The Indian SupplierReport

SupplierBusiness

CONTENTS

Executive Summary ....................................................................................................... 11 The Indian automotive industry ...................................................................................... 12

Evolution of Indian automotive industry ..................................................................... 13 Two-wheelers dominate........................................................................................... 14 Three-wheelers ........................................................................................................ 15 Light vehicles .......................................................................................................... 16 Medium and heavy duty commercial vehicle ............................................................ 21

Growing competition in all segments ........................................................................... 25 Moderation in vehicle sales ......................................................................................... 26

High inflation and interest rates ............................................................................... 26 Rising fuel prices ..................................................................................................... 27 Frequent strikes ....................................................................................................... 28

Industry response ........................................................................................................ 29 Medium to long-term outlook remains bright ............................................................... 30

Vehicle density remains abysmally low in India........................................................ 30 Vehicle sales and production forecast........................................................................... 31

India continues to attract new players ...................................................................... 32 Investment plans of automakers ............................................................................... 33

India’s automotive component industry .......................................................................... 37 Strong growth after global slowdown ........................................................................... 37 Growth moderation in 2011-12 ................................................................................... 42 Indian supplier industry continues to attract investment ............................................... 44 Investments ................................................................................................................ 46

Joint-ventures ............................................................................................................. 51 Mergers & Acquisitions ............................................................................................... 53

OEM-supplier relationship .............................................................................................. 56 Involvement of automakers in supplier development .................................................... 56 Direct involvement declines post-liberalisation ............................................................. 57 Greater localisation driving better OEM-supplier relationship ...................................... 58 Technology remains a big challenge for Indian suppliers .............................................. 59 Automakers’ close-knit suppliers ................................................................................. 59 Cost, quality, delivery (QCD) ...................................................................................... 60

India’s emergence as a sourcing hub ............................................................................ 61 Automotive cluster development ..................................................................................... 64

Northern region .......................................................................................................... 65 Southern region .......................................................................................................... 66

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Western region ........................................................................................................... 66 Growth of clusters....................................................................................................... 66 Gujarat emerging as major cluster ............................................................................... 67 Competition among clusters ........................................................................................ 68

Challenges for the Indian Supplier Industry ..................................................................... 72 Demand fluctuations ................................................................................................... 72 Capacity expansion ..................................................................................................... 72 Fluctuating raw materials prices .................................................................................. 73 Exchange rate volatility ............................................................................................... 75 Rising operating costs ................................................................................................. 77 R&D capabilities ........................................................................................................ 78 Trade practices ........................................................................................................... 79

Skilled manpower shortage ......................................................................................... 79 Growing competition .................................................................................................. 80

Government Policy ........................................................................................................ 82 Phase 1: Draconian regulations during 1947-1980 .................................................... 82 Phase 2: Limited liberalisation during 1980-1990 ...................................................... 82

Phase 3: Economic reforms of 1991 and afterwards .................................................. 82 Policy environment ..................................................................................................... 83

Tax policy ............................................................................................................... 83 Union Budget for fiscal year 2012-13........................................................................ 85

Trade Policy ............................................................................................................... 89 Major bilateral and multi-lateral trade agreements .................................................... 90 State policies ........................................................................................................... 92 Labour laws ............................................................................................................ 93 Land Acquisitions ................................................................................................... 94

Policy on fuel pricing ............................................................................................... 95 Industry regulations ................................................................................................. 96

Recent developments .................................................................................................. 99 Auto Policy 2002 ..................................................................................................... 99 Automotive Mission Plan 2006-16 ........................................................................... 99 National Automotive Board .................................................................................... 99 National Manufacturing Policy ............................................................................... 100 Government Initiatives on skills development ......................................................... 100

Infrastructure development......................................................................................... 101 Transportation ....................................................................................................... 101 Power .................................................................................................................... 104

India’s competitiveness in term of infrastructure in BRICS countries ........................... 105

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Survey of Indian Supplier Industry ................................................................................. 107 Interviews ..................................................................................................................... 118

Automakers ............................................................................................................... 118 Suppliers.................................................................................................................... 118 Michael Boneham, Managing Director and Sandeep Sanyal, Executive Director, Operations; Ford Motor India .................................................................................... 119 Rahul Bharti – Head, Corporate Planning & Investor Relations, Maruti Suzuki........... 122 Bharat Parekh, Chief, Strategic Sourcing, Tata Motors ............................................... 125 Neeraj Kanwar, Vice Chairman & Managing Director, Apollo Tyres .......................... 128 Shvetal Vakil, Executive Director, Setco Automotive .................................................. 133 J Sivkumar, Pricol ...................................................................................................... 135 Shailandra Bohra, Marketing Director, Bohra Rubber ................................................. 138 Amit Mukherjee, Deputy Executive Director, Automotive Component Manufacturers Association of India (ACMA) .................................................................................... 141

Supplier Profiles ............................................................................................................ 145 Aisin Seiki ................................................................................................................. 145 Alicon Castalloy ........................................................................................................ 148

Amalgamations Group............................................................................................... 150 Amtek Auto ............................................................................................................... 153 Anand Group ............................................................................................................ 157 Apollo Tyres .............................................................................................................. 161

Ashai India Glass ...................................................................................................... 165 Ashok Iron Works ..................................................................................................... 168 Ashok Minda Group .................................................................................................. 169 Auto Ignition ............................................................................................................. 173 Automotive Stampings ............................................................................................... 175

Axles India ................................................................................................................ 178 Bagla Group .............................................................................................................. 180 Bajaj Motors ........................................................................................................ 118182 Banco Products ...................................................................................................... 11883 Bharat Forge .............................................................................................................. 185

Bharat Gears.............................................................................................................. 189 Bharat Seats ............................................................................................................... 191 Bhushan Steel ............................................................................................................ 194 Birla Corporation ....................................................................................................... 197

Birla Tyres ................................................................................................................. 199 Bohra Rubber ............................................................................................................ 201 Bosch India ............................................................................................................... 203

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Brakes India............................................................................................................... 206 Bridgestone India ....................................................................................................... 208 Caparo India ............................................................................................................. 211 Clutch Auto ............................................................................................................... 214 Continental ................................................................................................................ 217 DCM Engineering ..................................................................................................... 220 Delphi TVS ............................................................................................................... 222 Delphi ....................................................................................................................... 224 Denso India ............................................................................................................... 227 Endurance Systems .................................................................................................... 230 EXECY India ............................................................................................................ 234 Exide Industries ......................................................................................................... 236

Faurecia .................................................................................................................... 240 Federal Mogul Goetze ............................................................................................... 243 Fenner India .............................................................................................................. 246 Fiem .......................................................................................................................... 248 Gabriel India ............................................................................................................. 251

GKN Driveline India ................................................................................................. 254 Goodyear India ......................................................................................................... 256 Guru Nanak Auto ...................................................................................................... 259 Halonix ..................................................................................................................... 261

Harita Seating ............................................................................................................ 264 Hi-Tech Gears ........................................................................................................... 266 Imperial Auto ............................................................................................................ 268 IP Rings .................................................................................................................... 270 Jamna Auto ............................................................................................................... 272

Jay Bharat Maruti ...................................................................................................... 276 Jay-Ushin .................................................................................................................. 278 Jaya Hind .................................................................................................................. 280 JK Tyre ..................................................................................................................... 282 JKM Automotive ....................................................................................................... 285 Johnson Matthey ....................................................................................................... 288 Kalyani Forge ............................................................................................................ 290 Kinetic Engineering ................................................................................................... 292 Krishna Maruti .......................................................................................................... 295 LG Balakrishnan ....................................................................................................... 298 Lucas TVS ................................................................................................................. 301 Lumax Automotive Systems ...................................................................................... 304

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Lumax Industries ....................................................................................................... 306 Machino Plastics ........................................................................................................ 309 Madras Engineering ................................................................................................... 311 Magna ....................................................................................................................... 313 Magneti Marelli ......................................................................................................... 316 Mahindra Hinoday .................................................................................................... 319 Mahindra Systech ...................................................................................................... 320 Mahindra Composities ............................................................................................... 322 MAHLE .................................................................................................................... 324 Mark Exhaust ............................................................................................................ 328 MRF ......................................................................................................................... 330 Manjal Auto .............................................................................................................. 333

Munjal Showa ........................................................................................................... 335 Neolite ZKW Lightings.............................................................................................. 337 NK Minda Group ...................................................................................................... 340 NRB Bearings ............................................................................................................ 344 Omax Auto ............................................................................................................... 346

Panasonic Automotive ............................................................................................... 348 Pricol......................................................................................................................... 353 Ramakrishna Forgings ............................................................................................... 356 Rane Brake Linings .................................................................................................... 358

Rane Engine Valves ................................................................................................... 360 Rasandik ................................................................................................................... 362 Remsons .................................................................................................................... 364 Rico Auto .................................................................................................................. 366 Ring Plus Aqua .......................................................................................................... 369

RSB Transmissions .................................................................................................... 371 Ruia Group ............................................................................................................... 373 Saint-Gobain ............................................................................................................. 376 Samvardhan Motherson Group .................................................................................. 378 Sandhar Technologies ................................................................................................ 381 Setco Automotive ...................................................................................................... 384 Shriram Pistons & Rings ............................................................................................ 387 Sigma Group ............................................................................................................. 389 SKF India .................................................................................................................. 391 Sona Koyo................................................................................................................. 394 Steel Strips Wheels..................................................................................................... 398 Sterling Tools ............................................................................................................ 401

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Subros ....................................................................................................................... 403 Sunbeam Auto ........................................................................................................... 406 Sundram Clayton ....................................................................................................... 408 Sundram Fasteners .................................................................................................... 411 Suprajit Engineering .................................................................................................. 414 Talbros Automotive ................................................................................................... 417 Tata AutoComp......................................................................................................... 420 Tata Ficosa ................................................................................................................ 425 Tata Johnson Controls ............................................................................................... 427 Tata Steel .................................................................................................................. 429 Tata Toyo Radiator ................................................................................................... 433 Timken ...................................................................................................................... 435

TRW Automotive ...................................................................................................... 438 Tube Investments ....................................................................................................... 441 UCAL Fuel Systems .................................................................................................. 444 Valeo ......................................................................................................................... 447 Varroc Group ............................................................................................................ 450

Victor Gaskets ........................................................................................................... 453 Visteon ...................................................................................................................... 455 WABCO India .......................................................................................................... 458 Wheels India ............................................................................................................. 461

ZF India .................................................................................................................... 464

LIST OF FIGURES AND TABLES Figure 1: Vehicle Sales and Production in India (2002-2011) ............................................ 12 Figure 2: Two-wheelers dominates Indian automotive market both in term of sales and production...................................................................................................................... 14 Figure 3: Two-wheeler Sales and Production in India (2004-2011) ................................... 15 Figure 4: Three-wheeler Sales and Production in India (2004-2011) ................................. 16 Figure 5: Indian Light Vehicle Sales ................................................................................ 17 Figure 6: Indian Light vehicle Production ....................................................................... 17 Figure 7: Vehicles Sales Percentage segment in India (2011) ............................................ 18 Figure 8: Audi, BMW and Mercedes-Benz sales in India (2009-2011, 2016, and 2022) ..... 20 Figure 9: India Light Vehicles Sales Forecast ................................................................... 21 Figure 10: India Light Vehicles Production Forecast ........................................................ 21 Figure 11: Indian Medium & Heavy Commercial Vehicle Sales and Production (2002-2011) ...................................................................................................................................... 22

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Figure 12: Indian Medium & Heavy Commercial Vehicle Sales and Production Forecast (2012-2022) .................................................................................................................... 23 Figure 13: Indian Vehicle Exports (2004-2011) ................................................................ 24 Figure 14: India's Consumer Price Inflation (Jan-09 to Jan-12) ......................................... 27 Figure 15: India's Central Bank Lending Rates (Jan-09 to Sep-11) .................................... 27 Figure 16: Indian Petrol and Diesel prices (Mar-10 to Dec-11) ......................................... 28 Figure 17: BRIC GDP Forecast (2008-2014) ................................................................... 30 Figure 18: India has one of the lowest car densities in the world ....................................... 31 Figure 19: Vehicle Sales and Production Forecast in India (2012-2022) ............................ 32 Figure 20: Turnover of India's automotive parts industry ................................................. 37 Figure 21: Components Manufactured in India by use in Vehicle ..................................... 38 Figure 22: India’s Auto Component Export Destinations Percent Share (FY2010-2011) ... 39 Figure 23: India’s Auto Component Export Destinations Percent Share (FY2009-2010) ... 39 Figure 24: India’s Auto Component Import Locations Percent Share (FY2010-2011) ....... 40 Figure 25: India’s Auto Component Import Locations Percent Share (FY2009-2010) ....... 40 Figure 26: Indian export and import value in USD (2005-2011) ....................................... 41 Figure 27: Two-wheelers and commercial vehicles continue to drive industry growth , passenger vehicles segment recorded impressive recovery ................................................ 43 Figure 28: Production of Light Vehicle Engines and Transmissions in India ..................... 44 Figure 29: Indian Supplier Investments in USD (2005-2011) ............................................ 45 Figure 30: Map of Automotive Clusters in India .............................................................. 70 Figure 31: Raw Material Prices ....................................................................................... 74 Figure 32: Exchange Rate – INR against USD (Jan-10 to Jan-12) .................................... 76 Figure 33: Exchange Rate – INR against EUR (Jan-10 to Jan-12) .................................... 76 Figure 34: Exchange Rate – INR against JPY (Jan-10 to Jan-12) ...................................... 76 Figure 35: Cargo handled at major Indian ports from 2004-05 to 2010-11 ........................ 103 Figure 36: Indian ranks third in terms of infrastructure among BRIC countries ................ 105 Figure 37: Survey – More than 60% of suppliers expect India’s automotive market to grow at 10-20% over the next five years .................................................................................. 107 Figure 38: Survey – High inflation and interest rates ‘very important’ challenges for suppliers ........................................................................................................................ 108 Figure 39: Survey – Retaining talent ‘most challenging’ issue for suppliers ...................... 109 Figure 40: Survey – Volatility in OEM demand, input costs fluctuation weigh heavy on suppliers’ minds............................................................................................................. 110 Figure 41: Survey – Maruti Suzuki, Volkswagen most attractive OEMs among suppliers . 111 Figure 42: Survey – Toyota, Volkswagen and Honda most exacting about testing and validation of components ............................................................................................... 112 Figure 43: Survey – Maruti Suzuki, Volkswagen and Toyota rank high on demanding supplier expansion ......................................................................................................... 113 Figure 44: Survey – Hyundai ranks high on contract finalisation with suppliers ............... 114 Figure 45: Survey – Maruti Suzuki, Hyundai quicker with supplier payments.................. 115 Figure 46: Survey – All OEMs ‘good’ in terms of payment terms negotiation with suppliers ..................................................................................................................................... 116 Figure 47: Survey – Ford, Toyota rank high on ‘return on investment’ they offer suppliers ..................................................................................................................................... 117

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Table 1: Investment plans in India .................................................................................. 34 Table 2: Maruti Suzuki has 19 JV vendors, 11 of which are located in its Supplier Park enabling component delivery not only just-in-time but also just-in-sequence ..................... 56 Table 3: List of Automotive Clusters in India .................................................................. 71 Table 4: Indian Supplier’s R&D Spend compared with Global Suppliers .......................... 78 Table 5: Presence of major global suppliers in India ......................................................... 81 Table 6: Budget 2012-13: Highlight 2012-13 .................................................................... 87 Table 7: Annual Energy Generation ............................................................................... 104

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