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The changing aftermarket industry in india

Automotive aftermarket in India and its growth opportunities

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The changing aftermarket industry in india

  1. 1. 1 The changing Aftermarket Industry and how Indian Automotive ancillaries can benefit from arising opportunities Prepared for: Singex Prepared by: Spire Research and Consulting Date: 18th September 2019
  2. 2. 2 Topic 1 Automotive Market 1a Overview 1b Segmentation of four wheelers 1c Tire Industry-Overview 1d Tire Industry-Key Players 2 Automotive Aftermarket 2a Overview & Trends 2b Online E-retailing 2c Safety & Security 2d Auto Components Export 3 Summary Agenda
  3. 3. 3 Automotive Market – Overview
  4. 4. 4 Automobile Industry in India – Overview The automobile industry in India is the world’s fourth largest vehicle market. In 2018 India was the world's 4th largest manufacturer of cars and 7th largest manufacturer of commercial vehicles. Indian automotive industry (including component manufacturing) is expected to reach INR16-18 trillion (USD251-283 billion) by 2026. 35 39 39 44 51 2 2 2.2 2.5 2.6 0 1 2 3 0 20 40 60 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 inMillions InBillions Size of the market FY19 Overall Revenue of Auto Components Number of Automobiles Sold in India Source: SIAM Society of Indian Automobiles.
  5. 5. 5 81% 13% 4% 3% Automobile Domestic Sales Trends FY19 Two Wheelers Passenger Vehicles Commercial Vehicles Three Wheelers Automobile Industry in India – Overview Source: SIAM Society of Indian Automobiles. Domestic sales are dominated by large number of two wheeler vehicles. In 2017, India surpassed China to become the world’s biggest market for two wheelers. A total of 21.1 million units were sold last year, which comes down to 58,000 units every day.
  6. 6. 6 Automobile Industry in India – Segmentation of four wheelers 50% 26% 24% Automobile Domestic Sales Trends 2018 Hatchbacks SUV's and MUV's Sedans Indian Market has been known for the market for hatchbacks. Even the government has implemented rules to allow the development of cars under 4 metres, as they attract lesser duty and other taxes. Petrol engines smaller than 1.2- litre and diesel engines that are under 1500cc, have a lesser excise duty. This helps to increase fuel efficiency and also reduce pollution. Total Number of Commercial Vehicles Sold in 2018 1,007,319
  7. 7. 7 Tire Industry: Overview Key Figures for FY2018: No. of Tyre Companies in India: 41 No of Tyre Plants in India: 62 Industry Turnover 2018-19 (est.): INR63000 crore (USD9 Bn) Exports 2018-19 (est.): INR12890 crore (USD1.8 Bn) 0% 20% 40% 60% 80% 100% 38% 30% 62% 70% Distribution across various channels Aftermarket OEM+exports 58% 28% 14% Global Truck & Bus Passenger Vehicle (PV) 2/3-Wheeler 55% 22% 13% 10% Indian Truck & Bus Passenger Vehicle (PV) 2/3-Wheeler Others Distribution of exports/sales of Tyres manufactured in India FY18 2011 2018
  8. 8. 8 Tire Industry: Key Players and Plant Locations • Limda, Gujrat • Perambra, Kerala • Kalamessey, Kerela • Orgadam, Tamilndadu • Chittor, Andhra Pradesh* • Kankroli, Rajasthan • Banmore, Madhya Pradesh • Mysore (2), Karnataka • Sriperumbudur, Tamil Nadu • Haridwar, Uttrakhand • Balasore, Orissa • SIPCOT Thiruvallur, Tamil Nadu • Dhar, Madhya Pradesh • Pune, Maharashtra • Chennai, Tamil Nadu • Arkonam, Tamil Nadu • Trichy, Tamil Nadu • Puducherry • Medak, Telangana • Poda, Goa • Kottayam, Kerala • Baruch, Gujarat* • Mumbai, Maharashtra • Halol, Gujarat • Ambarnath, Maharashtra • Nasik, Maharashtra • Nagpur, Maharashtra • Sriperumbudur, Tamil Nadu* • Bahadurgarh, Haryana • Modipuram, Uttar Pradesh • Rudrapur, Uttarakhand • Madurai, Tamil Nadu • Baliabhgarh, Haryana • Aurangabad, Maharashtra
  9. 9. 9 Automotive Aftermarket Overview and Trends Online E-retailing Government Regulations Auto Components Export
  10. 10. 10 Automotive Aftermarket The Automotive Aftermarket refers to the manufacturing, retailing and installation of all vehicle parts after the sale by the OEM (Original Equipment Manufacturer). The automotive aftermarket is broadly divided into three sectors: The post warranty vehicle (>4 years) service market was mainly captured by small independent garages i.e. the unorganized sector because of the huge cost differences (of after warranty services) between authorized and local garages. 46% 52% 1% 1% Automobile Aftermarket FY19 Organized Single Brand Outlet Unorganized MBOs/ Workshops Organized Multi Brand Outlets Online Platforms Automotive Aftermarket Products/Services Replacement Parts Replace the original stock components which are worn out in due course of time. Accessories Made for comfort, convenience, performance, safety, or customization, and are designed for an add-on.
  11. 11. 11 The total aftermarket has grown at a CAGR of 14% over 2013-2018. The vibrant automotive sector drives the growth of the automotive aftermarket in India and is estimated to grow at INR75,000 crore by fiscal year 2020. Automotive Aftermarket Drive Transmissi on and Steering, 21% Engine Compone nts, 18% Electricals, 18% Suspensio n and Braking, 15% Consuma bles and Miscellane ous, 14%Cooling Systems, 8% Rubber Compone nts, 3% Electronic Compone nts, 3% Product-wise share in aftermarket turnover (FY18) Major Players by Segments: Engine & Engine Parts Goetze, Rane Engine Valves, Ucal Fuel Systems etc. Transmission & steering parts Sona Koyo Steering Systems, Rane NSK Steering Systems. Suspension & braking parts Brakes India, Rane Brake Lining, Jamma Auto & Jai Parabolic and Gabriel India. Electrical Lucas TVS, Denso, Delco Remy Electricals Equipment Lumax, Premiere Instruments & Controls and Jay Bharat Maruti.
  12. 12. 12 Automotive Aftermarket Overview and Trends Online E-retailing Government Regulations Auto Components Export
  13. 13. 13 Trends in Automotive Aftermarket: Online E- retailing At present, the automotive aftermarket sale channels is fronted by traditional stores and garages. This majorly falls (53% in FY2018) under the unorganized sector. Taking in consideration factors such as increase in the spending capacity, changing consumer behaviour, penetration of technology, e-commerce and most importantly; need for an organized market. Online e-retailing will soon be a business disruptor for this sector. It has already been observed in western countries and developed markets. 2% 3% 3% 4% 4% 4% 0% 2% 4% 6% 2015 2016 2017 2018 2019* 2020* US Online sales of auto parts and accessories 2015-2020 Revenue from online sales of auto parts *Projected
  14. 14. 14 Trends in Automotive Aftermarket : Online E- retailing In 2014, the online auto aftermarket in India was estimated at around USD20 million (less than one percent of the overall parts aftermarket at a retail level) and is expected to increase at a CAGR of 7%, valued at USD26 million in 2018 and is projected to reach USD30 million by 2020. There are huge opportunities to explore in the B2B space due to speedy growth of organized and independent workshops along with customers being positively disposed towards them. Recent advancements in the online automobile aftermarket include: Online autoparts marketplace SparesHub.com has raised INR2 crore from Singapore-based Anthill Scale Ventures, US-based Esvee Technologies, Chennai Angels and other high net-worth individuals (HNIs). Boodmo – an online marketplace for auto components (Ukrainan company) – has ventured into the Indian Markets. It aims to organize the replacement parts market and make the shopping process easier and convenient. Recently raised a funding of INR8 crore, adding up to a total of INR35 crore. New Delhi-based Cross Roads India Assistance, popularly known as CRIA, has acquired based MeriCAR.com, a marketplace and aggregator for the after sales automotive space.
  15. 15. 15 Trends in Automotive Aftermarket : Online E- retailing These Online Markets are now offering complete range of auto components from OEM spares to price effective alternatives: Advantages compared to offline stores: Braking System Clutch Systems Filters Suspens ion Systems Unassign ed Parts Car Access- ories Tires Interiors Suspens ion Systems Maintan nce /Service Parts Convenience Freedom of choice Multi-Product Selection Round-the-clock Service Fair Points
  16. 16. 16 Automotive Aftermarket Overview and Trends Online E-retailing Government Regulations Auto Components Export
  17. 17. 17 Government Regulations 1st April, 2018 ABS (Anti-braking system) for two wheelers/cars for all new models. BS VI emission norms April, 20202024 1st April, 2018 ABS( Anti-braking system) for two wheelers/cars for existing models. Airbags mandatory for all new models/existing post 2017. FE Regulations 2 Government The government of India has revised/introduced new regulations for passenger safety and pollution checks for automobiles. Some are already in place, while upcoming norms have also been preponed. Deadline for airbags was preponed by 6 months and BS VI scheduled in 2023, has been preponed to 2020.
  18. 18. 18 Trends in Automotive Aftermarket : Safety & Security One of the key concerns in the automobile sector is the rising safety and security standards. Indian Government put in place new regulations for automobile manufacturers. Consumers have also realized the importance and relevance, where a growth in demand has been observed off late. TotalAutomotiveIndustry:TechnologiesandSegmentScope Technologies like Anti-lock Braking System (ABS) and Reverse Parking Sensors (RPG) have very high penetration across vehicle segments and are expected to generate revenue of INR16,000 crores by FY 2020. 2W PV CV Reverse Parking Sensor In Car Entertainment(ICE) System Anti- Lock Braking System (ABS) Driver Information System (DIS) Body Control Module (BCM) Immobilizers Telematics Tyre Pressure Monitoring System (TPMS) Airbag Electronics LED based Headlamps Electric Power Steering Remote Vehicle Diagnostic Sys. Automatic Transmission (AMT,DCT,CVT) Electric and Hybrid Vehicles
  19. 19. 19 India emerging as a global hub for sourcing auto parts Government Initiatives : The target for this sector is to cross the USD100 billion mark with exports reaching USD35-40 billion and USD20-22 billion in revenue from overseas assets. Initiatives that are taken by the government to encourage the growth of this industry include : 1. The Automotive Mission Plan 2016-26 (AMP 2026) 2. Voluntary Vehicle Fleet Modernization programme (V-VMP) AMP 2026 under one of it’s five main objectives, seeks to increase the net exports of the Indian Automotive industry several fold. It recognizes that the Indian Automotive industry (both vehicles and auto components) has the potential to scale up exports to the extend of 35-40% of its overall output over the next 10 years (FY16-26). This policy offers incentives worth 8-12% of the cost of a new vehicle for surrendering the old one. It would be able to generate steel scrap worth USD 1,728 million domestically every year with the set-up of organized shredding centres; in addition to providing environmental and energy efficiency benefits. Turnover USD200 billion Export USD80 billion Export USD80 billion Direct Incremental employment – 3.2 million Metal Scrap Vehicles Scrapping Policy 2018
  20. 20. 20 India emerging as a global hub for sourcing auto parts After the implementation of such government initiatives: Several global tier-I suppliers have already announced plans to increase procurement of auto parts from their Indian subsidiaries. French tyre manufacturer Michelin announced plans to produce 16,000 tonnes of truck and bus tyres from its Indian facility this year, a 45% rise from last year. Auto components maker Bharat Forge Ltd (BFL), has formalized an agreement with Rolls-Royce Holdings Private Limited Company (Plc), which will supply BFL with critical and high integrity forged as well as machined components. Everstone Capital – a Singapore-based private equity (PE) firm – has purchased 51% in Indian auto components maker SJS Enterprises for an estimated USD51.35 million.
  21. 21. 21 Trends in Automotive Aftermarket : Safety & Security Other technologies which may/can expect growth are: After new regulations, ICRA estimates 90% increase in the penetration by 2019. The domestic passenger vehicle market has sold close to 3.64 million units in the last financial year. India In-Car Entertainment market revenue is projected to grow at a CAGR of 5.3% during 2015-21. Audio system firm Harman is expects a revenue of USD1 billion by 2022. A recent study by Future Market Insights (FMI) predicted that the automotive global remote diagnostics market will grow at a CAGR of approximately 18% through 2028. The global market for automotive TPMS (Tire-pressure monitoring system) is anticipated to reflect a CAGR of over 6% 2016-24. Government making it mandatory in passenger cars and higher focus on enhancing fuel efficiency attract growth. Indian Vehicle Telematics market is projected to touch USD300 mn by 2021. It also becoming an important part of CV industry because it is widely used by aggregators like Ola, Zoomcar and Revv. Vehicle immobilizers are finding increased application in PV as well as CV. Automobile giants like TVS and Maruti also increased the electrical components per vehicle and added immobilizers for Anti- Theft functionality.
  22. 22. 22 Automotive Aftermarket Overview and Trends Online E-retailing Government Regulations Auto Components Export
  23. 23. 23 Automotive Aftermarket – Auto Components Export The automobile components industry contributes towards 25.6% to the manufacturing GDP and 3.8% to the national GDP, providing indirect employment to 1.5 million people. It has the capacity and accessibility to export to other auto components across key global automotive markets like Japan, Korea and Europe. The total value of exports for the year 2018 was USD13.50 billion. Following are the advantages India has over it’s competitors when it comes to export of auto components: 1. Geographical Proximity 2. Improved Product Quality 3. Increased Investment & Government Initiatives. USA, 22% Germany, 7% Turkey, 6.20% U.K., 5.10% Italy, 4.10% Thailand, 3.30% France, 3% U.A.E., 2.80% Mexico, 2.80% Brazil, 2.60% Share of Indian Auto Component Exports – Top 10 Countries FY17
  24. 24. 24 71% 71% 72% 75% 74% 29% 29% 28% 25% 26% 0% 20% 40% 60% 80% 100% 2014 2015 2016 2017 2018 Value of auto component exports FY19 Domestic Revenue Exports Automotive Aftermarket – Auto Components Export 35 39 39 44 51 Total Revenue in billions India’s exports of auto components increased at a CAGR of 5.77%, during FY14-FY18, with the value of auto component exports increasing from USD10.2 billion in FY14 to USD13.5 billion in FY18. Moreover, the number of automobiles being exported grew by 18% during FY14-18.
  25. 25. 25 Automotive Aftermarket – Auto Components Export Highest component is captured by “brakes and servo-brakes” which also accounts for a high percentage as it is one the most commonly worn out components of car. Second most sold component are “Gear boxes” which also account for higher percentage as it is comparatively expensive component. Bumpers and parts thereof, 5% Other oarts and accessories of bodies(including cabs), 7% Brakes and servo- brakes;parts therof, 23% Gear boxes, 19% Drive axles with differential w/n provided with other transmitters, 17% Road wheels and parts and accessories thereof, 8% Suspension shock absorbers, 7% Radiators, 2% Clutches and parts thereof, 3% Steering wheels, steering columns and steering boxes, 8% Component Wise Global Exports of Auto Components FY18
  26. 26. 26 Summary • Automotive market in India is currently progressing towards a positive growth path given the current opportunities and challenges. • The factors which contribute to its growth are primarily – • Government Regulations - Regulations related to the introduction of new safety features that encourage the manufacturing of new safety components along with ensuring their quality. • Changing Automotive ecosystem - The emergence of new sales channels like online e- retailing and multi brand outlets (MBOs) are playing a key role in changing purchase behaviour of the end customers. In summary, we believe that Indian Automobile Aftermarket & Indian Automobile Component Aftermarket is better placed and expected to grow. Another major factor which ensures this growth is that we are serving a lot of businesses in emerging countries outside India. This minimizes the risk of slowdown due to any dependency on domestic market. One of the example is tyre manufacturing and components industry which has shown tremendous growth in exports in past five years.
  27. 27. 27 Tel: (65) 6838 5355 Fax: (65) 6838 5855 78 Shenton Way #20-01 Singapore 079120 sg.info@spireresearch.com www.spireresearch.com