Auto Component Industry in India: Growing Capabilities & Strengths

1
Auto Component Industry in India Growing
Capabilities Strengths
Presentation by Mr. Arvind Kapur President, ACMA
Mg. Director, Rico Auto
2
Objective of the ACMA CEOs Delegation

• Understanding European OEMs' outlook for the
  global markets
• Providing an update on the Indian Auto component
  Industry and its capabilities
• Interacting with Purchasing Managers for future
  co-operation  
• Understanding expectations from the Indian Auto
  Component industry 

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Agenda

• India A Vibrant Economy
• Automotive Industry in India
• Auto Component Industry in India
• Policy Environment
• Capabilities Challenges
• The Way Forward
• About ACMA

4
India A Vibrant Economy
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India A Vibrant Economy

• 1. Largest Democracy 1.2 billion people,
  Growing Middle Class
• 2. 4th largest GDP (PPP) and 10th largest GDP
  (Nominal, USD 1.8 trillion)
• 3. One of the fastest growing economies -
  Estimates for 2012-13 7.6
• Indias average GDP growth rate 7.3 over past
  10 years
• Expected to outpace China in the next decade

6
The Indian Economy
GDP Growth Trend (2007 2013)

• GDP slows amidst turbulent Global Economic
  climate, however Indian Economy continues to
  witness
• Strong Domestic demand
• Exports surge 44 - Increase to 24 billion USD in
  Aug11
• Engineering Services register 81 growth

7
India A Vibrant Economy

• 1. Largest Democracy 1.2 billion people,
  Growing Middle Class
• 2. 4th largest GDP (PPP) and 10th largest GDP
  (Nominal, USD 1.8 trillion)
• 3. One of the fastest growing economies -
  Estimates for 2012-13 7.6
• Indias average GDP growth rate 7.3 over past
  10 years
• Expected to outpace China in the next decade
• 4. 3rd Largest Investor base in the World
• 5. Robust Legal and Banking Infrastructure
• 6. Demographics Advantage Youth driven economy

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India is heading towards a Demographic Sweet
Spot which will be a key driver of Economic
Growth
India's Population in billion
Households by Income const. 2000 prices
By 2025, 79 households will be in Middle Class
1.33
1.25
1.17
65
66
63
15-64
2025
2015
2005
Indian middle class
Under15
lt 2,000
gt22,200
2,000 4,500
2020
2015
2010
4,500 11,100
11,100 22,200
Indias active age population (15-64 years old)
is growing will become Wealthier, swelling the
ranks of the Middle Class
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India A Vibrant Economy

• 1. Largest Democracy 1.2 billion people,
  Growing Middle Class
• 2. 4th largest GDP (PPP) and 10th largest GDP
  (Nominal, USD 1.8 trillion)
• 3. One of the fastest growing economies -
  Estimates for 2011-12 7.6
• Indias average GDP growth rate 7.3 over past
  10 years
• Expected to outpace China in the next decade
• 4. 3rd Largest Investor base in the World
• 5. Robust Legal and Banking Infrastructure
• 6. Demographics Advantage Youth driven economy
• 7. Suburbanization Rural to Urban Migration
• 140 million by 2020 700 million by 2050
• 8. 2nd largest pool of Certified Professionals
  and highest number of Qualified Engineers in
  the world
• 9. Investment in Infrastructure

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Key Drivers of Indias Growth

• Urbanization to increase up to 35 by 2025
• 140 mln rural population estimated to move to
  urban areas by 2020

• 60 in the working-age group (15 to 64 yrs)
• By 2015, 44 mln household expected to join
  8,770-10,960 income band with 30 car penetration

• Personal disposable income expected to increase
  annually at 8.5 till 2015

• 2nd largest pool of certified professionals
• Highest no. of engineers in the world

• Huge base of 720 million consumers across
  627,000 villages

Sources Dreaming with BRICS- The path to 2050,
Goldman Sachs NCAER Morgan Stanley, CRISINFAC,
Wikipedia, IBEF
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Infrastructure Development A Special Thrust
Total planned infrastructure investments of 500
billion from 2007-12

• Infrastructural spend targeted to double to USD 1
  trillion for 2012-17

Also includes Irrigation, water supply and
sanitation, storage gas
() Also includes irrigation, water supply and
sanitation, storage and gas
Source Planning commission
Source Planning Commission
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India emulating the China growth
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Automotive Industry in India
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Automotive Clusters in India
North
New Hub Sanand
Hindustan Motors Tata Motors
East
West
Man Force Mercedes Benz PSA Skoda Tata
Hitachi Tata Motors Volkswagen Volvo Eicher
Bajaj Auto Fiat Force Motors GM John
Deere Mahindra Mahindra Navistar
South
(Illustrative List)
Significant Manufacturing base of OEMs Indian
Global
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15
Rapidly growing presence of Global OEMs -
Passenger Car
2007
2011
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(Illustrative List)
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Passenger Vehicles Production
(In 000 units)

• CAGR 2008-12 14
• CAGR 2012-21 13

Figures for financial year April to March
( Estimates)
16
17
Other Vehicles Production
Commercial Vehicles
Tractors
(In 000 units)
(In 000 units)

• CAGR 2008-12 22
• CAGR 2012-21 11

• CAGR 2011-21 6

Two Three Wheelers
Construction Vehicles
(In 000 units)
(In 000 units)

• CAGR 2008-12 16
• CAGR 2012-21 7

• CAGR 2011-21 14.6

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Figures for financial year April to March
( Estimates)
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Auto Component Industry in India
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Auto Component Industry Profile - Turnover

• CAGR 2007-11 14.6
• CAGR 2011-21 11

USD billion
Figures for financial year April to March
( Estimates)
Comprehensive Product Range
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Auto Component Industry Profile - Exports

• CAGR 2007-11 11
• CAGR 2011-21 18.8

USD billion
Figures for financial year April to March
Export Destinations
( Estimates)
OEM/Tier 1 account for 80 Aftermarket for 20
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Increased Component Outsourcing
Over 30 IPOs of Global OEMs Tier 1 Procuring
from India

• Tier 1 Component Manufacturers
• Bosch
• Continental
• Cummins
• DANA
• Delphi
• Denso
• Eaton
• Getrag
• Kolbenschmidt
• Magna
• Meritor
• TRW
• Valeo

• OEMs
• BMW
• Caterpillar
• Ford
• FIAT
• GM
• MAN
• Mercedes-Benz
• Nissan
• Peugeot
• Renault
• Toyota
• Volkswagen

(Illustrative List)
Indian components already driving on your roads
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Auto Component Industry Profile - Imports

• CAGR 2007-11 11
• CAGR 2011-21 15.2

USD billion
Figures for financial year April to March
( Estimates)
Sources of Imports
22
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Vision 2020 Indian Auto Component Industry
148
83.8
USD billion
48.4
(Exchange rate Rs. 46.5 / 1 USD)
Source ACMA - EY Vision 2020
Total Industry potential USD 148 billion by
2020
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Policy Environment Trade
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Favorable Policy Regime
Auto Policy 2002 and Auto Mission Plan 2006-16
framework for Automotive Manufacturing in India

• Manufacturing and Imports Free from Licensing and
  Approvals

• WTO compliant policies (no import restrictions
  and reduced tariff levels)

Robust Indian Automotive Industry

• Robust Legal system and stable Foreign Exchange
  regime

• Joined UN-ECE WP 29 for Global Standard in
  Technology

• Increased budgets for RD activities

• 100 FDI permitted without prior Govt. approval

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India-Sweden Auto Component Trade

• CAGR Exports 6
• CAGR Imports 1

USD million
Source Global Trade Atlas (GTA)
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Major European Auto Component Companies with
India Manufacturing footprint

• Borg Warner
• Brose
• Continental
• FAG
• Faurecia
• Fedrenfabrik
• Freudenberg
• GKN

• Hella
• Honeywell
• Kautex Textron
• Knorr Bremse
• Kolbenschmidt
• Kostal
• LUK
• Magneti Marelli

• Mahle
• Monark Diesel
• Pierburg
• Reinz
• Robert Bosch
• Valeo
• Vibracoustic
• ZF

(Illustrative List)
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Indian Auto Component manufacturers with
footprint in Europe

• Amtek Auto
• AMW Auto Component .
• Bharat Forge
• Endurance Technologies
• Spark Minda Group

• Motherson Sumi
• RSB Transmissions
• Sandhar Technologies
• Sona Group
• Varroc Engineering

(Illustrative List)
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Capabilities Challenges of Indian Component
Suppliers
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Indian Suppliers Focus Global Best Practices

• Industry fast embracing modern
• shop-floor practices
• 5-S 7-W
• Kaizen
• TQM
• TPM
• 6 Sigma
• Lean Manufacturing

Focus on Quality
Largest no. of Deming Award winning companies
outside Japan
30
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Increasing focus on Innovation and Research
Design Research Centers of leading Global
companies in India

• AMD
• Boeing
• Bosch
• Caterpillar
• Continental
• Cummins
• Ford
• GM
• GE
• Honda

• Honeywell
• Hyundai
• Intel
• Magna
• Motorola
• Mercedes Benz
• Microsoft
• Renault Nissan
• Suzuki
• Valeo

(Illustrative List)
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Challenges Typical of a high Growth Emerging
Market

• Raising Capital Scaling Capacities
• Infrastructure Challenges
• Roads
• Ports
• Power
• Inflation
• Availability of Skilled Manpower
• Managerial Depth across Tiers
• RD Competence

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The Way Forward
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Potential areas of Cooperation
Opportunities for

• European SMEs to invest in Green Field
  Manufacturing in India
• Partnerships with Indian SMEs Product and
  Process Technology
• Supply Base discovery in India for European OEMs
  and Tier-1s
• Strategic Alliance to supply to Global customers
• Joint RD with Indian companies for New Product
  Development, Designing, Testing and Validation

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The Addressable Opportunity

• Business opportunities in areas of technology
• - Engine Exhaust parts
• - Auto Electronics Electrical
• - Transmission Steering
• - Informatics Telematics
• - New Material/ Light weighting
• - Simulation Technology
• Collaboration for Manufacturing Excellence,
  Quality and Process Design
• Production Sharing in India Europe for a
  Holistic Service Capability
• Partnering for Global Requirements
• Explore newer Areas - Environment
• Merger Acquisition

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Advantage India
India is fast becoming a favored investment
destination for its..
Respect for Intellectual Property
Large and growing Domestic demand
Indian Auto Component Industry
Conversant with Global Automotive Standards
Product Development Capabilities
Strong Entrepreneurship
High Quality Standards
Flexibility in Small Batch production
Export capabilities
Growing IT capabilities
Availability of skilled manpower
..Key drivers enabling capability and growth of
Indian component suppliers
Source CRIS INFAC BMI IBEF
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Conclusion

• Vibrant Indian Economy
• Automotive Industry - Double Digit Growth in all
  segments
• India fast emerging as hub for Global Vehicle
  Programs
• 2020 USD 113 billion Auto Component Industry
• Growing Engineering and IT capability for
  Designing Manufacturing
• Respect for IPR
• Opportunity to Partner in Product Process
  Innovation

India The Gateway of Growth
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About ACMA
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About ACMA

• Established in 1959
• Apex body of Auto Component Industry in India
• 650 members from the Organized sector
• Represents 85 of the Industry by turnover
• Represented on all Government and Industry bodies
  
• Strategic to the Auto Sector
• Offices across all Regions in the Country
• An ISO 9001-2008 Institution

ACMA Excellence in Service Delivery
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ACMA Services
Promotes Indian Automotive Component Industry
Collection Dissemination of Information
Quality Enhancement
Technology Up-gradation
Trade Promotion
Vital Catalyst for Industrial Development
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Thank You
for any assistance contact
ACMA The Capital Court, 6th Floor, Olof Palme
Marg, Munirka, New Delhi 110 067Tel
011-26160315, Fax [phone]E-mail
acma_at_acma.in, Website www.acmainfo.com