Transcript FUTURE OF AUTO COMPONENT INDUSTRY”

PRESENTATION ON
“FUTURE OF AUTO COMPONENT INDUSTRY”
BY
MR. M. RADHAKRISHNAN
JT.MANAGING DIRECTOR
AUTOLINE INDUSTRIES LTD.
PRIMARY 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 )
After 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.
DOMESTIC 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.
PRODUCTION OF FOUR WHEELERS
PAST AND FUTURE (IN 000S)
Production of Four wheelers
Past and Future (In 000s)
(In thousands)
7000
6000
5000
4000
3000
2000
1000
0
2003
2004
2005
Year
2009
2014
INDUSTRY OVERVIEW
INDIAN AUTO COMPONENT INDUSTRY
The Indian automobile ancillary sector is transforming itself from a lowvolume, 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.
Original Equipment Manufacturers of 4-Wheelers In India &
Production During 2005-06
Japanese/Joint Venture OEMs
Production in 000s
American OEMs
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
41.00
Total
58.00
12.00
KOREAN OEMS
670.10
Hyundai Motor India
Ltd
Honda Siel Cars India Ltd
Swaraj Mazda Ltd
Total
260.00
Original 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
Volvo India Pvt. Ltd
1.00
Ashok Leyland Ltd
65.00
Tatra Trucks India Ltd
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
Original 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
Total
2
3860
Original 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
The table below shows segment-wise distribution
of the auto component Industry www.acmainfo.com.
Organized
Component
Unorganized
Component
Manufacturers
Manufacturers
Year
1999
2006
1999
2006
Share in OE
supply market
80%
80%
20%
20%
Share in
Aftermarket
40%
35%
60%
65%
The table below shows segment-wise distribution of the
auto component Industry www.acmainfo.com.
Strengths
Weaknesses
Organized Component
Manufacturers
Unorganized
Component
Manufacturers
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
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
EXPORT 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
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
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
Global 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 world’s small car
production
•
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.
Strategies 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.
Reorganization 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.
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.
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 CV’s)
Role of technology in reshaping the industry
•
Extent to which a Design is economical, functional and easy to
manufacture –impact new car’s 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.
•
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.
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.
•
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.
• 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
• Worldwide market for design services pegged at USD 11
billion (Rs. 44,000 Crores) and presently India’s 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.