The Indian Automotive Supplier Report

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Oct 30, 2013, 08:03 ET

NEW YORK, Oct. 30, 2013 /PRNewswire/ -- Reportlinker.com announces that a new market research report is available in its catalogue:

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.

Executive Summary

Introduction

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

Vehicle Production

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

OEM-Supplier Relationship

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

Government Policy

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

Infrastructure Development

Transportation

Roads

Ports

Power

Roadblocks in infrastructure development

Survey of Indian Supplier Industry

Supplier Profiles

Alicon Castalloy

Amalgamations Group

Amtek Auto

Anand Group

Apollo Ty

Ashai India Glass

Ashok Iron Works

Ashok Minda Group

Auto Ignition Limited

Automotive Stampings

Axles India

Bagla Group

Bajaj Motors

Banco Products

Bharat Forge

Bharat Gears

Bharat Seats

Bhushan Steel

Birla Corporation

Birla Tyres

Bohra Rubber

Bosch India

Brakes India Limited

Bridgestone India

Caparo India

CEAT

Clutch Auto

Continental

Cooper-Standard

DCM Engineering Products

Delphi

Denso India

Endurance Systems

EXEDY India

Exide Industries

Faurecia

Federal-Mogul Goetze

Fenner India

Fiem

Gabriel India

GKN Driveline India

Goodyear India

Guru Nanak Auto

Halonix

Harita Seating

Hi-Tech Gears

Imperial Auto

IP Rings

Jamna Auto

Jaya Hind

Jay Bharat Maruti

Jay-Ushin

JKM Automotive

JK Tyre

Johnson Controls

Johnson Matthey

Kalyani Forge

Kinetic Engineering

Krishna Maruti

LG Balakrishnan

Lucas TVS

Lumax Automotive Systems

Lumax Industries

Machino Plastics

Madras Engineering

Magna

Magnetti Marelli

Mahindra Systech

Mahle

Mark Exhaust

MRF

Munjal Auto Industries

Munjal Showa

Neolite ZKW Lightings

NRB Bearings

Omax Auto

Pricol

Ramakrishna Forgings

Rane Group

Rasandik

Remsons

Rico Auto

Ring Ring Plus Aqua

RSB Transmissions

Ruia Group

Saint-Gobain

Samvardhana Motherson Group

Sanden Vikas

Sandhar Technologies

Setco Automotive

Shriram Pistons and Rings

Sigma Group

SKF India

Sona Koyo

Steel Strips Wheels

Sterling Tools

Subros

Sunbeam Auto

Sundaram Clayton

Sundram Fastners

Talbros Talbros Automotive

Tata AutoComp

Tata Steel

TRW Automotive

UCAL Fuel Systems

Valeo

Varroc Group

Victor Gaskets

Visteon

WABCO India

Whells India

ZF India

Figures

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 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

India

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