Market Trends

1. Rising PE/VC investments

a. Consolidation is expected in the auto ancillary space with the global
and Indian OEMs expected to significantly decrease the number of
suppliers. Smaller suppliers are likely to perish or absorbed by MNC
player.
b. PE investors are likely to help in the consolidation process by
providing funding opportunities.
c. Low EBITDA multiples makes this sector attractive for PE investors.
Source: http://auto.economictimes.indiatimes.com/autologue/pe-
investment-scenario-in-indian-auto-auto-ancillary-industry/1057

2. Foreign presence
a. According to a joint study by ACMA and Mc Kinsey, Indian exports
comprise of just 1% of overall global exports.
b. The report suggests that the Indian suppliers are well positioned
and exports should increase four times to $ 40bn from $ 10.2bn by
2020. (Source: Funds India Report)
c. Key exports include: Hydraulic Power Steering Systems & Steering
Gear Systems, Gear boxes, Parts of diesel engines, Drive-axles and
parts, Spark Ignition and parts, parts for automobiles, Suspension
systems and parts, Crank shaft for engines, Toothed wheels and
Brakes.
d. Therefore, a humungous opportunity lies ahead to tap the export
market.

3. Organised vs Unorganised Sector

a. Organised sector holds a market share of 15% as compared to 85%
in the unorganised sector
b. Unorganised sector suffers majorly from the problem of poor quality.
c. Organised sector has somewhat reduced the erroneous levels owing
to automation.
d. Government intervention in recent times should lead to the
increase in growth of organised sector share

4. OEM vs Replacement
a. OEM sector holds a market share of 84.3% as compared to 15.7% in
the Replacement sector
b. Replacement demand is steadier and provides a hedge against the
downturn in economy as well as the cyclicity
c. Battery, tyres, lubricants have shorter shelf lives and have strong
replacement demand
d. Replacement goods are set to see a larger growth as compared to
flat sales growth in OEM
5. Auto-Component Turnover
2800 40.00%
2600 35.00%
2400 30.00%
2200 25.00%
2000 20.00%
1800 15.00%
1600 10.00%
1400 5.00%
1200 0.00%
1000 -5.00%

Turnover ('00 crores) Growth Rate

CAGR of 6% has been observed from 2010-11 to 2015-16.

6. Passenger Vehicles, Commercial Vehicles, Tractors, Two and Three
Wheelers
4000
3500
3000
2500
2000
1500
1000
500
0

PV ('000 units) CV ('000 units)

Tractors ('000 units)

25000

20000

15000

10000

5000

Two and Three Wheelers

CAGR of passenger vehicle, commercial vehicles, tractors and two and

three wheelers are 2%, -2%, 3% and 6% respectively.
 Inference from the above figures, considering the units of Passenger
Vehicles as the proxy for auto industry, as expected we find its sales to be
highly correlated to the turnover of Auto-Component industry.
7. Import-Export difference
1000
800
600
400
200
0
-200
-400

Exports ('00 crores) Imports

Difference

In India, the exports of auto-component industry are lagging behind the

imports, although the CAGR of exports has exceeded that of imports over
the past 5 years. With the focus on R&D, FDI and government support, this
is an exciting opportunity for the major players of the auto-component
industry.
8. Product Range

Body and chasis; 12%

Engines Parts; 31%
Suspension and braking parts; 12%

Equipments; 10%
Electrical
Drive Transmission
Parts; 9% and Steering Parts; 19%
Others; 7%
9. Auto Component Supply to OEMs

MCV; 5% LCV; 4% SCV; 1%

HCV; 8%
3 wheelers; 4% PVs; 45%

2 wheelers; 22%
Backhoe Loaders; 2% Others; 2% Tractors; 8%