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Key Features |
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Engine Parts is the second largest product segment of the automotive components industry with a 24% production share. The segment is classified in terms of core engine, fuel delivery and other components. |
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Engine assembly is a high precision job, requiring adherence to high level of quality norms. The demand shares of the replacement and export markets for the Engine Parts segment vary significantly across products. It is as high as 60% for some products and as low as 10% for some others. The demand from OEMs varies from 40% to 90%. The share of the replacement market may decline in the short to medium term for some engine parts because of technological considerations. |
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Technological changes are expected to drive the design and development of new products in this segment. |
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Traditionally, the Engine Parts segment manages the highest operating margins in the components industry, because of higher sales realisations. However, with the slowdown in the automotive industry in recent years, there has been a relative decline in margins for the Engine Parts segment. |
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Major Players |
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There are four major players in the pistons sub-segment: Goetze, Shriram Pistons & Rings, India Pistons, and Samkrg Pistons. Almost all players in the pistons sub-segment have technological tie-ups with global majors. |
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The piston rings sub-segment is dominated by Goetze, Shriram Pistons & Rings, Perfect Circle Victor and India Pistons. |
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Rane Engine Valves, KAR Mobiles, and Shriram Pistons & Rings dominate the engine valves sub-segment. Technical collaboration exists for major players. |
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Ucal Fuel Systems, Spaco Carburettors & Escorts Auto Components are the prominent players in carburettors, a part of the petrol-based fuel injection systems sub-segment. |
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In diesel-based fuel injection systems, Mico, Delphi TVS Diesel System and Tata Cummins are the prominent players. |
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Outlook |
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The Engine Parts segment is a technology and capital-intensive one, and is likely to be dominated by the existing major players in the short to medium term. Moreover, since engine technology is expected to move towards superior design (for optimal fuel consumption and lesser emission), access to such newer technologies is likely to be limited to players in the organised sector. This apart, some of the newer technological changes currently being witnessed in this segment are introduction of turbochargers and common rail systems. Further, the trend of outsourcing a considerable part of the engine from one vendor may gain importance in this segment in the short to medium term. |
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ELECTRICAL PARTS |
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The electrical system in an automotive consists mainly of starting, ignition and charging systems. According to the classification by ACMA, the primary sub-segments in the Electric Parts segment are: starter motors, generators, distributors, spark plugs, ignition coils, flywheel magnetos and voltage regulators, and electric ignition systems (EIS). |
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Key Features |
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Electrical Parts is the fifth largest product segment of the automotive components industry with an 8% production share. |
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The demand share of the replacement and export markets is low for the segment at around 25%, while that of the OEM segment is around 75%. |
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The operating margins of electrical parts manufacturers, which are lower than the industry average, have improved in recent years following a decline in material costs. The material costs have declined as players have increasingly localised their operations, thus bringing down their reliance on imports. |
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Major Players |
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Lucas TVS, Denso, Motor Industries Co. (MICO), Delco Remy Electricals and India Nippon Electricals are the major players in the Electrical Parts segment. |
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Major players in this segment have technical arrangements with global majors. |
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Outlook |
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Specific sub-segments in this segment (starters and generators) face a low threat of tierisation. The increasing popularity of electric start mechanisms for select models of two-wheeler manufacturers is providing a growing opportunity to manufacturers of EIS. While a large number of players are present in the unorganised segment of this market (serving replacement requirements), their market share is likely to decline in the long term because of quality and technology considerations. Moreover, competition is expected to intensify in the Electrical Parts segment serving four-wheelers, with the position of multinational companies strengthening. |
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DRIVE TRANSMISSION AND STEERING PARTS
As per the classification by ACMA, the primary sub-segments in the Drive Transmission and Steering Parts segment are: gears, wheels, steering systems, axles and clutches. |
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Key Features |
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Drive Transmission and Steering Parts is the third largest product segment in the Indian automotive components industry with a 16% production share. |
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Steering systems, gears and axles require high precision technology. |
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Replacement demand in this segment is limited mainly to products like gears, clutches and axles. |
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With margins in this segment being lower than the industry average, manufacturing efficiencies and localisation of production hold the key to improving profitability. |
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Major Players |
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Sona Koyo Steering Systems, Rane Madras and Rane TRW Systems are the major players in Steering Systems. In the sub-segment of Steering Systems for Commercial Vehicles, there is only one player: ZF Steering. Technical collaboration exists for major players. |
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Bharat Gears, Gajra Bevel Gears, Gajra Gears and Eicher are the major players in the gears sub-segment. Besides, two international companies, Graziano Trasmissioni and SlAP Gears India, have set up bases in the country. |
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Clutch Auto, Ceekay Daikin, Amalgamations Repco and Luk Clutches are the major players in the clutches sub-segment. In the clutch facings sub-segment, Rane Brake Lining and Rico Auto are the prominent players. All major players have set up joint ventures in partnership with global players. |
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GKN Driveshafts (India) and Delphi cater to the drive shaft requirements of passenger cars in India, while Sona Koyo Steering Systems is present in the Commercial Vehicle segment. |
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Outlook |
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The players in the unorganised sector are unlikely to make a foray into segments like steering systems because of their capital-intensive and technology-intensive nature. However, in specific sub-segments like clutches, the share of the replacement market is likely to increase as traffic density increases and roads remain poor (requiring frequent clutch use). Moreover, competition is expected to intensify in specific sub-segments like gears and clutches following the entry of global players. Also, these sub segments are likely to witness the trend of continuing tierisation. Moreover, given the trend of systems outsourcing in sub-segments like axles, it is likely that OEMs will prefer to source complete axle assemblies from one or two vendors rather than individual components from various vendors. |
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SUSPENSION AND BRAKING PARTS
According to the classification by ACMA, the primary sub-segments in the Suspension and Braking Parts segment are: brakes, brake assemblies, brake linings, shock absorbers & leaf springs. |
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Key Features |
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Suspension and Braking Parts is the fourth largest product segment of the Indian automotive components industry with a 12% production share. |
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Demand share of the replacement market in this segment varies from 30-70%, depending on the product. The unorganised sector has a significant presence in some products with low technological intensity. |
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The profit margins in this segment are in line with the industry average. The companies in this segment typically offset the high raw material costs with low employee costs. |
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Major Players |
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There are three major brake system suppliers in India: Brakes India, Kalyani Brakes and Automotive Axles. |
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Rane Brake Lining, Sundaram Brake Lining, Hindustan Composites and Allied Nippon, dominate the brake linings sub-segment. International companies have presence in this sub segment. |
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Jamna Auto & Jai Parabolic are the major players in the leaf springs sub-segment. |
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Gabriel India and Munjal Showa dominate the shock absorbers sub-segment. Delphi is present in the higher end of this sub-segment. |
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Outlook |
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Some specific sub-segments in the Suspension and Braking Parts segment like brake assemblies are likely to witness tierisation with the present Tier 1 suppliers being relegated to the Tier 2 position. Furthermore, with products in this segment on an average having a high replacement demand, it is likely that players will continue to maintain a diversified customer base in both the replacement and OEM segments, apart from the export market. For companies focusing on the replacement market, the focus is likely to be on establishment of a wide distribution network, maintenance of an array of products and building of brand image. For companies having a larger share in the export market, cost and quality management are likely to be the priorities. Competition is also expected to intensify in sub-segments like shock absorbers following the entry of global players. |
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EQUIPMENT |
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According to the classification by ACMA, the primary sub-segments in the Equipment segment are: headlights, halogen bulbs, wiper motors, dashboard instruments, switches, electric horns & other panel instruments. |
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Key Features |
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Equipment is the smallest product segment with a 7% production share. |
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The demand share of the replacement market for the Equipment segment varies in the range of 30% to 70%. The unorganised sector has a significant presence in some products with low technological intensity. |
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Major Players |
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Lumax, Autolite & Phoenix Lamps are the largest players in the headlights sub-segment. |
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Premiere Instruments & Controls is the leading player in the dashboard sub-segment. |
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Jay Bharat Maruti, Omax Auto and JBM Tools dominate the sheet metal parts sub-segment. |
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Outlook |
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Specific sub-segments like headlights are likely to witness the market leaders expand and upgrade their facilities to meet the needs of the new car manufacturers. This apart, for the replacement market, companies are likely to focus on distribution network, brand image, product portfolio and pricing policy. Companies are also likely to focus on exports, given that sub-segments like headlights have strong export potential. |
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OTHERS
The Others segment includes all components that cannot be clubbed under any of the other heads because of functional disparities. Some of the major components in this segment (as per ACMA classification) include sheet metal parts, pressure die-castings, plastic moulded components, fan belts and hydraulic pneumatic equipment. |
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Key Features |
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The segment is one of the fastest growing within the automotive components industry, and is the largest with 33% production share. |
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Outlook |
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Currently, leading players in the sub-segment like sheet metal parts are in the process of expanding the customer base. This apart, companies in this segment are likely to continue with cost reduction, in an effort to improve margins. |
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KEY FINDINGS OF THE REPORT
The Indian automotive components industry is rapidly transforming itself from a low-volume, fragmented sector, into a highly competitive sector characterised by world-class technology, large and assured volumes, and adherence to strict delivery schedules as specified by global vehicle manufacturers.
The Indian automotive components industry has braced itself up to meet this structural transformation. In particular, most Indian companies have entered into technological collaborations and equity partnerships with world leaders in automotive components. Besides, subsidiaries of global vehicle manufacturers like Delphi of GM have set up manufacturing facilities in India. This, in turn, is expected to enable the Indian automotive industry measure up to strict quality standards and imbibe the latest technology. Additionally, these companies would also need to make higher investments to improve their R and D capabilities. However, on the other side, small Indian players without any tie-ups with international component manufacturers are under increasing threat.
This apart, faced with declining profitability, vehicle manufacturers worldwide have reduced the number of component suppliers to make the supply chain more efficient. India is no exception to this trend, with vehicle manufacturers in India reducing the number of suppliers. Indian vehicle manufacturers are also likely to prefer integrated systems suppliers rather than the single-part suppliers, who are expected to play an increasing role in production, designing and development of vehicles and components.
ICRA perceives that the Indian automotive components industry has the ability to become a truly global industry by establishing its footprint in regions such as Eastern Europe and Northern Africa. This could be achieved through the setting up of manufacturing units or via strategic alliances. Significantly, the automotive components industries in some of these regions enjoy numerous fiscal concessions, and the Indian automotive components industry could take advantage of such concessions by establishing units there.
Notwithstanding the ability to become a global player, Indian component manufacturers have relatively weak in-house R&D capabilities as compared with their global counterparts. One of the main reasons for this is that vehicle design activity is minimal in India. Also, Indian companies are better at product adaptation than product development. This situation is unlikely to change until vehicle platforms are designed in India. Spending on R and D in the Indian automotive components industry currently averages 2-3% of the annual turnover and may have to be increased significantly if Indian suppliers are to compete seriously in the global market.
With the automotive industry showing signs of revival in domestic market, the outlook for the automotive components industry has improved. In particular, the two-wheeler industry has been growing at a reasonable rate, primarily on the strength of the strong demand for motorcycles. The commercial vehicle and passenger car segments have done well in FY2003. However, the expected growth in demand for automotive components is unlikely to benefit all players uniformly because of the structural transformation affecting the industry. As far as export demand is concerned, the Indian automotive components industry has strong potential to increase exports with India emerging as the sourcing hub for global automotive giants. ICRA expects this trend of outsourcing to gain momentum with Indian component manufacturers having the potential to consolidate their exports in segments that are growing at a brisk pace in the global market. For instance, the Indian manufacturers enjoy competitive advantage in the production of assembled parts like clutches (one of the fastest growing items in the global export market) and lighting equipment requiring low labour costs. In a similar vein, Indian manufacturers enjoy advantage in the production of castings and forgings, as these are subject to less stringent environment regulations in India, as compared with developed countries.
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