Title:
1 FUTURE OF AUTO COMPONENT INDUSTRY
PRESENTATION ON
- BY
- MR. M. RADHAKRISHNAN
- JT.MANAGING DIRECTOR
AUTOLINE INDUSTRIES LTD.
2PRIMARY GROWTH DEMAND
- Dependant on OEMs
- OEM market drivers (for India)
- Growth in Economic Activity
- Increase in the Personal disposable incomes
- Growth in Rural Economy
- Multiple easy finance options
- Decline in tax rates
- Economic vehicles (Nano effect )
3After market Drivers
- Old vehicle population
- Life span of components (frequency of
replacement). - Average value of parts replaced.
- Share of genuine-branded components in the total
aftermarket.
4DOMESTIC MARKET
- Growth opportunities in terms of volume
- The domestic market for four wheelers is
projected to grow at a compounded annual growth
rate of 9 during the next few years. - This will provide reasonably good growth
opportunities in terms of volume to component
manufacturers such as our company with facilities
having latest technologies and mass manufacturing
facilities.
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6PRODUCTION OF FOUR WHEELERS
PAST AND FUTURE (IN 000S)
7INDUSTRY OVERVIEW
- INDIAN AUTO COMPONENT INDUSTRY
- The Indian automobile ancillary sector is
transforming itself from a low-volume, highly
fragmented one into a competitive industry, and
backed by competitive strengths, technology and
transition up the value chain. Broadly the
Indian automotive component industry can be
divided into the organized and the unorganized
segments. While the forte of the organized sector
is the high valued added precision engineering
products, the presence of a large unorganized
sector is characteristic especially of the
lower value-added segments of the industry. - In the organized segment, the component
manufacturers supply components to at least one
of the Original Equipment (Vehicle) Manufacturers
(OEMs). Such component manufacturers usually have
access to the required technology due to their
tie-ups with some of the foreign collaborators or
through their links with the automobile
manufacturer. There are presently 29 Vehicles
Manufacturers (OEMs) in India located at Gurgaon,
Pune and Chennai who together manufactured more
than 5.2 million vehicles during 2005-06.
8Original Equipment Manufacturers of 4-Wheelers In
India Production During 2005-06
American OEMs
Japanese/Joint Venture OEMs
Production in 000s Production in 000s
Maruti Udyog Ltd 572.10 General Motors India Pvt. Ltd 31.00
Toyota Kirloskar Motor Pvt .Ltd 45.00 Ford India Pvt. Ltd 27.00
Honda Siel Cars India Ltd 41.00 Total 58.00
Swaraj Mazda Ltd 12.00 KOREAN OEMS
Total 670.10 Hyundai Motor India Ltd 260.00
9Original Equipment Manufacturers of 4-Wheelers In
India Production During 2005-06
EUROPEAN OEMS Production in 000s INDIAN OEMS Production in 000s
Skoda Auto India Pvt.Ltd 9.80 Tata Motors Ltd 450.00
Daimler Chrysler India Pvt. Ltd 1.80 Mahindra Mahindra Ltd 128.00
1.00 Ashok Leyland Ltd 65.00
0.10 Force Motors Ltd 36.00
Fiat India Pvt.Ltd 0.70 Eicher Motors Ltd 24.00
Total 13.40 Hindustan Motors Ltd 15.00
Total 718.00
Volvo India Pvt. Ltd
Tatra Trucks India Ltd
10Original Equipment Manufacturers of 2-Wheelers in
India and production during 2005-06
JAPANESE OEMS Production in 000s
Hero Honda Motors Ltd 3006
Honda Motorcycles Scooters 603
Yamaha Motor India Pvt. Ltd 249
Suzuki Motorcycles India Pvt. Ltd 2
Total 3860
11Original Equipment Manufacturers of 2-Wheelers in
India and production during 2005-06
Indian OEMs Production in 000s
Bajaj Auto Ltd 2042
TVS Motors Co .Ltd 1367
LML Ltd 107
Kinetic Engineering Ltd 82
Majestic Auto Ltd 57
Kinetic Motor Co.Ltd 54
Royal Enfield 31
TOTAL 3740
12- The table below shows segment-wise distribution
of the auto component Industry www.acmainfo.com.
Organized Component Manufacturers Unorganized Component Manufacturers
Year 1999 2006 1999 2006
Share in OE supply market 80 80 20 20
Share in Aftermarket 40 35 60 65
13The table below shows segment-wise distribution
of the auto component Industry www.acmainfo.com.
Organized Component Manufacturers Unorganized Component Manufacturers
Strengths 1.Higher production capacities 2. Captive OE market 3. Access to technology through tie ups 4. Quality standards 5. Potential to export 6. Improving quality consciousness of end users 1. Low capital investment 2. Minimal overheads 3. Taxes and levies exemption (violation) 4. Poor regulation on sale of spurious parts 5. Price sensitivity of market
Weaknesses 1. High Investment in plant and machinery 2. Higher overheads 3. Higher rates of taxes and differential regional tax patterns 4. Limited domestic OE volumes 1.Sub normal quality 2.Obsolete technology 3. Low capital availability 4. Restricted growth potential
14EXPORT MARKET
- Despite a relatively small share of Asia in
the global pie, India is now amongst one of the
most preferred destinations and has come to
occupy the image of an exporting hub for most of
the major global OEM players. Almost all the big
auto manufacturers of the world are either
already or are in the process of outsourcing from
the country. - Hyundai Motors India Export base for small cars
- Ford Motors India exporting CKDs of Ikon to
South Africa and other countries - Skoda India Hub for exports of cars to
neighboring countries - General Motors Global Purchasing Team
- Volvo Global buying team
- Delphi International purchase office
- Renault scouting for truck part suppliers
15 Exports of auto components from India have
witnessed a CAGR of 20.3 over the last six
years. The value of exports which was US
300 million in 1997 had grown to over US 2000
million in 2006. GEOGRAPHICAL DISTRIBUTION
DETAILS OF AUTO COMPONENT EXPORTS FROM INDIA
Continent/Country Percentage share of Total Exports
Europe 36.00
USA 26.00
Middle East 10.00
Africa 10.00
Asia 16.00
Oceania 1.60
Others 0.40
Total 100.00
16 There has also been a qualitative shift in
the composition of exports from being
predominantly for the aftermarket during the
1990s to the OEM market presently as depicted
below
Market segment Percentage share in Total Exports
1990 2006
OEM 35 75
Aftermarket 65 25
Total 100 100
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18Global Trends that will impact the auto component
industry in India
- Global Industry - Major car makers in the world
introducing car models simultaneously in
different countries of the world - Ripple
effect - Under pressure to identify consumers preferences,
national biases, Government regulations, new
market segments - to gain market share, leading
to impetus for Research, Design, innovations and
changes in the manufacturing processes. - Result Frugal Engineering (Renault Nissan
Chairman) - India emerging as a base of the entire
worlds small car - production
19- Pattern of demand for new cars.
- - In developed countries, Mature market with
stagnant demand (1 growth over last 10 years) - - Sales growth from China, India, South
America, Eastern Europe (26 growth to go upto
40 by 2010) - Response to increasingly diverse set of customers
- - Large proliferation of segments models (
challenges of cross over production from same
line). - - Plus myriad of features like power steering,
power windows, cruise control etc. - - No. of vehicle models offered for sale in
the US market alone doubled since 1980 to more
than 1050 in 2004.
20Strategies of Global Auto Majors impacting
Component Manufacturers
Adopt a global perspective in the operations
- Since 1990s, presence of all in virtually every
corner of the world. - Especially in Emerging
Markets, where all OEMs are fiercely competing
for market shares as the market grows. -
Leading to simultaneous launch of models in
different locations with similar standards. -
Replicate Supply Chain structures.
21Reorganization of their vehicle portfolio around
product platforms and car modules and systems.
- Declining sales per vehicle model, short
product life cycle preventing economies
of scale in design manufacturing with
adverse impact on cost. - Focusing on common
platforms and interchangeable modules
leading to faster lower cost deployment of
new solutions across the whole product range,
while tailoring vehicles to a multitude of
tastes and preferences of consumers in
the world. - Design with a common underbody
platform adapting body, trim and ride to
particular market conditions.
22- Wave of Consolidation
- - Perspective of future platform sharing
clearly acknowledged in deals such as Daimler
acquiring Chrysler, GM Mitsubishi, Nissan
Renault, Nissan Renault Mahindra, Nissan
Renault- Bajaj Auto (for Joint Manufacturing). - - Estimated that within next 5 years, less than
10 independent automakers may survive.
23- Increased Vendor Responsibilities reaching
impressive levels - treated as partners - - Passing the responsibility of developing,
manufacturing and assembling important sections
of the Car on to their Vendors. - - Attempting innovative approaches in terms of
assembly suppliers assemble a number of modules
in the final assembly plant and attach them
directly to the vehicle themselves. (V/W GM
projects in Brazil) - ( Drivers Cabin for CVs)
24- Role of technology in reshaping the industry
- Extent to which a Design is economical,
functional and easy to manufacture impact new
cars revenues costs. - Cars are technically complex in that
- a) fairly deep level of engineering expertise
- b) a large number of parts must fit together in a
precise way i.e. product architecture is integral
, rather than modular.
25- Today most functions in the styling , design
engineering departments are done utilizing
computers and math based engineering (as against
paper based (draftsmen) ,clay models based
processes). - Various software tools and processes, such as
FEA, CAE and product data management (PDM/PLM)
practices are utilized to validate the components
to validate the components for - -Form, Fit Function.
26- Auto Component Industry in a state of Transition
and Transformation - Indian auto component industry to take advantage
of the transition that is taking place
internationally and dominate the global supply
chain in auto components due to - - reasonably priced skilled work force
- - large population of technology workers
- - established strengths in I.T. and
electronics.
27- Transformation of global auto component industry
structural change from 1,2,3 4th tiers to 0.5
tier structure. - New direct suppliers are either specialised in
complex systems OR integrators of several simpler
systems. - - Systems Integrators Suppliers capable of
designing and integrating components,
subassemblies and systems into modules. - - Global standardizers Systems Manufacturers
capable of setting the standard on a global basis
for a component or system through design,
development and manufacturing of complex systems. - - Component specialists - Suppliers capable of
designing manufacturing a specific component or
subsystem, for a given car or platform process
specialists or product specialists.
28- INDIAN ADVANTAGE IN DESIGN DEVELOPMENT
- In the new paradigm, the design and development
capability is a critical success factor. - India has emerged as an offshore hub for software
services outsourcing. - - Design development and supply of auto
components provides a far greater opportunity as
Automobile Industry is one of the largest
industries in the world. - - Leading OEMs have started outsourcing
designing work to start- ups such as Virtual E
3D and Ecad in India. - - Have set up their own captive development
centres in India
29- Worldwide market for design services pegged at
USD 11 billion (Rs. 44,000 Crores) and presently
Indias share is a mere 1 percent - - Almost all major Auto and auto component
companies in India are using 3D software
engineering design tools to create designs . - - India offers more than 20 cost reduction to
any client and hence Global OEMs tempted to
outsource to India. - - A typical CAD project in the USA will cost
about USD 60 per man hour, as against about USD
25 in India. - - India is known world over for its expertise
in I.T., and has a long history in manufacturing
, with strong domestic market. - Outsourcing of engineering design services is a
Big Opportunity for India.