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A n a ly s i s

B.V.R. Raja
Quality Assurance Manager,
Alloy Steels Plant, SAIL

Introduction Besides the burgeoning demand of auto components


from global majors, the domestic automobile industry has
The Indian automotive component industry is dominated
been showing a sparkling growth caused by increasing
by around 500 players which account for more than 85% of
customer base and affordable loans. Based on this, the
the production. The turnover of this industry has been
turnover of the Indian auto component industry is expected
growing at a mammoth 28.05% per annum from 2002-03
to touch US$ 18.7 billion by 2009 and estimated to reach
onwards as illustrated in Fig.1 which clarifies its emergence
US$ 40 billion by 2014.
as one of India's fastest growing manufacturing sectors.
Overview of Indian Automobile Industry
The liberalized policies of the Indian Government paved
towards steady evolution of India as a stable and market
driven economy with the real Gross Domestic Product
growth in excess of 8%, foreign exchange reserves crossing
the $150 billion mark, growing value of Indian Rupee
compared to US dollar and reducing inflation rate. 100%
Foreign Direct Investment, absence of local content
r e g u l a t i o n ,
manufacturing and
During 1990s, the auto components market in India used imports free from
to be dominated by supplies to the aftermarket with only 35% licensing & approvals
exports sourced by global Tier 1 OEMs (Original Equipment in the automobile sector
Manufacturers). The industry made a sustained shift to the coupled with customs
global Tier 1 market and today, the component manufacturers tariff for auto
supply 75% of their exports to global Tier 1 OEMs and the components reducing to
remaining to the aftermarket. This is largely due to the 12.5% resulted in
growing capability of the Indian component suppliers in increased number of multinationals establishing their bases in
understanding technical drawings, conversance with global India and with export markets looking up, the Indian
automotive standards, economically attractive costs automobile industry is poised for a phenomenal growth. The
(manufacturing costs are 25%-30% lower than its western automobile production in the sub-continent has been growing
counterparts), flexibility in small batch production and steadily @ 18.53% per annum from 2002-03 onwards with
growing information technology application for design, total vehicle production standing at a mammoth 1,00,31,296
development and simulation. nos. in 2005-06 as is shown in Fig.2.

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A n a ly s i s

passenger car demand rapidly up the price ladder. Analysts


speculate car production in the sub-continent to touch
1575,000 in 2009 and 2654,000 by 2014. Cars and MUVs
exports rose from 72,000 in 2002-03 to reach 176,000 nos. in
2005-06 with growth @ 48.155 per annum from 2002-03
onwards.
Out of the two wheelers produced in India, motorcycles
account for 81.59%, scooters about 13.42% and mopeds to
the tune of 4.99% of the total production. The production
statistics is shown in Fig.4 which shows the growth of 2
Among the automobiles, 2 wheelers account for 75.77%, wheelers @ 16.58% per annum from 2002-03 onwards. Out
cars about 11.09%, 3 wheelers to the tune of 4.33%, tractors of this, motorcycles have exhibited production growth @
about 2.95%, buses & trucks constitute 2.19%, Multi Utility 19.99% per annum, scooters @ 6.74% per annum & mopeds
Vehicles (MUVs) to the tune of 1.96% and Light Commercial @ 2.65% per annum from 2002-03 onwards.
Vehicles (LCVs) about 1.71% of the total number of
automobiles produced in the country. Presently, India is the
second largest market after China for two & three wheelers.
In tractors production, India is one of the two largest
manufacturers in the world along with China. The sub-
continent stands as the 4th largest producer of trucks in the
world. Coming to the passenger car segment, the country is
positioned 11th in car production in the world.
The Indian passenger car market is far from being
saturated leaving ample opportunity for volume growth since
the per capita car penetration per 1000 is only 7 compared to
500 in Germany. The production of cars in the country has Two wheeler production units in India constitute of
been growing at a mammoth 27.58% per annum from 2002- Japanese OEMS (Original Equipment Manufacturers) which
03 onwards as is shown in Fig.3. In general, cars are broadly include Hero Honda Motors, Honda Motorcycle & scooter
India (P) Ltd., Yamaha
Motor India (P) Ltd. &
Suzuki Motorcycle India
(P) Ltd. and Indian OEMs
consisting of Bajaj Auto
Ltd., TVS Motor
Company Ltd., LML Ltd.,
Kinetic Engineering Ltd.,
Majestic Auto Ltd.,
Kinetic Motor Company
Ltd. and Royal Enfield of
classified as Mini, Compact, Mid-Size, Executive & Eicher Ltd. Out of the
Premium varieties. There has been a steady rise in compact aforementioned, Hero Honda accounts for 39.55%, Bajaj
car production from 333,000 in 2002-03 to 715,000 in 2005- Auto about 26.87%, TVS Motors 17.98%, Honda Motors
06, mid-size cars from 122,000 to 204,000 nos., executive 7.94%, Yamaha Motors 3.27%, LML 1.41% and the
cars from 2000 to 23,000 nos. and premium variety cars from remaining 2.98% of the total 2 wheelers production in the
4000 in 2002-03 to 5000 nos. in 2005-06. The mini car country. The exports of two wheelers made a significant
segment production reduced from 150,000 in 2002-03 to growth from a level of 180,000 in 2002-03 to reach 513,000
98,000 nos. in 2005-06. These statistics vividly reveal the nos. in 2005-06. The latest estimates put up production of 2
increasing capacity of the Indian customer, thus driving the wheelers to 13.6 million by 2009.

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A n a ly s i s

The production of Multi Utility Vehicles (MCVs) has


been showing sparkling growth @ 23.84% per annum, Light
Commercial Vehicles (LCVs) @ 35.49% and Medium &
Heavy Commercial Vehicles (M & HCVs) @ 27.33% per
annum from 2002-03 onwards in India as shown in Fig.5.

The Indian automobile industry is flooded with huge


investments involving green field and brown field projects.
Hyundai plans to set up a LCV plant at Pune, India. Toyota
would be investing US$ 4.2 billion for starting production of
small cars & Suzuki plans to invest US$ 1.6 billion in India.
Isuzu Motor & Nissan Motor belonging to Hitachi Ltd. of
Industry analysts put up MUVs production to reach
Japan would begin manufacturing cars in India. Tata Motors
207,000 in 2009 and 277,000 in 2014. Commercial vehicle
is setting up its novel small car production facility near
exports made a steady growth from a level of 11,000 in 2002-
Kolkata. Hyundai plans to make India an export base for
03 to 41,000 in 2005-06.
small cars. Telecon is investing about US$ 54 million for
The manufacturing units for four wheelers in India production of earth moving vehicles/components at
constitute of Japanese OEMs covering Maruti Udyog Ltd., Kharagpur in India. Also, Honda Motorcycles & scooters
Toyota Kirloskar Motor (P) Ltd., Honda Siel cars India Ltd. & have ambitious plan for making this sub-continent a hub for
Swaraj Mazda Ltd., Indian OEMs consisting of Tata Motors two wheelers exports. All these forward towards further
Ltd., Mahindra & increase in demand for auto components.
Mahindra Ltd., Ashok
Leyland Ltd., Force Auto Components Production Range
Motors Ltd., Eicher In India
Motors Ltd. &
India is bestowed with excellent infrastructure for
Hindustan Motors
production of auto components. There are various national
Ltd., Korean OEM
and multinational companies in the country that have put up
Hyundai Motor India
state of art auto component manufacturing facilities. The
Ltd., American OEMs
production range of auto components in India is shown in
which include General
Fig.7. For many of the auto components, steel remains the
Motors India (P) Ltd. & Ford India (P) Ltd. and European
OEMs consisting of Skoda Auto India (P) Ltd., Daimler
Chrysler India (P) Ltd., Volvo India (P) Ltd., Tatra Trucks
India Ltd. & Fiat India (P) Ltd. Presently, Maruti Udyog
accounted for 33.24%, Tata Motors 26.14%, Hyundia Motors
15.13%, Mahindra & Mahindra 7.47%, Ashok Leyland
3.78%, Toyota Kirloskar 2.61%, Honda Siel Cars 2.40%,
Force Motors 2.08%, General Motors 1.78%, Ford India
1.57%, Eicher Motors 1.41% and othe4rs 2.39% of the total
production of four wheelers in India.
dominant material due to its versatility providing a wide
The tractors production in the country has been making a range of properties through the choice of appropriate
steady growth @ 25.80% and three wheelers @ 19% per combination of composition and processing. Along with the
annum from 2002-03 onwards as illustrated in Fig.6. above, long term availability of raw materials, good recycling

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A n a ly s i s

ability, a relatively favorable price and the large experience steel industry towards development and manufacturing of
based knowledge favor steel as a choice for use in auto steel with closer band of metallurgical properties, physical
component manufacturing. properties, leaner alloy compositions, higher strength to
weight ratio etc. at the most competitive prices.
The steel requirements in general for engine parts such as
fan, pulley, piston pin & oil fan are met by low carbon steels, Today, automobile sector accounts for 7% of the total steel
medium carbon steels/alloy steels based on requisite consumed in India. The sparkling growth of the automotive
mechanical properties are applied for crankshafts, connecting component industry and the automobile industry in India
rods, rocker arm shafts translates into a tremendous potential and opportunity for
etc. While low domestic steel producers to cater to the needs of these
carbon/low carbon alloy industries where steel is the most vital input.
case hardening steels are
India Emerging as Hub for Auto
u s e d f o r
moderately/severely Components
stressed components. Indian auto component industry is fast emerging as an
Transmission parts such attractive OEM & Tier 1 supplier. The auto component
as input shaft, output exports from India rose from a mere US$ 0.760 billion in
shaft, front axle, rear axle, 2002-03 to US$ 1.8 billion in 2005-06 showing growth @
kick down & reverse 45.61% per annum from 2002-03 onwards. In 2005-06, about
bands, pinion shafts, 36% of the component exports headed for Europe, 26% for
clutch discs & plates, automatic transmission components America, 16% for Asia, 10% to Africa, 10% to Middle East,
etc. are made with medium carbon/alloy steels while the gears 1.5% to Oceania and others account for 0.5% of the total
are made of low carbon/low carbon alloy case hardening exports.
steels. Suspension and steering parts such as knuckle ball
studs, arm sector shafts, arm parts, pitman & idler arms, Based on the sparkling growth in demand for auto
struts, tie rod ends, ball joint studs, center link etc. are either components, global auto majors and domestic giants have
made of medium carbon steel or alloy steel depending upon been investing heavily in India because of India's competitive
the conferred properties, spring steels for suspension springs advantage. Accordingly, the total investment in Indian auto
while low carbon case hardening steels are applied for component industry has been showing a tremendous growth
components that require wear resistance. Various low @ 22.12% per annum from 2002-03 onwards as shown in
carbon/low carbon alloy steels are used for rivets, bolts, nuts Fig.8.
& other fastener items. Steel required for chassis components
are met with cold forming & weldable low carbon/micro-
alloyed steel sheets/plates while deep drawing & extra deep
drawing varieties of steel sheets are employed for body.

Steels are shaped, formed, heat treated and/or machined


into automotive components fulfilling the specific design
criteria requiring critical set of properties like strength &
toughness, fatigue & fracture resistance, wear resistance,
corrosion resistance etc. Technology of machining,
fabricating or forming of engineering components has
undergone rapid changes with the advent of Computer Aided
Manufacturing systems and robotics. Consequently, the auto The investment is expected to rise further with huge
component manufacturers require the highest degree of strides. Among various investments pumping in India, auto
consistency in the quality of the steels both metallurgical and parts maker Robert Bosch of Germany will investment US$
dimensional. Also, the changes in customer expectations for 201.4 million in its Indian subsidiaries over two years with
lighter, more powerful & fuel efficient vehicles with greater bulk of investment in Motor Industries Co. Ltd.(MICO).
degrees of reliability & safety will continuously drive the Hitachi Ltd. of Japan is planning to start auto component

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A n a ly s i s

manufacturing in body panel, horns, dash board assembly, starters, alternators


India with its & door trims from the present level of US$ 150 million to
OEMs- Isuzu around US$ 600 million by 2009 from India. Visteon which
Motor & Nissan had already invested US$ 56 million is sourcing components
Motor to begin for exterior, instrument, cluster assembly & bumpers, AC
manufacturing cars system, starters, motors, alternators and panel instrument
in India. GKN assembly from India. Along with this, over 20 OEMs have set
Driveline, a wing of up International Purchasing Offices (IPOs) in India for
UK based auto components and the figure is expected to double by 2010.
c o m p o n e n t Considering the above, Indian auto component
manufacturer GKN plans to open a new manufacturing manufacturers are substantially increasing investments in
facility in India. Dubai based auto ancillary Parts production capacities, establishing partnerships in India &
International Company plans to invest about US$ 3.6 million abroad and have been investing in or acquiring companies
in India over three years which includes setting up a overseas. In continuation with this, global multi nationals are
manufacturing facility to service exports to CIS & SAARC shifting automotive design centers into India with India
countries. Fiat India has been taking various measures to evolving as an excellent automotive R & D base for
become a global sourcing hub for components by exporting prototyping, testing, validating and production of auto
components worth US$ 8.3 million last year to its operations components caused by excellent IT skills & exemplary
in South Africa and plans to source components worth US$ automotive domain knowledge.
200 million. Toyota already invested US$ 197 million to
supply transmission system, gear boxes, axles, propeller Conclusions
shafts and aluminium pressure die casting products to global With increased role of outsourcing in an integrated global
operations. Delphi is planning to source components such as economy and India being considered as a low cost automotive
piston rods, steering system, drive shafts, catalytic converter, component producer possess a greater edge in the global
stampings in power train, sheet metal/stampings for chassis market aspiring to capture 10% share of the global market
and electrical parts like wiring harnesses & armature motors which translates into an export target of US$20 billion by
worth US$ 250 million by 2007. General Motors which 2015. Also, by the current trends in the domestic automotive
presently is sourcing components worth US$ 6 million from industry, the indigenous demand for auto components is
Indian suppliers intends to ship parts worth US$ 1 billion for estimated to reach US$20 billion in the next 10 years. This is
its global production units by 2010 and the components expected to increase the demand for alloy steels providing a
include crankshaft forgings, rdiator caps, gear boxes, leaf great opportunity for alloy steel producers in the country to
springs, wiring harnesses & cables. Ford Motors plan to capitulate on it.
source components like steering columns, alloy wheels, References
crankshafts, exhaust parts, complete engines for IKON
model, radiators, springs, castings, forgings, leaf springs,

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