India is emerging as global hub for auto component sourcing Relative to competitors, India is geographically closer to key automotive markets like the Middle East and Europe. Tese are the major advantages for India to grow in automotive industry.

1. Indian Auto Component Industry-
Exports
Presented By -
V. Harish
Arunava Chakraborty

2. INDIA – Vibrant Economy
1. Largest Democracy – 1.2 billion people, Growing Middle Class
2. 3th largest GDP (PPP) and 10th largest GDP (Nominal, USD 1.8 trillion)
3. One of the fastest growing economies - Estimates for 2013-14: ~ 5%
• India’s average GDP growth rate for the last five year: over 7%
• Expected to outpace China in the next decade
4. 3rd Largest Investor base in the World
5. Demographics Advantage – Youth driven economy
6. Suburbanization & Rural to Urban Migration – 140 million by 2020; 700 million by 2050
7. 2nd largest pool of Certified Professionals and highest number of Qualified Engineers in
the world.

3. Auto Component Industry in India

4. Where does India stand?
2nd Largest TWO WHEELER and BUS manufacturer
India is now a supplier of a range of high-value and critical automobile components
to global auto makers such as General Motors, Toyota, Ford and Volkswagen,
amongst others.
The industry currently accounts for almost seven per cent of India’s gross domestic
product (GDP) and employs about 19 million people, both directly and indirectly.
The Indian auto component industry is expected to register a turnover of US$ 66
billion and industry exports are projected to reach US$ 12 billion by FY 15–16
depending on favorable conditions, as per the estimates of Automotive Component
Manufacturers Association of India (ACMA).

5. Advantage India
Export Opportunities-
• India is emerging as global hub for
auto component sourcing
• Relative to competitors, India is geographically closer to key automotive markets like the Middle East
and Europe
Competitive Advantages-
• A cost-effective manufacturing base keeps costs lower by 10-25 per cent relative to operations in Europe
and Latin America
• Presence of a large pool of skilled and semi-skilled workforce amidst a strong educational system
• Fourth largest steel producer globally, hence a cost advantage

6. Robust Demand-
• Growing working population and expanding middle class are expected to remain key demand
drivers
• India is set to break into the league of top five vehicle producing nations
Policy Support-
• Continued policy support in the form of Auto Policy 2002 and National Automotive Mission
Plan 2002-16
• Strong support to R&D through establishment of NATRiP centers
• 100% FDI permitted without prior Govt. approval

7. Government Initiatives
The Government of India extended the excise duties concession beyond December
2014. Under the scheme, excise duties have been reduced for the following segments-
 For small cars, motorcycle, scooters and commercial vehicles – duty has been
reduced from 12 per cent to 8 per cent.
 For mid-sized cars – duty has been reduced from 24 per cent to 20 per cent.
 For large cars – duty has been reduced from 27 per cent to 24 per cent.
 100% FDI is allowed under the automatic route in the auto components sector,
subject to all the applicable regulations and laws.

8. Suspension &
braking parts
Auto components
Transmission &
steering parts
Equipment OthersElectrical parts
Pistons and
piston
rings
Engine valves
and parts
Fuel-
injection
systems and
carburettors
Cooling
systems and
parts
Power train
components
Pressure die
castings
Hydraulic
pneumatic
instruments
Gears
Wheels
Steering
systems
Axles
Clutches
Brake linings
Shock
absorbers
Leaf springs
Headlights
Halogen bulbs
Wiper motors
Dashboard
instruments
Other panel
instruments
Starter
motors
Spark plugs
Electric
Ignition
Systems (EIS)
Flywheel
magnetos
Other
equipment
Sheet metal
parts
Body and
chassis
Fan belts
Brake and
brake
assemblies
Engine & engine
parts
The Auto Components Market is Split Into Six Product Segments

9. Growth
drivers
Demand side
drivers
Policy
support
Supply-side
drivers
• Competitive advantages
facilitating emergence of
outsourcing hub
• Technological shift;
focus on R&D
• Market liberalisation
• Establishing special auto
parks and virtual SEZs for
auto components
• Lower excise duty on specific
parts of hybrid vehicles
• Robust growth in
domestic automotive
industry
Growth Drivers of the Indian Auto Components Market

10. • Hydraulic Power Steering Systems &
Steering Gear Systems and Parts
• Gear boxes and parts thereof
• Wheels and Components for
Construction & Earthmoving Equipment
• Drive-axles and parts thereof
• Gas compressors: Turbo chargers
• Crank shaft for engines
• Parts for automobiles and earth moving
Equipment
• Brakes and servo-brakes; parts thereof
• Spark Ignition
• Suspension systems and parts thereof
• Air-conditioning equipment
• Road wheels and parts & accessories thereof
• Starter motors & generators
• Parts-air conditioning machines
• Brake linings & pads
• Valves, inlet and exhaust
• Head lamps and other lighting Equipment
• Radiators & parts thereof
• Injection pumps for diesel engines
• Toothed wheels, other transmission parts
Top 20 Auto Component Exports from India-

11. Production volumes by product range (FY13)
Source: ACMA, Aranca Research
 ‘Engine parts’ account for 31% of
the entire product range of the
auto components sector followed
by ‘drive transmission and
steering parts’(19%)
 ‘Two wheelers’ is the largest
domestic customer segment for
the auto components industry
 Original Equipment
Manufacturers (OEMs)
dominate production volumes by
market range; encouragingly,
exports account for a healthy
15%
31%
19%
12%
12%
10%
9%
7%
Engine Parts
Drive Transmission
and Steering Parts
Body and Chassis
Suspension and
braking parts
Equipments
Electrical Parts
Others
Production Breakup -

12. HS Codes for Auto Components in India
 8708 - Parts and accessories of the motor vehicles except engines
 8409 - Parts solely used for or inside the engines
 7326 - Articles and parts wholly made of Iron and Steel
 7318 - All kinds of Screws and Bolts used in the vehicles
 8511 - Parts of electrical ignition or starting equipment of a kind used for
internal combustion or compression (ignition coils, sparking plugs, glow
plugs and dynamos, etc.)

13. Value of auto component exports
(USD billion)
Source: ACMA, Aranca Research
• India’s exports of auto components increased at a CAGR of 19.6 per cent to USD9.3
billion during FY08-13
• Europe accounts for the largest share of Indian auto components exports (35.0 per cent)
followed by North America (26.0 per cent) and Asia (25.0 per cent)
Shares in export volumes by
geography (FY13)
3.8 4.0
3.4
5.2
8.5
9.3
0.0
1.5
3.0
4.5
6.0
7.5
9.0
10.5
FY08 FY09 FY10 FY11 FY12 FY13
35%
26%
25%
1%
4%
9%
Europe
North America
Asia
South America
Australia
Africa
Exports aided overall Growth in the sector

14. Indian Suppliers’Focus – Global Best Practices
Indian suppliers have won 39 awards in aspects of production and distribution of auto
components till now including awards like –
• Deming award (largest number of companies, after Japan)
• Japan Quality Medal
• TPM award
• Shingo Silver medallion
• JIPM award
This became possible since the industry is embracing modern shop-floor practices like –
• Kaizen
• TQM
• TPM
• 6 Sigma
• Lean Manufacturing

15. Global components
sourcing hub
• Major global OEMs are planning to make India a component sourcing hub for their global
operations
• Several global Tier-I suppliers have also announced plans to increase procurement from
their Indian subsidiaries
• India is also emerging as a sourcing hub for engine components, with OEMs increasingly
setting up engine manufacturing units in the country
Improving product-
development
capabilities
• Increased investments in R&D operations and laboratories, which are being set up to
conduct activities such as analysis and simulation, and engineering animations
• The growth of global OEM sourcing from India and the increased indigenisation of global
OEMs is turning the country into a preferred designing and manufacturing base
Inorganic route to
expansion
• Domestic players are acquiring global companies to gain access to latest technology,
expand their client base and diversify revenue streams
• Players such as Amtek Auto and Bharat Forge have adopted a dual-shore manufacturing
model
Notable Trends in the Indian Auto Component Sector -

16. Auto Policy 2002
• Automatic approval for 100 per cent foreign equity investment in auto component
manufacturing facilities
• Manufacturing and imports in this sector exempt from licensing and approvals
Automotive Mission
Plan 2006–16
• Setting up of a technology modernisation fund focusing on small and medium enterprises
• Establishment of automotive training institutes and auto design centres, special auto parks and
auto component virtual SEZs
NATRiPs
• Set up at a total cost of USD 388.5 million to enable the industry to adopt and implement
global performance standards
• Focus on providing low-cost manufacturing and product development solutions
Dept. of Heavy
Industries &
Public Enterprises
• Created a USD 200 million fund to modernise the auto components industry by providing an
interest subsidy on loans and investment in new plants and equipment
Union Budget
2014–15
• Reduction of excise duty on auto components from 12 per cent to 10 per cent, Vehicles
(CV’s, Small Cars and two wheelers from 12 per cent to 8 per cent, SUV’s from 30 per cent
to 24 per cent
• Reduction in excise duty on capital goods from 12 per cent to 10 per cent will provide a push
towards investments, elimination of customs duty on auto components will also help
Favorable Policy Measures Aiding Growth

17. KEY PROVISIONS OF THE 2O14-2O15 UNION BUDGET:
 Investment allowance (additional depreciation) at the rate of 15% to manufacturing
companies that invest more than INR 1 Billion in plant and machinery acquired and
installed between 01.04.2013 and 31.03.2015 provided the aggregate amount of
investment in new plant and machinery during the said period exceeds INR 1 Billion.
 In order to provide a further fillip to companies engaged in the manufacture of an
article or thing, the said benefit is an additional deduction of 15% of cost of new P&M,
exceeding INR 250 Million which is acquired and installed during any previous year
ending up to 31.3.2017.
 From above two provisions any of one can only be availed by the manufacturers.

18. R&d Incentives For Industry And Private Sponsored Research:
 Deduction of 200% is granted to assesses for any sums paid to a national laboratory,
university or institute of technology, or specified people with a specific direction and
that the said sum is used for scientific research within a program approved by the
prescribed authority, under section 35 (2AA) of the Income Tax Act.
 Under Section 35 (2AB) of the Income Tax Act, tax deduction of 200% for both capital
and revenue expenditure, incurred on scientific research and development. Expenditure
on land and buildings is not eligible for deduction.
 Export incentive schemes like Focus Product scheme, Duty remission scheme and
Focus Market scheme are also aiding to the growth in auto components exports.

19. Focus Product Scheme:
Objective - To incentivize export of select products that have high export intensity /
employment potential, thereby to offset infrastructure inefficiencies and other associated
costs involved in marketing of these products.
Incentive: Transferable or sellable duty credit @ 2% of FOB value of exports in foreign
exchange from 27.08.2009
Focus Market Scheme:
Objective - To offset high freight cost and other externalities to select international markets
with a view to enhance India's export competitiveness in select countries
Incentive: Transferable or sellable duty credit @ 3% of FOB value of exports in foreign
exchange from 27.08.2009
Exporters of products to countries within Europe, Latin America block, African block, or
Commonwealth Independent States (CIS) block are entitled to this scheme

20. Less competitive than India In competition with India
Source: ACMA, Aranca Research
Design and
engineering skills
Manufacturing
skills
Manpower
costs
Supplier
base
Raw
materials
East Asia
Korea
China
Thailand
Indonesia
Vietnam
Central &
Eastern Europe
Czech Republic
Romania
Poland
Slovakia
Russia
Hungary
Turkey
Latin America
Brazil
Mexico
Exports Driven by India’s Competitive Advantage over peers

21. 5.1 4.2 6.6 8.8 9.7 10.2
13.3%
-17.6%
58.6%
32.3%
9.9%
5.4%
-30.0%
0.0%
30.0%
60.0%
90.0%
0
2
4
6
8
10
12
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
EXPORTS -AUTO COMPONENT INDUSTRY: 2009-14
USDBillion
Growthrate
CAGR 2009-14: 15%
Africa; 7.11%
Latin America
and the
Caribbean;
7.35%
North America;
21.39%
Asia; 25.16%
Europe;
38.11%
Oceania ;
0.88%
USA 20.50 Brazil 4.03
Germany 8.08 Thailand 3.41
UK 6.16 France 3.32
Turkey 5.20 China 3.04
Italy 4.93 UAE 2.77
Export Destinations: Top 10 Countries in %

22. Open die forging
Closed die forging
Crank shaft
Front axle beams
Hubs
Acquisitions in
various countries
Transmission parts
FY14
Organic Growth
& Integration
Entry into new
markets like US,
Greece
FY05
Turnover of
USD291.5
million
Turnover of
USD1,121.4
million
ISO
Accreditations
1960 1970 1980 1986 1990 1996 2000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Joint Ventures and
technical
partnerships
Bharat Forge Success Story : India’s largest auto components exporter

23. India Is Poised To Emerge As An Outsourcing Hub
Global auto component players are increasingly adopting a dual-shore manufacturing
model, using overseas facilities to manufacture few types of components and Indian
facilities to manufacture the others.
 Hyundai plans to source gasoline and diesel engines from its Indian
manufacturing operations for its domestic and global operations
 The company is also planning to invest USD300 million for a new
engine plant and metal pressing shop in India
 Honda intends to set up a power-train facility in Rajasthan with an
investment of USD115 million.
 The company has an export base for certain key engine components in
India

24.  Ford is investing USD72 million to expand its power-train facility in
Chennai to further support its sales and export growth plans in India.
 Plans to make India its manufacturing hub for engines for the Asia-
Pacific region and Africa
 Volkswagen plans to increase sourcing from India to 70 per cent of its
total global sourcing
 Plans to build engine assembly plant in India by 2015 and
additional investment of USD84* million on component
manufacturing. It also plans to set up a USD244 million plant in India.

25. Capacity Addition Plans Of Key Players
 Bosch, which has six companies in India, plans to invest USD458
million on fuel economy and safety technology along with an additional
USD7.7 million at the end of 2013 to nearly triple its Antilock Braking
System manufacturing capacity to about 800,000 units at its Chakan plant.
 The company has acquired 97 acres of land in Bidadi for the
construction of a new manufacturing facility which will commence
production of Diesel Fuel Injection System components in 2015
 Tata Auto Component Systems is setting up five auto component
manufacturing plants in Sanand, Gujarat, at an investment of USD62
million. These new factories are part of the vendor park being
developed at the Tata Nano plant site.
 It is also investing USD 114 million for capacity addition in its Chakan
plant in Maharashtra

26.  Apollo Tires is planning to invest USD551.4 million over by 2015 to
set up two new facilities in East Europe and Brazil and expand its
global footprint. Apollo tires currently generates approximately 40
per cent of the group’s total revenue from overseas operations
 Hyundai India is setting up a plant in Tamil Nadu with an
investment of USD333 million to manufacture diesel engines and
auto components
 India’s TVS Group has acquired a 90 per cent stake in
Universal Components UK Ltd for USD19.2 million, as part of its
expansion plans. Universal Components is a wholesale distributor of
commercial vehicle parts.
 It has also signed a co-operation agreement with BMW Motorrad to
develop motorcycles below 500cc segment

27. Challenges – Typical of an Emerging Market
• Raising Capital & Capacity Utilization
• Infrastructure Challenges
• Roads
• Ports
• Power
• Inflation
• Availability of Skilled Manpower
• Managerial Depth across Tiers
• R&D Competence

28. Potential Areas Of Cooperation
Following are possible opportunities for the industry to overcome some of the
challenges
• Outsourcing from India for OEMs/T1s and Aftermarket
• European SMEs to invest in Green Field Manufacturing in India
• Partnerships with local SMEs – Product and Process Technology
• Supply Base discovery in India for European OEMs and Tier-1s
• StrategicAlliance to supply to Global customers
• Joint R&D with local companies for New Product Development, Designing,
Testing and Validation