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Auto Ancillary Market in India 2013

SUMMARY


Auto ancillary market is expected to witness steady growth in the next five years. The original equipment manufactures and auto aftermarket is generating huge demand for the auto ancillary products.
The report commences with an overview of the major macro economic indicators which highlights the present economic scenario prevalent in India.
This is followed by the market overview section which comprises of an illustration of the transition path of the Indian auto ancillary market, where it depicts India’s gradual transformation into a full-scale Tier 1 supplier along with the rising exports of complex auto parts. This section further provides an insight into the overall auto ancillary market in India. The market size and forecasted growth along with the market segments and their respective values have been mentioned in the report. It also highlights the employment opportunities and contribution to country’s GDP by the auto ancillary sector. Then it provides the potential growth prospects of the auto ancillary industry in terms of imports, exports and domestic production. This is followed by an illustration of the complete value chain, starting with the raw material producers and concluding with the end users of this sector. Further, it states the opportunities for the players positioned at different levels within the auto ancillary sector.
Moving along, auto ancillary market segments section in the report elaborates on the basic six market segments, engine parts, drive transmission & steering parts, body & chassis, suspension & braking parts, equipments, electrical parts and others, wherein it lists their respective production share in the overall market, brief outlook and their major sub-segments. Then for each sub-segment, the report displays the demand and forecasted growth, product variation, major players and strategic alliances along with market segmentation in terms of region, sector, structure and type. Thereby it offers very detailed information about the major sub-segments within the broad auto ancillary segments.
The opportunity areas section in the report talks about the five major automobile production hubs in India, stating the key auto hubs, key auto ancillary hubs and emerging auto ancillary hubs within each major auto hub. It also highlights the auto industry scenario and growth drivers specific to each auto hub.

The report provides detailed information about the exports and imports of auto ancillary products along with present and future growth in both exports and imports in value terms. It also provides country-wise export-import data for the financial year 2011.
Factors driving the growth of auto ancillary market in India are also explained in detail, which includes growing automotive industry, healthy economic outlook, auto aftermarket demand, growing investments and opportunity from new US IT compliance law. The key challenges identified are exposure to cyclical downturns in the automobile industry, rising labour costs and price of raw materials, counterfeit market, technical inefficiency and depreciating currency.
The report covers the various government initiatives concerning the auto ancillary sector in India. This section discusses the impact of the Union Budget 2012-13 on the auto ancillary market, plans of setting up the National Automotive Board, National Automotive Testing and R&D Infrastructure Project, export incentives and the various initiatives undertaken by Auto Component Manufactures’ Association in India.
The trends section in the report comprises of an in-depth analysis of the major trends prevailing in the auto ancillary market, which include diversification, rising PE/VC investments, focus on quality, adoption of green strategies, increasing foreign presence and changing design.
The competitive landscape section begins with the Porter’s Five Forces Analysis, illustrating the competitive rivalry, bargaining power of suppliers and buyers and threat of new entrants and substitutes. It outlays the competitive landscape of the auto ancillary market in India briefing about the domestic and foreign players existing in the market. The section includes competitive benchmarking of the top players operating in the Indian auto ancillary market. The report also features brief profiles of major domestic and foreign players in the market and a snapshot of their corporation, financial performance along with the key financial ratios, business highlights, their product portfolio and individual SWOT analysis providing an insight into the existing competitive scenario.
The report concludes with a section on strategic recommendations which comprises an analysis of the growth strategies of the auto ancillary market in India.

(Source : http://www.reportstack.com/product/101924/auto-ancillary-market-in-india-2013.html)

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Auto Ancillaries 2011

• The fortunes of the auto ancillary sector are closely linked to those of the auto sector. Demand swings in any of the segments (cars, two-wheelers, commercial vehicles) have an impact on auto ancillary demand. Demand is derived from original equipment manufacturers (OEM) as well as the replacement market. Out of the total revenues, engine parts account for 31% of the total revenues of the industry in FY10. 
• ACMA, the Indian auto component industry body had around 588 players registered with it in FY10. 
• Margins in the replacement market are higher than the OEM market. The OEM market is very competitive and component manufacturers have to compromise on margins to bag bulk orders. Moreover, delivery schedules and quality standards have to be adhered to very strictly. 
• Indian auto ancillary sector has traditionally suffered from poor quality. While this still holds true for the unorganized sector, the organized sector has been resorting to increased automation to reduce the defect levels. 
• Lower labour costs give Indian auto ancillary companies an absolute cost advantage. To put things in perspective, ACMA numbers suggest that wage cost accounts for 3% to 15% of revenues for Indian manufacturers as compared to 20% to 40% for US players. India's strength in exports lies in forgings, castings and plastics historically. But this is changing with more component manufactures investing in upgradation of technology in recent years.

Key Points

Supply
Low for high technology products. Unorganized sector dominates the domestic component market due to excise benefits. Generally, excess supply persists.

Demand
Linked to automobile demand. Export demand is linked to the increasing acceptance towards outsourcing.

Barriers to entry
Capital, technology, OEM relationships, customer service, distribution network to meet replacement demand.

Bargaining power of suppliers
Low with OEMs. Relatively high in the replacement market

Bargaining power of customers
Companies operating in the export market face competition at a global level. At the domestic level, market structure is fragmented for a large number of ancillary products. Most companies adopt low cost and differentiation strategies. In some products (like batteries), only two or three companies control over 80% of the market.

Competition
Will intensify, as global players will enter the market leading to consolidation. Dereservation of SSI will result in access to capital and technology.


 Financial Year '11

• After a strong FY10, the Indian automobile industry mirrored this strong performance in FY11 too. Consequently, the passenger car and CV segment witnessed a growth of 30% and 27% respectively for the full year. 
• In light of this strong surge in growth, auto component industry managed to do well during the year as Bharat Forge and Exide reported 59% YoY and 21% YoY growth in sales respectively. Despite subdued economic conditions in the developed world, some players were able to put up a strong show in exports as well. For instance, Bharat Forge saw its exports grow by a stupendous 73% YoY on account of new customer additions and product development. Capacity utilisation rates of the auto ancillary sector were also high in light of strong growth in the domestic market. 
• Just like the auto industry, the auto ancillary industry witnesses a rise in input costs during the year. This was in sharp contrast to the scenario in FY10 whereby input costs had softened considerably. As a consequence, rising input costs exerted pressure on margins and those who were able to keep other cost heads under control were able to maintain margins if not expand them.

 Prospects

• There has been a conscious effort by manufacturers to improve productivity of the suppliers in the past few years. Though the number of active vendors has declined significantly for auto manufacturers, technology transfer and fresh fund infusions have resulted in improved productivity in the remaining ones. Relaxation of FDI norms for the small-scale sector could emerge as one of the key growth drivers in the long run. The Indian automotive components industry has lined up sizeable investment schedules for the next few years. 
• The automobile sector is cyclical and dependent on the growth of the economy and improvement in infrastructure. Factors like increased public spending, favorable interest rates and general improvement in per capita income point towards higher demand for automobiles in the future. Also, government's initiatives in the infrastructure sector such as the Golden Quadrilateral project and NHDP (National Highway Development Programme) are likely to give boost to four-wheeler sales especially CVs. Just to put things in perspective, we expect CV segment to grow by 7% to 8%, 2-wheeler demand to increase by around 12% to 15% and passenger car sales growth at 10% to 12% over the medium to long term. This is a positive for auto ancillary manufacturers. 
• In the long term, the growth of this sector will depend partly on pace of indigenization levels across all segments. The prospects look bright as most companies are increasing the indigenous components, in an effort to reduce their currency losses and remain competitive. Also, the fact that auto manufacturers like Ford, Hyundai and Maruti are exporting cars, make the prospects look encouraging. 
• Margins are likely to come under pressure in the long term because as competition increases, manufacturers will find it difficult to increase prices and will try to cut costs. The burden will eventually fall on auto ancillary players. In the near future though, companies will need to have manufacturing lines that can be adapted for new models, have strong technology backing, an ability to export to developed markets, market dominance in specific products and a growth plan driven by volumes and product innovations. Companies will have to focus on quality and abide by delivery schedules if they want to survive. As manufacturers sourcing components are keen to get components from fewer sources in future, this will lead to consolidation in the sector. 
• The growing number of Free and Preferential trade agreements being signed by India with countries like Thailand, Singapore and other ASEAN countries will hurt the cost competitiveness of Indian companies as Indian players play significantly higher duties than their Asian counterparts. Therefore, Indian companies might lose out on big orders if the duty structure is not rationalized.

(Source : http://www.equitymaster.com/research-it/sector-info/autoc/#kp)