chart 3: Projected growth rates Chart 4: Actual growth rates % yoy Source: ACMA Source: ACMA. 65% as compared to increase in FY 07 which is 20.534. In terms of actual value the maximum increase is in the year FY 11 comparing with FY 10. Analyzing growth trends: In 2000 ACMA.e.79%. While the market structure of the automotive aftermarket in India has gradually begun to consolidate to realize scale benefits. signify the benefits obtained after the implementation of AUTO Policy 2002.1067 bn respectively.66% in the year FY 09 due to recession market affecting across the industry in export and import. 07. 645 and Rs. In value terms in FY 06. The maximum increase is in FY 08. 14% by replacement market and the balance 16% by exports. cost and timely delivery are the key factors in the growth of this industry. 70% was contributed by domestic OEMs. Product quality. In FY 12 of total industry production size of Rs. as most players in the Indian aftermarket are still sub-scale and will be at risk of margin decline due to pricing pressures as well as rising costs. that is. growth has been in the double digit range. The Indian aftermarket offers significant opportunities for profitable growth. yoy production turnovers. 2063 billion. it will still be necessary for players to make smart granular choices on “where to compete” and “how to compete” to achieve sustainable and profitable growth. and players who proactively make right “where to compete” and “how to compete” decisions will emerge as winners in the long run. Rs. Generally in all these years.Chart 2: Automotive components industry trends Source: CII TF Research Except for large automotive distributors. The least growth being (0.

Also. currency volatility and ability to invest on product development to be able to move up the value chain. Looking back at the past. 6 Sigma. the industry faces strong challenges in the form of threat of low cost imports. All of these factors have contributed in putting into place a large potential and competitive edge for the sector. the sluggishness was partly arrested on the back of rise in component exports and higher domestic replacement market sales. the various GOI policies have been favourable and encouraging. That said. Key challenges: The Indian auto components industry has been witnessing a moderation in its revenue growth following the deceleration in sales volume growth across all automobile segments post criss. TQM etc. are likely to be better equipped to offset the expected moderation in business volumes of select domestic automobile segments over the short term. translated into muted revenue growth for the auto components industry in FY 12. companies from abroad preferred Indian companies. More emphasis is being laid on adopting modern shop floor practices such Kaizen. the return on capital (ROCE) has been under pressure for players across the industry. the performance of individual auto component manufacturers will continue to vary depending on their revenue mix (OEMs/ Replacement Market). particularly those belonging to the passenger vehicle (PV) and Medium and Heavy Commercial Vehicle (M&HCV) segments. While lower yoy volume growth of domestic OEMs. CII TF Research Key growth drivers: Apart from Auto Policy 2002. dependable and low cost capabilities. While the long term prospects for the industry remain strong in line with the outlook for the OEM segment. Most ACMA members have at least one standard certification. auto component manufacturers who have a growing presence in the replacement market and also have geographically dispersed customer base. independent service workshops. the Indian auto component industry possesses competitive advantage due to its quality produce. they have acted as a catalyst to improve in exports and to expand the installed capacity. Overall. and higher ___________________________________________________________________________ 6 CII’s AUTO CARE 2013 . Chart 5: Quality certificates and recognitions Source: ACMA. Quality Certifications have significantly contributed to the growth of the industry. and dealership service centers. the other favourable measures in aiding growth are: a. particularly rentals and manpower costs. Despite strong growth. b.acquiring quality certifications. The achievements with respect to various certifications obtained are indicated in Chart 5. This is primarily due to rising operating costs. segment leaning (PV/CV/2W) and geographical diversification (domestic/ exports). timely delivery. Increasing demand for Vehicles Setting up of a technology modernization fund focusing on small and medium enterprises by AMP 2006-16 The Department of Heavy Industries and Public Enterprises (DHI and PE) creating a fund of USD 200 mn to modernize the auto components industry by providing an interest subsidy on loans and investment in new plans and equipment and provided export benefits to intermediate suppliers of auto components against the Duty Free replenishment Certificate (DFRC). The revenue growth of the auto components industry is likely to be a close reflection of the blended growth of individual automotive segments. ROCE has declined across players – spare part retailers. in fact. c. Barring large independent national distributors.

The value chain in India is highly fragmented and requires significant intermediation for parts to reach end customers. original equipment suppliers (OES). steadily advancing safety regulations and noise reduction measures (in line with European countries). b. Globally cost competitive being low manufacturing cost Adheres to strict quality controls Access to latest technology Ability to cater to low volume. This proportion is around one to two times in mature markets of Europe. land. propeller shafts. Valeo. The parts and service markets are largely fragmented. The list includes castings. but there are clear Strengths & Threats: The distinct and great achievement is relating with Deming awarded by Japan and India is the first country to obtain this award for outside Japan established organizations in this sector followed by largest in number. Global OEMs like Volvo. Taiwan etc Continued pressure on prices from OEMs c) Lack of design capabilities with the domestic auto component manufacturers is leading major OEMs in importing the requirements for their new launches and variants. a few leading aftermarket distributors in the country have maintained or increased their ROCE during the past few years through operational excellence. and go through independent distributors.capital lock-in for higher inventory and other fixed capital (e.. Original equipment suppliers have an edge as they can both directly supply OEMs. Indian auto is being considered for outsourcing by developed countries (USA and Europe) owing to its low cost of production and quality sustenance produce. Many people love their cars. Magna. leaf springs. indications of consolidation. driven by OEMs’ thrust on localization and steadily growing replacement market demand. Global Advantage: The Indian Automotive Aftermarket Industry is one of the few sectors in the economy that has a distinct global advantage in terms of Cost and Quality. b. building. India has also become a centre for low-cost innovation with several global auto majors setting up R&D centers in India. gearbox and engine components. Toyota and Daimler are sourcing components from India. and generic manufacturers. Given the healthy growth prospects of the Indian automobile industry over the medium term. the independent channel has grown in significance in recent times.g. Essentially cheap imports from other low cost countries such as China. b. Future prospects: Currently. power train components. and Brose. the auto components industry in India is around two-thirds the size of the OEM segment. America and Japan. Nevertheless with prices of key commodities showing trends of softening and providing partial relief to the industry players that had grappled with commodity cost pressures FY 11. Ford. Fiat. selling parts through directly-owned or franchised dealers. The production of parts is split between original equipment manufacturers (OEM).. While OEMs may rely on their own distribution networks. the challenges can be overcome. d. Global sourcing from India is also being carried out by companies like Bosch. This indicates a.. forging. Higher proportion of imports of auto components in India by OEMs Lower replacement market sales. and enthusiasts often want to make their cars the best or the fastest cars ___________________________________________________________________________ 7 CII’s AUTO CARE 2013 . Threats: a. Audi and Daimler have established outsourcing offices in India. and equipment). Renault. etc. Thailand. Separately. c. will also bring in new opportunities and challenges for component manufacturers.. etc. Strengths: a. In contrast. one can expect the size of the auto components industry to grow at a rate faster than the OEM segment. Fifteen global car makers like GM. regulatory environment that includes emission norms.

The Indian auto component industry is expected to reach a turnover worth US$ 113 bn by FY 21 from US$ 43. especially with margins likely to come under pressure. the focus must increasingly shift towards quality and reliability as customer expectations grow. Supportive government policies. and global suppliers are expanding their sourcing and distribution presence in India. Scaling up capacity to service the growing demand will be a challenge for Indian companies across the value chain. Game-changers will latch on to these trends earlier while others will also need to sooner or later move into the new orbit. The exports from the industry are expected to grow at a compound annual growth rate (CAGR) of 17 %. Winners will be those who are able to take advantage of the growth opportunity in the market. However. The growing number of parts suitable for manufacturing by generic players and the increasing vehicle parc (especially in rural India) puts generic manufacturers and independent garages in a very attractive position. availability of reasonably priced talented workforce and stable outlook for the industry has made India a global hub for the international manufacturers to set up their facilities in the country. Indian automotive industry has a promising future and so has the automotive aftermarket. The Indian automotive aftermarket is at an inflection point – vehicle parc is increasing. despite the unique position of OESs that enables them to ride off the success of both OEMs and independent distributors. demanding exclusivity and increasing warranty periods. the Indian automobile and auto components industry can be expected to surpass China's growth path by 2021.4 bn in FY 12. While increasing customer affluence and an already well-established network give OEMs a sound starting position. That's where aftermarket auto parts come in. they must continue to create barriers to entry for independent players by expanding networks. Consequently. the economy is set to witness some structural changes in the Indian automotive aftermarket owing to a continuously transforming business environment. changing business landscape and their organization’s responsiveness to these factors. With growing disposable incomes and greater thrust on consumer preferences.518 mn. Overall. are likely to emerge as winners. In the coming years of this decade.that they can afford. the future is bright for the automotive aftermarket. and players who adapt their business models to the changing scenario. ___________________________________________________________________________ 8 CII’s AUTO CARE 2013 . customers are more price sensitive. it is vital they seize opportunities to forward integrate along the value chain. the industry revenue pools will significantly increase. Several favourable trends will positively impact the Indian automotive aftermarket in the years ahead. all players remain susceptible to certain risks and so will need to focus on implementing key imperatives in order to enjoy high margins and growing profits. parts are getting more complex. The amount of cumulative foreign direct investment (FDI) inflow into the automobile industry during April 2000 to November 2012 was worth US$ 7. The auto components manufacturers are also reaping the benefits. amounting to 4 % of the total FDI inflows. positive business environment. However. Similarly.