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
Dependant on OEMs
OEM market drivers (for India)
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.
INDIAN AUTO COMPONENT INDUSTRY
The Indian automobile ancillary sector is transforming itself from a low-volume, 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.
Volvo India Pvt. Ltd
Tatra TrucksIndia Ltd
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.
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
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:
- 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)
- 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.
- 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.
- 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)
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.
-Form, Fit & Function.
- reasonably priced skilled work force
- large population of technology workers
- established strengths in I.T. and electronics.
- 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.
- 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
- 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.