AUTO ANCILLIARY INDUSTRY

SUBMITTED BY - DIVISION A
ADITI SEHGAL
ASHWARYA SINGHAL
PRANOTI PURO
SHIVANI GOKANI
SONAKSHI VIJ
SURBHI MEHTA

A007
A017
A037
A045
A050
A052

ACKNOWLEDGEMENT
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We would like to sincerely thank Mr. Vasant Cavale & Dr. Narayani R.
for guiding us throughout the course of analyzing the Auto Ancilliary
Industry of India. The insights provided by them have helped us to
analyze the industry in a comprehensive manner considering
various factors and looking at the industry from different
perspectives.

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CONTENTS:
INTRODUCTION
4

SCOPE
.4
MARKET
SEGMENT4
PLAYERS IN THE
INDUSTRY..8

PESTEL
ANALYSIS
9
REVENUE AND ANNUAL
GROWTH11
COMPARATIVE RATIO
ANALYSIS.12
INDUSTRY
ANALYSIS..13
REFERENCES
.15

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INTRODUCTION
Indian auto ancillary or auto component industry is one of the
fastest growing industries in India. It is piggy riding on the success
Indian auto industry and is highly competitive with the presence of a
large number of global and Indian auto-companies. The industry has
a growing demand and technological advancements. The auto
ancillary industry in India has emerged as one of the major market
in Asia as well as in the world. India currently supplies components
of auto ancillary parts to international companies like General
Motors, Toyota and Volkswagen.
The automobile component industry contributes around 80% of the
total auto components sales volume of OEM. The industry accounts
for 22% of Indias manufacturing GDP (Gross Domestic Product).

Scope:
Indian auto component industry can be broadly segmented into six
major segments. Engine and drive transmission parts together
contribute about 50% of the auto component industry production.
The major scope of our report hovers around Engine parts, which
constitute 31% of the production, mainly comprise of pistons,
engine valves, carburetors, fuel injection systems, camshafts,
crankshafts and cooling systems. The major market segments are
divided on the basis of Products, Revenue generation, Export, Import and
Sales.

Market Segment (on the basis of)

Products:
The Indian auto ancillary industry can be broadly segmented into six
major segments. Engine and drive transmission parts together
contribute about 50% of the auto ancillary industry production.
Engine parts, which constitute 31% of the production, mainly
comprise of pistons, fuel injection systems, camshafts, crankshafts
and cooling systems. The transmission parts, which constitute 19%
of the total production, include axle assembly, steering parts and
clutch assembly.
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Key Ratios; 0.38

Debt-Equity Ratio; 0.38
Long Term Debt-Equity Ratio; 1.8

TurnOver- Revenue Generation:

Over the last decade, the auto ancillary industry has scaled three
times to US$ 40 billion in 2015. The Indian Auto Ancillary industry is
expected to grow by 8-10 per cent in FY 2017-18. According to the
Automotive Component Manufacturers Association of India (ACMA),
the Indian auto-components industry is expected to register a
turnover of US$ 100 billion by 2020.

Turnover in INR' 00 crore (USD Billion)

3000
2500
2000
1500
1000
500
0

1883

2046

2160

2117

2348

2556
Turnover in INR' 00
crore (USD Billion)

Exports:
The Indian auto ancillary sector exports grew by 11.6% (in rupee
terms) to USD 11.2 bn (INR 685 cr) in FY15 from USD 10.2 bn (INR
614 cr) in FY14. Europe is the leading marketplace with 38%
contribution, while USA is on top of the list. Also Indian suppliers
account for just 1% of overall global exports of USD 1,006 bn
indicating a significant upside opportunity for exports.

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Exports in billion U.S. Dollars

12
10
8
6
4
2
0

6.7

5.1

8.8

9.7

10.2

11.2
Exports in billion U.S.
Dollars

4.2

Imports:
The domestic consumption has grown at 26% per annum over the
last 6 years to reach USD 36 billion in FY 11.

Auto component consumption (USD Billion)

40

35.6

30
20
10

8.9

12

15.9

19.7 21.4

26.4

Auto component
consumption (USD
Billion)

0
FY05 FY06 FY07 FY08 FY09 FY10 FY11

Sales:
The major production volumes of the auto ancillary industry
accounts PVs and Two-wheelers.

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PV's
Two-wheelers
SCV; 1%
Backhoe-Loaders; 3% Others; 3%
Tractors

LCV; 4%
Three-Wheelers; 5%
HCV; 5%
MCV; 5%
Tractors; 7%

MCV
HCV

PV's; 46%

Three-Wheelers
LCV

Two-wheelers; 21%

Backhoe-Loaders
Others
SCV

Geographical spread:
There are 402 medium and large key players in auto components in
the organized sector along with 6000 ancillary units. However in the
unorganized sector there are approximately 5000 SSIs.
The geographical spread of medium and large companies as per
records of Automotive Component Manufacturers Association of
India (ACMA) is as under
INDIA

No. of
companies

North region

161

Western region

123

Southern
region

91

Eastern region

27

Volume:
The automobile industry contributes to Indias 80% of the total auto
components sales volume.

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Contribution to GDP:
The auto-components industry accounts for almost 7 per cent of
Indias Gross Domestic Product (GDP) and employs as many as 19
million people, both directly and indirectly.

Size in world:
3.4% in 2014
Size of Global industry is expected to grow by

Size in India:
The 120 billion-auto ancillaries are fragmented with over 5000
players. The industry comprises of organized sector and
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unorganized sector, each holding the market share of 15% and 85%
respectively.
Indian auto-components industry is set to become the third largest
in the world by 2025!

Size in India compared to the world:

Less than 1 percent share in the global market, India has
tremendous potential to emerge as supply base.
The Indian automobile market is estimated to become the third
largest in the world by 2016 and will account for more than 5 per
cent of the global vehicle sales.

Players in the Industry

Government:
The government specially focuses on exports of small cars, multiutility vehicles (MUVs), two and three-wheelers and auto
components, which helped foreign companies to make large
investments in India.
It has also increased purchasing power, large domestic market, a
development in infrastructure.

Make in India
The automobile and auto component sector contributes for over
30% of the entire manufacturing sector in India.

Key Government Policy

FDI and exemption from licensing: In the auto component sector,
100% foreign equity investment is allowed via automatic route and
the manufacturing and imports are exempt from licensing and
approvals.
R&D incentives for Industry: Weighed deduction of 200% is granted
to assess for any sums paid to a national laboratory, university or
institute of technology, or specified people.
State Incentives: Incentives are in areas like subsidized land cost,
relaxation in stamp duty, concessional rate of interest on loans,
investment subsidies, tax incentives, backward areas subsidies.

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Suppliers of the Industry

Suppliers help clients improve productivity, strengthen innovation, and
compete globally in a variety of markets.
Lighting technologies to breakthrough powertrain solutions, suppliers
manage the frontlines in an attempt to find superior solutions for their
OEM customers.
They're also responsible for roughly 70 percent of the industry's costs,
placing them front and center in the continuing effort to boost
productivity.

Customers of the Industry

Indian auto ancillaries industry is highly competitive with the
presence of a large number of Global and Indian auto-companies.
It is classified into the organized and unorganized sector.
The organized sector- It caters to the Original Equipment
Manufacturers (OEMs) and consists of high-value precision
instruments
The unorganized sector- it comprises of low-valued products and
caters mostly to the aftermarket category.
Some of the major players in the engines market include:
Bosch, Continental AG, Ford Motor, General Motors.

PESTEL Analysis
POLITICAL AND ECONOMIC:
Since 1990s, the economic reforms have made the business
environment of the industry favourable for FDI and Trade.
Up to 100% FDI is allowed under automatic route in most of
the activities.
Approvals related to foreign investment and foreign technical
collaboration can also be received through FIPB.
The government has taken steps to encourage acquisition
foreign technology through collaboration agreements.
Government of India has given powers to RBI to allow
payment for foreign technology collaboration by Indian
companies.
SOCIAL:
Automotive Mission Plan for the period 2006-2016 aims to
make India emerge as a global automotive hub. This plan
would make India the destination choice for design and
manufacture of automobiles and auto components.
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It aims at providing employment to over 25 million people.

The industry has also become an attractive hub for
investments thereby enhancing the future development of the
industry.

TECHNOLOGY:
The industry is benefitted and has leverage over the foreign
competitors because of the increasing use of high-end
software in automobile design and R&D.
Mahindra Research Valley undertake research activities for
design needs and aims at doing the high end work for other
OEMs (original equipment manufacturers) and this has
facilitated India to become the epicentre for engineering
design.
The research and design services are expanded either
organically or through acquisitions which enables the
companies to launch new models effectively and efficiently.
ENVIRONMENTAL:
Auto ancillary has a major impact on the climate due to the
carbon dioxide (CO2) emissions. The increasing growth of this
industry has resulted in growing fuel consumption. Energy
hungry production technologies have led to higher GHG
emissions and this has further increased the carbon footprint
of the manufacturing organizations.
Every organisations needs to take steps to reduce the GHG
emissions. Steps include identifying the source of emission,
application of calculation methodology and making mitigation
plans to reduce overall carbon footprint. Mitigation measures
such as Energy efficiency measures, use of Renewable energy,
Recycling, material usage efficiency, and Plantations can help
in this direction.
LEGAL:

Automotive Research Association Of India(ARAI)

Automotive Component Manufacturers Association (ACMA)

o These aforementioned organisations perform the below
listed functions:
o Preparation of new standards for automobile components
o To review and recommend amendments to the existing
standards
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o Recommend testing facilities at appropriate stages.

Pricing:
Margins are likely to come under pressure in the long term because
as competition increases, manufacturers will find it difficult to
increase prices and will try to cut costs. In the near future though,
companies will need to have manufacturing lines that can be
adapted for new models, have strong technology backing, an ability
to export to developed markets, market dominance in specific
products and a growth plan driven by volumes and product
innovations. Companies will have to focus on quality and abide by
delivery schedules if they want to survive. As manufacturers
sourcing components are keen to get components from fewer
sources in future, this will lead to consolidation in the sector.
The growing number of Free and Preferential trade agreements
being signed by India with countries like Thailand, Singapore.
Therefore, Indian companies might lose out on big orders if the
duty structure is not rationalised.

Profitability
Turnover of the industry
Indian auto industry is highly competitive with the presence of a
large number of global and Indian auto-companies. Auto sector
alone contributes nearly 84.3% of the total turnover (OEM) and the
rest belongs to the replacement market. The auto component sector
clocked a turnover of USD 35.1 bn in FY14.
Overall, the Indian automotive industry posted a growth of 8.7% in
FY15. Exports on the other hand did better as they were up 15% YoY.

Annual Growth
According to reports, Indian passenger vehicle market is expected to
grow at a CAGR of 12% to reach 5 mn units by 2020. The twowheeler market is also expected to grow at the same pace to 29.5
mn units, while the commercial vehicle market will grow at a CAGR
of 7% to 1.2 mn units. The auto component industry accounts for
22% of the country's manufacturing gross domestic product (GDP).
India is presently the world's third largest exporter of two-wheelers
after China and Japan.
Higher the economic growth leads to higher job opportunity and
earnings. Thus, we expect uptick in auto sales volume and would
benefit the auto component industry.
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The size of the replacement market (15.7% of the total auto

component sales in value terms) in India is significantly owing to
large vehicle base. The replacement market in the country grew by
12% in FY14 to 356.0 bn as against 317.9 bn in the previous fiscal.
Low vehicle scrapping rate in the country also necessitates frequent
replacement of parts.
Industry officials said that the replacement market for components
with shorter shelf lives would see a double-digit growth, compared
with single-digit and flat growth in sales to OEMs.

Road Ahead

The rapidly globalising world is opening up newer avenues for the

transportation industry, especially while it makes a shift towards
electric, electronic and hybrid cars, which are deemed more
efficient, safe and reliable modes of transportation. Over the next
decade, this will lead to newer verticals and opportunities for autocomponent manufacturers, who would need to adapt to the change
via systematic research and development.
The Indian auto-components industry is set to become the third
largest in the world by 2025. Indian auto-component makers are
well positioned to benefit from the globalisation of the sector as
exports potential could be increased by up to four times to US$ 40
billion by 2020.
COMPARATIVE RATIO ANALYSIS
KEY RATIOS
Debt-Equity
Ratio
Current Ratio
Asset Turnover
Ratio
Inventory
Turnover Ratio
Debtors
Turnover Ratio
Net Profit Ratio
ROCE

AGGREG
ATE

BOS
CH

FEDERAL
MOGUL GO

SHRIRAM
PISTONS

0.26
2.32

0.01
2.33

0.5
0.9

0.6
1.36

1.71

2.27

1.33

1.02

8.1

9.23

7.7

6.92

8.07

9.12
10.9
1
22.3

8.35

6.85

1.88
9.43

4.21
11.74

7.94
18.34

DEBT-EQUITY RATIO: The debt-equity ratio indicates how much

debt a company has as compared to its owners fund. The ideal ratio
is 2:1. The industry aggregate is less than the ideal ratio; this
indicates that the industry is heavily dependent on the equity
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capital. All the companies are completely dependent on the owners

equity and this is not a good sign as it not using cheaper sources of
fund. But, from investors point of view it reflects in a good way as
the company has no debt at all and they will be willing to lend them
money.
CURRENT RATIO: It is the firms ability to pay off its short-term
liabilities with its current assets. The ideal ratio is 2:1. The industry
aggregate is slightly over the ideal ratio; this indicates that the
industry has good short-term financial strength. Federal Mogul go
has the ratio less than 1, this indicates that the company will have
problems meeting short term obligations. Shriram Pistons and Bosch
have the ratios closer to the idea ratio, indicating how strong the
companies are financially.
ASSET TURNOVER RATIO: It measures the efficiency of the
companys use of its assets in generating sales revenue or sales
income to the company. Bosch has a ratio greater than the industry
this shows that the company is more efficient as compared to the
industry in using its assets for revenue generation. On the other
hand, the other two companies are not as efficient as the industry.
INVENTORY TURNOVER RATIO: It measures the number of times
the inventory is sold or used in a time period. Bosch has higher ratio
as compared to the industry, it indicates that company has high
sales as compared to the industry.
DEBTORS TURNOVER RATIO: It measures the firms effectiveness
in extending credit and in collecting debts on that credit. Bosch and
Federal Mogul go have ratio greater than the industry, this indicates
a multiple things about the companies the companys collection of
accounts receivables is efficient and that the company has a high
proportion of quality suppliers and customers who pay off their
debts on time. It is also possible that the company has a
conservative policy for extending credit. Shriram Pistons has a low
ratio indicating it has bad credit policy and its inefficient in
collecting the receivables.
NET PROFIT RATIO: It is the measure of profitability. Bosch has
higher ratio as compared to the industry, this indicates it is more
profitable as compared to the industry, it is leveraging its
borrowings effectively, it has high operational efficiency and may
have less interest cost whereas the other two companies stand way
below in comparison to the industry in terms of profitability.
ROCE: It is a ratio that measures the companys profitability and
the efficiency with which its capital is employed. Bosch has high
ROCE as compared to industry showing how well it utilizes its capital
employed. Investors tend to prefer companies with goof ROCE.
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Federal Mogul go and Shriram pistons have ROCE less as compared

to the industry and may not be able to attract investors

Industry Analysis
Industry
Aggregate
No. Of
Companies
Key Ratios
Debt-Equity
Current Ratio
Asset
Turnover
Inventory
Turnover
Debtors
Turnover
Net Profit
Ratio
ROCE

Latest

2016

2015

2014

2013

2012

22

11

11

13

14

0.26
2.32
1.71

0.22
2.41
0.14

0.31
2.43
2.51

0.38
2.38
0.57

0.28
2.42
1.74

0.28
2.37
2.04

8.1

0.66

12.57

2.93

8.46

8.07

0.65

12.02

2.89

8.21

8.98

7.94

-4.03

8.32

3.03

6.66

7.75

18.34

-0.05

28.08

4.57

15.63

20.27

o Along the years as we can see that the Debt-Equity Ratios has
almost been constant. Although there is a slight increase in
2014 but it again declined in 2015 onwards. Therefore we can
see that the external borrowings have not been much in the
industry. But we can also see that it is not acquiring funds
from other cheaper sources.
o The Current Ratio, is also consistent and is higher which is
favourable for any Industry. This means that the Company will
be able to pay off their current liabilities.
o The Asset Turnover Ratio tells us how good an industry is
performing in respect to the assets it is holding. The higher
the asset turnover ratio, the better it is and that we can see in
the year 2015, the asset turnover ratio has been really high
but it significantly declined later on which shows that either
the industry has not been performing well in terms of revenue
or there has been a decline in the amount of assets it holds.
o The Inventory Turnover ratio shows how many times the
inventory is being sold in a year. As we can see there is a
significant increase in the year 2015, but we can also say that
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the industry is trying to recover in terms of inventory turnover

as per the latest trends.
o Debtors Turnover ratio implies how efficiently a firm manages
to give credit to its customers and also is able to collect on
that credit. As per the data available we can say that the
debtors turnover ratio has not been good enough in the
industry. Although we can see that there is a significant
increase in the year 2015, but as per the latest trends the
industry has been trying hard enough to gain on its debtor
turnover.
o Net Profit Ratio is a measure of profitability as a percentage of
revenue. We can see from the available data that it has
increased in the year 2015, whereas it is negative in the year
2016. This shows that the industry is currently experiencing
loss.
o The Return On Capital Employed (ROCE) shows
profitability/efficiency of an industry with which its capital is
employed. From the given data , we can say that the company
did exceptionally well in the year 2015 as compared to a loss
in the year 2014. But we can also say that the company is
trying to recover by the latest trends given.
Thus, we come to a conclusion that in the year 2015, the
industry has performed exceptionally well.
We can also see that the 2016 data shows negative returns which
we think might be possible because it shows only 3 companies
data .This might be because of the unavailability of the data for the
year 2016, as the financial year has just ended.
We assume that the unavailability of data is the reason for negative
returns and not that the industry has actually performed bad,
because we know for a fact that the Auto Ancilliary Industry in india
today is one of the fastest growing industries.

REFERENCES
o
o
o
o

http://www.acma.in/pdf/ACMA_Annual_Report_2014-15.pdf
http://reports.dionglobal.in/sicstockadmin/Reports/RR28082015c6f4
e.pdf
http://www.ibef.org/industry/autocomponents-india.aspx
http://www.ibef.org/industry/auto-components-presentation

http://www.acma.in/docmgr/ACMA_Industry_Data/IndustryStatistics.pdf

http://www.statista.com/statistics/318093/value-of-indianautomotive-part-exports/

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http://www.tsmg.com/download/article/Overview%20of%20the
%20Indian%20Auto%20Component%20industry.pdf

http://reports.dionglobal.in/sicstockadmin/Reports/RR28082015c6f
4e.pdf

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