The Indian Automotive Supplier Report
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The Indian automotive industry is currently going through one of its most challenging phases so far. Vehicle sales are set to register a negative growth in 2013 – first time in more than a decade – compared with the previous year. Official data shows that vehicle sales in India declined at a high single digit rate year on year in the first nine months of 2013 compared to 2012. This downward spiral has prompted automakers and suppliers to cut production to avoid excess inventory build-up. Besides, there's little respite on the cost front. Though there has recently been some softening in raw materials prices, other costs such as wages, cost of power and finance expenses, continue to erode suppliers' operating margins.
The weakness in the automotive market has taken its toll on the investment drive of many suppliers. While international suppliers have continued their investments in India, citing the country's long-term growth prospects, local suppliers have almost put their expansion plans on hold until there is a sustained recovery in vehicles sales. The Indian automotive industry at the moment is facing multiple challenges such as slowing economic growth, high inflation and high interest rates – compared with many of its peers. IHS however is sanguine about the country's growth trend in the medium to long term and forecasts recovery in vehicle sales in 2014, and high single-digit growth in vehicle sales for the rest of this decade. IHS expects vehicle sales in India to grow at an average rate of 12.2% annually between 2014 and 2020; sales are expected to reach 7.1 million units by 2020 compared with 3.6 million in 2012.
This fourth edition of the Indian Supplier Report offers an account of the current volatile business environment in the country. The report, based on comprehensive first hand interaction with industry officials, gives an insight into how suppliers are dealing with the current market and economic challenges. The analysis in this report is supported by a survey conducted among more than 50 senior industry executives – mostly tier one suppliers. The survey reflects IHS's opinion that, despite short-term challenges, India remains an attractive market for the automotive industry.
Vehicle sales in 2012 Major players in light vehicle segment Medium and heavy commercial vehicle segment Competitive landscape Vehicle sales decline in 2013 Factors behind declining vehicle sales in India Declining economic growth High inflation and interest rate Rising fuel prices Medium to long-term outlook remains bright
Emerging exports hub
Moderation of production in 2013
Long term production outlook remains strong
Investment plans of automakers
India's Automotive Component Industry
Mixed performance in recent yearsDiverse supply base Exports remain robust Imports have grown at higher rate Investment declines as slowdown stretches Long-term growth outlook remains strong Joint-ventures Mergers & Acquisitions
Involvement of automakers in supplier development
Direct involvement declines post-liberalisation
Greater localisation driving better OEM-supplier relationship
Technology remains a big challenge for Indian suppliers
Automakers' close-knit suppliers
Cost, quality, delivery (QCD)
India's emergence as a sourcing hub
Automotive Clusters in India
Cluster development Three major clusters Distribution of Indian auto components manufacturers across India Northern cluster Southern cluster Western cluster Competition among clusters
Challenges for the Indian Supplier Industry
1. Demand fluctuations
2. Capacity expansion
3. High cost of capital
4. Fluctuating raw materials prices
5. Exchange rate volatility
6. Rising operating costs
7. R&D capabilities
8. Free trade agreements (FTAs)
9. Skilled manpower shortage
10. Growing competition
Challenges and opportunities go hand in hand
Policy environment Tax policy Union Budget for FY2014 Direct taxes Indirect taxes Trade policy State policies Labour laws Land Acquisitions Policy on fuel pricing Industry regulations Recent developments Auto Policy 2002 Automotive Mission Plan 2006-16 National Automotive Board National Manufacturing Policy Government Initiatives on skills development
Roadblocks in infrastructure development
Survey of Indian Supplier Industry Supplier Profiles Aisin Seiki
Ashai India Glass
Ashok Iron Works
Ashok Minda Group
Auto Ignition Limited
Brakes India Limited
DCM Engineering Products
GKN Driveline India
Guru Nanak Auto
Jay Bharat Maruti
Lumax Automotive Systems
Munjal Auto Industries
Neolite ZKW Lightings
Ring Ring Plus Aqua
Samvardhana Motherson Group
Shriram Pistons and Rings
Steel Strips Wheels
Talbros Talbros Automotive
UCAL Fuel Systems
Figures Figure 1: Vehicle sales recorded average annual growth of 14.5% between 2005 and 2012
Figure 2: Hatchbacks continue to dominate India's LV market (LV segmentaiton based on body type)
Figure 3: A segment vehicles accounted for half of LV sales in 2012 (Global segmentation of LV sales)
Figure 4: Maruti Suzuki is the largest LV maker in India but its market share has declined amid intensifying competition
Figure 5: Trucks accounted for 85% of M&HCV sales in 2012 (M&HCV sales break up by vehicle)
Figure 6: Tata Motors accounted for more than half of M&HCV sales in 2012 (M&HCV sales break up by OEM)
Figure 7: Vehicle sales growth has moved in tandem with real GDP growth in India
Figure 8: RBI has been reluctant to cut rates significantly as CPI remains high
Figure 9: Both petrol and diesel prices remain high affecting vehicle demand (Movement of petrol and diesel prices in Delhi from April 2010 to August 2013)
Figure 10: Despite immediate concern vehicle sales outlook in India remains strong in medium to long term (LV and M&HCV sales forecast 2012-–2020
Figure 11: Vehicle production in India has recorded consistent growth between 2005 and 2012
Figure 12: Maruti-Suzuki's market share has eroded between 2008 and 2012 (Light vehicle production market share by OEM)
Figure 13: Vehicle exports from India has tripled over the past eight years (Vehicle exports from India 2006–2012)
Figure 14: Vehicle production in India is expected to by 9.8% between 2014 and 2020
Figure 15: Most automakers expect to see strong growth in production capacity by 2020 (Vehicle production growth projection by 2012 compared with 2020 by OEM)
Figure 16: After three years of strong growth, turnover of Indian supplier industry took a hit in FY2013 amid continuing weak domestic vehicle sales (Indian supplier industry turnover 2008–2013)
Figure 17: Most suppliers produce Powertrain components in India (Figures for financial year ended 31 March 2012)
Figure 18: Europe remains biggest market for Indian suppliers (India's Export Market 2010 and 2012)
Figure 19: Asia and Europe together accounted for more than 90% of total auto component imports in FY2011 (India's Import Market 2012)
Figure 20: Gap between exports and imports of auto component has widened over the past six years (India auto components trade: 2007-08 and 2012-13)
Figure 21: Suppliers have invested USD7bn between FY2007 and FY2012
Figure 22: Northern region has the highest concentration of auto parts suppliers
Figure 23: Supplier Parcs in India Mapped
Figure 24: Raw material prices has remained moderate in 2012 and 2013 so far
Figure 25: Indian rupee has depreciated significantly against major currencies
Figure 26: Power leads allocation for infrastructure in 12th FYP (Sectoral investment planned in 12th FYP)
Figure 27: Cargo handled in India has grown on average 8.5% between FY2006 and FY2012 (Cargo handled in India between 2006–2012)
Supplier Survey Figure 28: Q1. India's economic growth has come under pressure in the past few quarters. By when do you see a recovery?
Figure 29: Q2. High inflation, a major issue for the Indian economy over the past five years, has seen some moderation in the past few quarters. Do you expect this trend to continue in the coming quarters?
Figure 30: Q3. The Reserve Bank of India (RBI) has cut policy rates in the past few quarters in response to softening inflationary pressure. Do you see room for further cuts?
Figure 31: Q4. The Indian rupee has depreciated significantly in the past few months. Do you see this as a significant threat to economic growth?
Figure 32: Q5. Do you believe the Indian government's policy regarding the automotive industry is supportive towards automakers in India?
Figure 33: Q6. India is negotiating a Free Trade Area (FTA) agreement with the EU, which is feared to result in substantial reduction in import duty for European-made cars. Do you think this would discourage vehicle manufacturing in India?
Figure 34: Q7. Vehicle sales in India have been declining since the beginning of 2013. What are the major reasons behind this weakness?
Figure 35: Q8. By when do you expect a recovery in vehicle demand?
Figure 36: Q9. The decline in vehicle sales has prompted local automakers' association SIAM to seek a stimulus package – similar to the one given in 2008-2009 – from the Indian government. Do you think SIAM's demand is justified?
Figure 37: Q10. Considering falling sales, do you believe in the Indian automotive industry's long-term growth potential?
Figure 38: Q11. Where do you see vehicle sales in India by 2020 compared with the 3.62 million units in 2012?
Figure 39: Q12. Automakers are adjusting production capacity in India in response to recent declines in vehicle demand. Has this impacted your company's business?
Figure 40: Q13. Has it become more challenging to secure contracts from customers amid the weak economic outlook for the Indian automotive industry?
Figure 41: Q14. Have recent cuts in repo rates and cash reserve ratio (CRR) helped your company to cut financing costs?
Figure 42: Q15. What has been the net financial impact (export value - import value) of recent the depreciation of the Indian pupee on your company's business?
Figure 43: Q16. Are OEMs in India willing to negotiate contract prices due to a change in the following factors?
Tables Table 1: Investments by automakers in India (from 2012 onwards)
Table 2: Recent Supplier Investment Announcements
Table 3: Recent Supplier Joint-Venture Announcements
Table 4: Recent Supplier Merger and Acquisition Announcements
Table 5: Maruti Suzuki has close knit of 18 suppliers in which it has some stake
Table 6: Automotive Clusters in India
Table 7: Interest rates in some key automotive market as on 20 September 2013
Table 8: Most Indian suppliers spend less than 1% of their total revenues in R&D
Table 9: Tax structure for foreign and domestic companies in Inida
Table 10: Development of length and surface area of roads in india 2005–2011
Table 11: Development of length of national and state highways in india 2005–2011
Table 12: Annual Energy Generation
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