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Indian Auto Component Industry– Opportunities Unbound

Presentation by:

Vinnie MehtaExecutive Director, ACMA

November 10, 2010; Taipei, Taiwan

Automotive Component Manufacturers Association of India

• India: A Vibrant Economy

• Automotive Industry in India

• Auto Component Industry in India

• Capabilities & Challenges of Component Suppliers

• The Way Forward

• About ACMA

Agenda


India: A Vibrant Economy

Automotive Component Manufacturers Association of India 4

India: On the Map


Area: 3.3 Million Sq. Area: 3.3 Million Sq. KmsKms

面積面積面積面積330萬平方公里萬平方公里萬平方公里萬平方公里

7th Largest Country 第七大國第七大國第七大國第七大國

28 States ││││28個邦個邦個邦個邦

Coastline: 7500 km

海岸線海岸線海岸線海岸線7500公公公公里里里里

主要城市主要城市主要城市主要城市: 孟買孟買孟買孟買, 加爾各答加爾各答加爾各答加爾各答, 清奈清奈清奈清奈, 班班班班加羅加羅加羅加羅, 海得拉巴海得拉巴海得拉巴海得拉巴

人口人口人口人口: 十十十十一億以上一億以上一億以上一億以上

語言語言語言語言: 印度語印度語印度語印度語, 英語及其他英語及其他英語及其他英語及其他21種正式種正式種正式種正式語言語言語言語言宗教宗教宗教宗教 : 印度教印度教印度教印度教(82.6%), 回教回教回教回教(11.4%), 基督教基督教基督教基督教(2.4%), 錫克敎錫克敎錫克敎錫克敎(2.0%), 佛佛佛佛教教教教(0.7%)

通貨通貨通貨通貨 : 印度印度印度印度盧盧盧盧比比比比 (US$1 = INR 45)

Chennai清奈清奈清奈清奈

New Delhi新德里新德里新德里新德里

Mumbai孟買孟買孟買孟買

5

Kolkata


• Largest Democracy in the world – 1.18 billion people

• 4th largest GDP (PPP) and 11th largest GDP (Nominal)

• 2nd fastest growing economy (RBI estimate 2010-11 – 8.5%)

• 3rd largest investor base in the World

• Robust Legal and Banking Infrastructure

• Demographics of Youth – 50% under 25 years & 65% under 35 years

• Rural to Urban Migration - 140 million by 2020; 700 million by 2050

• 2nd largest pool of certified professionals and highest number of qualified

engineers in the world

India: A Vibrant Economy


61.478.2

111.5

149.2

291 279

181.3

253

27%

43%

34%

15%

-4%

40%

22%

0

50

100

150

200

250

300

350

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10-10%

0%

10%

20%

30%

40%

50%

Imports(US $ bln) Growth rate(%)

Imports

52.763.8

83.5

103.1

182.6 177

124.6

163

21%

31%

-3%

12%

23%

31%

21%

0

20

40

60

80

100

120

140

160

180

200

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10-5%

0%

5%

10%

15%

20%

25%

30%

35%

Exports(US $ Bln) Growth rate(%)

Exports

4.23.1

5.5

27.3

33

2.6

24.57

15.7

-16%

-26%

185%

56%

112%

11%

21%

0

5

10

15

20

25

30

35

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10-50%

0%

50%

100%

150%

200%

FDI(US $ bln)# Growth rate(%)

FDI

75.4

107

142

252274

173.1

281

1369%

-10%

4%

62%

22%

42%

27%

0

50

100

150

200

250

300

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

FE Reserves* ( US $ bln) Growth rate(%)

FE Reserve

# Partly Estimated * As on May 19, 2010

Growing trade, Investments & Forex reserves…In US $ bn

In US $ bn

In US $ bn

In US $ bn


Automotive Industry in India

Automotive Component Manufacturers Association of India 9

Significant Investments by OEMs


“INDIA ” – A Global hub for Compact CarsNew Plant Addition in the Last 1 Year

Increased local content - Creating Global CompetenceIncreased local content - Creating Global Competence

Maruti

� Capacity 250K

� Investment US $ 380 mln

Hyundai

� Capacity Increased to 600K cars

� Investment US $ 1 billion

Tata Motors

� Capacity 500K


Toyota

� Capacity 200K


Ford

� Capacity 200K

� Investment US$ 500 mln

General Motors

� Capacity 140K

� Investment $650 mln

Nissan-Renault

� Capacity 400K

� Investment USD 1 billion

VW

� Capacity 110K


Honda

� Capacity 60K

� Investment $ 250 mln


Vehicle Production in India: 2009-2020

2,200

150120

200

10,230

420

40

5,100

670

360

710

100

0

500

1,000

1,500

2,000

2,500

3,000

Passenger vehicles

SCVs LCVs M&HCVs Two- & Three-wheelers

Tractors Construction equipments*

2009 2015 (E) 2020 (E)

470 –530

540 –600

30,000 –33,500

940 –1,050

170 –190

1,100–1,220

390

8,700 –9,700

22,100

*Includes backhoes, track excavators, wheeled loading shovels, vibratory rollers and lif tall

‘000 units

� India to be the 5 th largest vehicle manufacturers in the world by 2020 from current 7th

� Vehicle production in India is expected to grow by 3 fold from 2009 figure by 2020.

� SCV is expected to grow the fastest.

Source: ACMA - EY Vision 2020


Auto Component Industry in India


Auto Component Industry– Growth DriversG

R O

W T

H

D R

I V

E R

S

Availability of low-cost skilled manpower

Increasing demand forvehicles

Low-cost and high-qualitystandards

Policy initiatives to Promote growth in the

sector

� India generates about 0.4 million engineering gradu ates every year.� The cost of entry-level engineers is as low as US$ 8,000 per year.� India accounts for 26% of the world’s Engineering S ervice

Outsourcing (ESO)

� Vehicle production grew to ~ 14 million in 2009–10.� Global OEMs are entering India to set up their manu facturing base.

� India offers low labor costs.� This has resulted in a significant cost reduction a s opposed to

overseas production maintaining international quali ty standards.

� De-regulation and policy initiatives such as lower excise duties, realization of VAT, etc., have been implemented.

� FDI up to 100 per cent is permitted through the aut omatic route for manufacturers of automobiles and components.

Source: IBEF


Auto Component Industry: Size & Product Range

6.7 8.712

18 18.422

26

1529%

38%

20% 18%2%20%

25%

05

1015202530

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11(E)0%

10%

20%

30%

40%

Growth rate(%)

CAGR: 21%CAGR: 21%

Engine Parts31%

Drive Transmission & Steering Parts

19%

Equipments10%

Electrical Parts9%

Others7%

Suspension & Braking Parts

12% Body & Chassis12%

Turnover

Product Range

In U

S$ b

n


� The Indian auto component industryhas an opportunity to tap a potential~ $ 110 bn by 2020.


Auto Component Industry – Exports & Exports Markets

CAGR: 21%CAGR: 21%

Exports market size

Exports market

� OEM/Trier-1: 80%

� Aftermarket: 20%

Profile of ExportsAfrica7.4%

Asia28.1%

Australia1.1%Europe

36.9%

N.America24.0%

S.America2.5%

In U

S$ b

n


Exports could grow 6 fold by 2020Exports could grow 6 fold by 2020


1.41.9

2.53.6

5.2

6.8

8.245%

20%

33%

45%

30%31%

0.0

2.0

4.0

6.0

8.0

10.0

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-100%

10%

20%

30%

40%

50%

Growth rate(%)

Imports market size

Auto Component Industry – Imports & Sources of Imports

CAGR: 34%CAGR: 34%

Import Sources

Asia54.34%

Australia0.22%

Europe36.03%

N.America8.28%

Africa0.20%

S.America0.92%

In US $ bn


Auto Component Industry Investments

CAGR: 20%CAGR: 20%

In U

S$ b

n


Investments

~$ 2.5bn Investment is expected next year~$ 2.5bn Investment is expected next year


Increased Component Outsourcing from India

Indian Components already Driving on your Roads…Indian Components already Driving on your RoadsIndian Components already Driving on your Roads……


Vision 2020: The future

$ 30 bn

$ 69 bn

$ 110 bn

US

$ bn

* Imports is also included


$ 3.8 bn

$ 9.4 bn

$ 26 - 29 bn

US

$ bn

� Turnover is expected to grow by 3 folds by 2020

Exports PotentialTurnover


Vision 2020: Domestic Auto Component Demand

4.3 8.4 12.825.7

60.6

100.2

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2009 2015(E) 2020(E)

Aftermarket OE

$ 30 bn

$ 69 bn

$ 108 -119 bn

In $

bn

23.5

17.1

25.6

6.410.7

17.1

2020(E)

Transmission & Steering

Suspension & Braking

Interior

Engine & Exhaust

Electronics & electrical

Body & structural

Component wise

46.9

4.34.312.8

21.3

6.44.3

2020(E)

Construction Equipments

Farm Equipments

2 & 3 Wheelers

HCV

LCV

SCV

Passengers cars

Category wise

* Imports is also included



Capabilities & Challenges of Component Suppliers


Advantage India

Growing domestic Demand for vehicles

•Growing per capita income and demandfor skilled manpower

•Vehicle production is expected to grow three-fold in the next decade

Potential R&D hub

•India has starting toprove its product development capabilityin mass market vehicles

•NATRiP was set up at a cost of US$ 380 million to promote R&D in the sector.

Proximity to EU/MEA

•Cost effectiveshipments from Indiacompared to thosefrom other distantLCCs.

•Many major EU vehiclemanufacturers haveset up operations in India with localsupply base.

Global Standards

•Indian companies

compliant in global

automotive standards,

e.g., JIS, DIN.

•Intn’l manufacturers

are building platforms

looking at domestic

and exports markets

Cost Effectivemanufacturing base

•Increasing

economies of scale

- Low PD cost

- Local Supply Base

- Low Labor Cost

Source: E&Y, IBEF,SIAM

Auto Component Industry– Advantage India


Indian Auto Component Industry Focus: Global Best Practices

Largest Deming Prize Award winning companies outsid e JapanLargest Deming Prize Award winning companies outsid e Japan

11

15

32

99

208

445

562

Deming Award

TPM Award

QS 9000

OHSAS 18001

ISO 14001

TS 16949

ISO 9000

JIPM - 3 Japan Quality Medal - 1Shingo Silver Medallion - 1

Modern shop-floor practices• 5-S; 7-W• Kaizen• TQM• TPM• 6 Sigma• Lean Manufacturing

More than 600 members


Design & engg. skills

Manufacturing skills

Manpowercost

Domestic demand

Commercial environment

Supplier base

Raw material

Infrastructure

Korea 1 1 7 9 1 3 2 1

China 4 4 1 2 12 3 1 4

Thailand 8 11 7 8 1 6 11 2

Indonesia 8 7 3 9 5 7 11 11

Vietnam 13 13 7 14 5 12 15 11

Czech 1 1 7 9 5 1 6 3

Romania 13 13 7 6 10 14 13 15

Poland 8 9 15 8 3 8 13 6

Slovakia 11 4 7 14 5 10 6 5

Russia 5 11 3 1 10 14 3 8

Hungary 3 9 7 2 12 13 10 8

Turkey 13 7 6 9 3 8 5 8

Brazil 6 4 7 2 15 3 9 6

Mexico 12 13 3 6 5 10 4 13

India 6 3 1 2 12 1 6 13

Eas

t Asi

aE

aste

rn E

urop

e

India is less competitiveIndia is more competitive India is comparable

Latin

A

mer

ica

Note: Number inside each cell indicates country ra nking

Other supporting factors

India is more competitive India is comparable India i s less competitive

A comparison between India vis-a-vis other



Indian Component Industry Development Capability

During the development process, Tata Motors asked suppliers to think out of the box and innovate products and process design.

This approach has resulted in 37 patents being filed to cover innovations in the car and has given Indian Engineers a canvas to showcase their skills and capabilities.

“Hyundai i20, Made in India with European Design feel”

Hyundai exported 286K cars last year with a focus on Europe

Indigenization levels for high volume cars are at 8 0-90%Indigenization levels for high volume cars are at 8 0-90%


Some Design & Research Centers in India


Challenges in the Auto Component Industry

1. Raising Capital to meet the growth trajectory

2. Scaling Capacities ahead of the demand

3. Infrastructure Deficit & Cost – Energy & Logistics

4. Maintain productivity gains ahead of inflation

5. Availability of Skilled Manpower

6. Build R&D Competence

7. Develop Managerial Depth across Tiers of the Industry


Indo -Taiwan Auto Component Trade

• Insignificant Trade/between between India and Taiwan

• A Few Taiwanese Companies operating through their Indian

partners; e.g.

� Sunworld Industrial Co. Ltd – Tensioner, Fuel cock, oil pump etc.

� LIN Electricals Pvt Ltd – Auto electrical parts, relays etc.

� Taigene Electric Machinery Co. Ltd. – Auto electrical parts

� TYC – Lighting parts

� Steady Stream Business co – Molds and Dies


The Way Forward


Areas of Cooperation

1. Taiwanese SMEs can invest in green-field manufacturing in India to meet growing domestic demand for auto-components especially Telematics /auto-electronics.

2. Opportunities for Partnerships with Indian SMEs - Product and “Process Technology”.

3. Opportunity for Strategic Alliance to cover Global customers

4. Joint R&D with Indian companies for new product development and designing

5. Institutional cooperation e.g. ITRI of Taiwan with Indian IITs.


The Addressable Opportunity…

• Business opportunities in areas of technology

- Auto Electronics & Electrical

- Informatics & Telematics

- Simulation Technology

• Collaboration for Manufacturing Excellence, Quality and Process

Design

• Partnering for Global Requirements

• Explore newer Areas - Environment

• Merger & Acquisition


Conclusion

• Vibrant Indian Economy

• Automotive Industry showing double digit growth in all segments

• India fast becoming Global and Regional hub for vehicle programmes

• Vision 2020: A USD 110 Billion auto component industry

• Growing engineering and IT capability for designing & manufacturing

• Auto Component Industry :Culturally compatible Values

• Opportunity to partner in product & process innovation

India : A Gateway to GrowthIndia : A Gateway to Growth


About ACMA


Introduction


Role

Members

Quality System

Re-Christened

Inception

An apex agency of the Indian Automotive Industry

600+ companies forming majority of the auto component output in the organized sector

ACMA operates on Quality System basedon ISO 9001:2000

In the year 1959 as The All India Automobile & Ancillary IndustriesAssociation (AIA & AIA)

As Automotive Component Manufacturers Association of India in the year 1982


ACMA membership

(More th

an 600 members)

46

51

82

179

245

> 100 Million US $

> 50 ~ 100 Million US $

> 25 ~ 50 Million US $

> 5 ~ 25 Million US $

< 1 ~ 5 Million US $

Annual Turnover

ACMA Membership

More than 70% of Companies are SMEsMore than 70% of Companies are SMEs


Collection &Dissemination ofInformation

QualityEnhancement

TechnologyUp-gradation

Promotes IndianAutomotive Component Industry

Vital Catalyst for Industrial Development

Trade Promotion

ACMA and Its Services


Promote India as a Brand

Promote India as a Brand

Organize Business Development Delegation

Overseas

Organize Business Development Delegation

Overseas

Undertake ExportPromotional Projects

Undertake ExportPromotional Projects

Organize Participation in Overseas Automobile

Exhibitions & Fairs

Organize Participation in Overseas Automobile

Exhibitions & Fairs

Global Interaction through

Counterpart Association

Global Interaction through

Counterpart Association

Dissemination of Export Enquiries Dissemination of

Export Enquiries

Organize Private Exhibitions &

Suppliers Conference

Organize Private Exhibitions &

Suppliers Conference

Facilitate potentialBusiness Partnership ofJV / Strategic Alliance

Facilitate potentialBusiness Partnership ofJV / Strategic Alliance

Providing International

Sourcing Forums

Providing International

Sourcing Forums

Working closelywith IPOs in IndiaWorking closelywith IPOs in India

International Business Development


ACMA Center for Technology

ACMA Center for Technology (ACT)

Support ACMA Activities

To establish World Class shop floor

In house ACT Journal

To support and update members on Standardization

and Technology interventions

Cluster Approach ACT Publication Technology Up gradation


ACMA Head OfficeThe Capital Court, 6th Floor, Olof Palme Marg, Munirka, New Delhi – 110 067

Tel: 011-26160315, 26175873, 74,Fax: 011-26160317E-mail: [email protected], Website: www.acmainfo.com

The Automotive After Market and ServiceExposition

…….. BE A PART OF IT.. BE A PART OF IT


Thank YouThank YouThank YouThank You

for any assistance contact [email protected]

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