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Auto Components

Last Updated: October 2011 Indian Auto Components Industry: Brief Introduction With a surging Indian automobile industry, the inter-related Indian auto component industry is heading strong towards a high growth trajectory. The US$ 30 billion industry is anticipated to grow on the back of robust domestic demand. The Indian auto component industry recorded its highest year-on-year (y-o-y) growth of 34.2 per cent in 2010-11, raking in revenue of US$ 39.9 billion; major contribution coming from exports at US$ 5 billion and fresh investment from the US at around US$ 2 billion. Indian Auto Components Industry Profile Two-thirds of the components manufactured by the industry in India are accounted for by two and threewheelers, along with passenger cars. However, a national survey by Ikon Marketing Consultants has revealed that components' demand for commercial vehicles has shown magnificent growth during 20062011. Going by the product range, 31 per cent of the market share is formed by the engine parts followed by drive transmission and steering parts at 19 per cent. Other products like body and chassis parts, suspension and breaking parts, equipment and electrical parts also contribute significantly in overall industry turnover. Among the major export destinations for Indian auto components, Europe leads the way with 36 per cent of the share, followed by Asia (28 per cent) and North America (23 per cent). Destination India Indian auto component manufacturers have proven their mettle product-development by providing genuine and reasonably priced automotive parts to auto companies across the world which has made India a major global outsourcing hub in this field as well. For instance, Gujarat that rolled out red carpet for auto makers like Tata Nano is on the world map as a major auto hub. Auto giants like Ford Motor and Peugeot Citroen have lined up investments worth around US$ 2 billion to build new plants in the state. Rajkot is another hub that has more than 500 auto component manufacturers, of which around 50 supply parts to OEMs and the remainder are small and medium enterprises (SMEs) that supply to the retail market. The industry in Rajkot makes over 300 types of parts for the automobile industry and employs about 10,000 people. Indian Auto Components Industry: Key Developments and Investments

Indian auto-component manufacturers are now focusing their efforts to develop research and development (R&D) capability of their own in order to achieve competitive edge on the global map. Technological innovations being the major driver for growth in the years to come, companies are working to improve their resource efficiency, implementing new techniques and putting in place lean management mechanisms. The Indian government plans to increase the expenditure on R&D to 2 per cent by 2012, which is currently around 0.8 per cent of the gross domestic product (GDP). India's largest head lamp maker Lumax Industries has planned an investment of Rs 150 crore (US$ 30.86 million) to set up three green field manufacturing units while Jay Bharat Maruti (JBM) would invest Rs 500 crore (US$ 102.86 million) in 2011-12 to expand capacities across its facilities and set up new ones. Marking a milestone for India's auto component industry, Hero Honda would become the one-nonly international supplier of gearboxes for BMW's motorbikes for domestic as well as foreign markets. ZF Hero Chassis Systems, which currently supplies axle assembly to General Motors India, is in

talks with Suzuki and Honda to supply components in India. As a part of its expansion spree, the company will also make an investment of Rs 100 crore (US$ 20.57 million) to set up new plant in the country. It has already decided to set up a plant in the National Capital Region (NCR) to produce chassis frames, axle systems and sheet metal components for the domestic car market. ZF Hero Chassis Systems is a joint venture (JV) between Hero Motors and German auto component major ZF. Government Initiatives The Indian government is in the process of forming a National Automotive Board (NAB) which would become a formal set-up to look into the issue of recall of vehicles and hence improve manufacturing standards. The prospective body, to oversee technical and safety aspects of vehicles, will have representatives from all the nodal ministries and automotive bodies such as the Automotive Research Association of India (ARAI). In a first-of-its-kind public-private partnership, automotive components manufacturer Tata AutoComp Systems Ltd has signed a memorandum of understanding (MoU) with the Government of Gujarat for imparting vocational training to rural youth to widen employment opportunities for them. The agreement, focussed to fill-in the skilled manpower shortage faced by the auto industry, would facilitate revamp of the State's Industrial Training Institutes (ITIs), launch of skill development programmes and introduction of modular employable skills (MES) courses. Tata AutoComp will train nearly 1,500 youth in Gujarat annually through this MoU. Meanwhile, following the discussions between the visiting Soe Thein, Myanmar Minister of Industry and Mr Praful Patel, India's Minister of Heavy Industries and Public Enterprises, Tata Motors has proposed to set-up a bus-assembly facility in the neighbouring country along with supply of passenger vehicles to them. The discussions entailed mutual industrial collaboration between the two nations. Road Ahead According to industry experts, the Indian auto component industry will cross US$ 100 billion mark by 2020, growing at a Compound Annual Growth Rate (CAGR) of 15 per cent while its share in the world's is also likely to grow to over 3 per cent by 2015-16. For the year 2011-12, the industry is expected to grow 12-15 per cent. Not only domestic demand, India is poised to scale new heights in terms of exports as well. Automotive Component Manufacturers Association of India (ACMA) expects exports to be worth US$ 29 billion by 202021, growing at a CAGR of 18.8 per cent through 2011-21. [Exchange Rate Used as on October 29, 2011: INR 1 = US$ 0.0206] References: Press Releases, Industry statistics report by Automotive Component Manufacturers Association of India (ACMA

Automobiles
Last Updated: October 2011 Indian Automobile Industry: Brief Introduction India, the world's second-fastest growing auto market, is in top-gear growth. The country is a hot destination for automobile manufacturers due to its robust economic growth, favourable demographics, higher disposable income, changing lifestyle and positive industrial eco-system. India is expected to become the third biggest automaker in the world within next decade, according to Diane H Gulyas, President, DuPont Performance Polymers. Owing to its vertical and horizontal integration with other key segments of the

economy, the industry is said to be a major growth driver. Market Dynamics For FY 2011, Maruti Suzuki held a reasonable market share of 48.74 per cent while that of Hyundai was around 18.10 per cent. Tata Motors' market share stood at 12.92 per cent for the period. General Motors India (GMI) and Honda Siel cars India (HSCI) had a market share of 4.40 per cent and 2.97 per cent respectively during FY2011. According to the data released by the Society of Indian Automobile Manufacturers (SIAM), Maruti held 43 per cent of the total Indian passenger-car market in the six months ended September 2011 as against Hyundai's 20 per cent pie. Key Statistics

SIAM expects India's car sales to grow 2-4 per cent in the fiscal year ending March 2012 while a growth of 13-15 per cent is projected in commercial vehicles' sales segment. Car sales in September 2011 stood at 165,925 cars. Sales of commercial vehicles (a key indicator of the country's economic activity), increased by 18.05 percent to 70,634, while motorcycle sales rose 19.93 percent to 933,465 of them in September. Total sales of vehicles across categories witnessed a growth of 19.39 per cent to 1571,342 units in September 2011 from 1316,118 units in the corresponding period last year. The sales of scooters increased by 50.74 per cent to 231,710 units (from 153,716 units in September 2010) while that of three-wheelers stood at 49,255 units (from 48,814 units in September 2010) in September 2011. Overall automobile exports registered a growth rate of 32.31 per cent during April-December 2011. Passenger Vehicles registered growth at 21.01 percent in this period while two-wheelers, commercial vehicles and three wheelers segments recorded growth of 32.34 per cent, 35.91 per cent and 49.55 per cent respectively.

Indian Automobile Industry: Major Developments & Investments Seoul-based Hyundai Motor Company has launched its cheapest car model 'Eon' in Indian markets to give in a face-off to Maruti Suzuki India Ltd and the company expects to sell 140,000-150,000 Eon cars a year. With a view to add a model that could vie for international markets, India's largest utility vehicle maker Mahindra and Mahindra Ltd (M&M) has introduced a new sport utility vehicle (SUV) XUV500; nine years after the launch of Scorpio. Marking its first motor export from India, Toyota Kirloskar Motor Pvt Ltd (TKM) would commence export of the 'Etios' series sedan and hatchback to South Africa in March 2012. The company is targeting emerging economies to increase its sales. Swedish company Volvo's Indian bus-making unit has unveiled its plan to invest around Rs 4 billion (US$ 80 million) over 2011-15 to increase its annual output to 5000 buses and revenue to Rs 490 billion (US$ 1 billion) by 2015 to cater to the burgeoning Indian market. German luxury car makers are on their toes to achieve top slot in the Indian markets and they would enhance their sales network by 2012 to a great extent to accomplish the same. While Mercedes Benz will add 8 dealerships in 2012, Audi plans to increase the number of sales outlets from 13 to 25 in 2012. Also, BMW is working on a project to triple its dealerships by 2015. The company plans to add 18 of them by October 2012 to take the total number to 40. Formula One (F1) on the track

Taking a huge step in motor sports segment, India is conducting Grand Prix F1 race at the end of October 2011 in Greater Noida where 12 international teams (all based out of Europe) would participate. The 5.14 km track was designed by the German track designer Hermann Tilke and built by the Noida-based construction company Jaypee Group. The Jaypee Group, which acquired the rights for the race in India, employed over 6,000 workers and 300 engineers to build the track and arena, which is spread over 850 acres, and will accommodate around 120,000 viewers. Jaypee Sports International Ltd (JPSI) has spent around Rs. 1,800 crore (US$ 365 million) on the project, which includes paying licensing fees to Fdration Internationale de l'Automobile (FIA), the sport's governing body. Government Initiatives The Indian government is in the process of forming a National Automotive Board (NAB) which would become a formal set-up to look into the issue of recall of vehicles and hence improve manufacturing standards. The prospective body, to oversee technical and safety aspects of vehicles, will have representatives from all the nodal ministries and automotive bodies such as the Automotive Research Association of India (ARAI). In a first-of-its-kind public-private partnership, automotive components manufacturer Tata AutoComp Systems Ltd has signed a memorandum of understanding (MoU) with the government of Gujarat for imparting vocational training to rural youth to widen employment opportunities for them. The agreement, focussed to fill-in the skilled manpower shortage faced by the auto industry, would facilitate revamp of the State's Industrial Training Institutes (ITIs), launch of skill development programmes and introduction of modular employable skills (MES) courses. Tata AutoComp will train nearly 1,500 youth in Gujarat annually through this MoU. Also, the government of Gujarat has provided 600 acre plot in Sanand to the European car-maker PSA Peugeot Citroen to set up its manufacturing facility. In order to bring-in new and efficient vehicles on the Indian roads, SIAM has endorsed a regular, concrete scrappage policy to the government which says that all vehicles (cars, commercial vehicles and twowheelers) made before 1996 should be scrapped. According to SIAM, such a policy would also help control pollution and harmful emissions. Meanwhile, following the discussions between the visiting Myanmar Minister of Industry Soe Thein and Mr Praful Patel, Minister of Heavy Industries and Public Enterprises Tata Motors has proposed to set-up a busassembly facility in the neighbouring country along with supply of passenger vehicles to them. The discussions entailed mutual industrial collaboration between the two nations. Road Ahead Luxury car makers are keen on Indian markets as the sales for the same are expected to touch 150,000 units by 2020. Indian luxury car market is growing at an annual rate of 70 per cent and is expected to cross 20,000 units by the end of 2011 in terms of sales. Hence, the concerned majors are looking at Tier-II cities for new dealerships along with opening second or third outlet in top 10 metros. According to industry experts, India is poised to become the third largest car market by 2020 after the US and China. [Exchange Rate as on October 18, 2011: INR1 = US$0.0203] References: Society of Indian Automobile Manufacturers (SIAM), Press Releases, Media Reports