Bumpers And Parts For Motor Vehicles - Time to Bump up export profits March 2018 issue

Bumpers And Parts For Motor Vehicles - Time to Bump up export profits

In terms of value, bumpers have been among the front-runners when it comes to exports of auto components from India. Last fiscal, Indian manufacturers exported bumpers in various shapes and sizes, worth $179 million. And industry experts expect its exports to only rise further going forward. So, what makes this product a hot favourite amongst foreign buyers? The Dollar Business analyses.

Ahmad Shariq Khan | September 2016 Issue | The Dollar Business

Anyone, well almost everyone, who has driven on India's chaotic roads knows the value of bumpers! Not very surprising it is therefore that a huge aftermarket for bumpers and its parts exists in India. Interestingly, that's not only the case with India, but in many countries across the globe. Well, the good news is that Indian manufacturers are already exporting in significant numbers. So chances are, if you see a Ford Escape on the roads in Texas (US), its bumpers may have actually been shipped all the way from India!
Over the years, the Indian automotive industry has shown significant progress in engineering as well as in various allied segments. In fact, the industry has today emerged as one of the largest in the world with an annual production of 23.96 million vehicles in FY2016, registering a growth of 2.58% over FY2015.
Similarly, the auto component industry has also shown a healthy growth. According to the Automotive Component Manufacturers Association of India (ACMA), the turnover of the auto component industry stood at $39 billion in FY2016, registering a growth of 8.8% in rupee term over the previous year, and a CAGR of 6% over the last six years.
What's more? According to FY2016 Industry Performance Review by ACMA, exports of auto components has grown by 3.5% in FY2016 to Rs.70,900 crore from Rs.68,500 crore in FY2015. In fact, the segment has registered a CAGR of 18% over the last six years. When it comes to export markets for India-made auto components, Europe accounts for 36% of the total exports followed by Asia and North America, each taking up 25% share of the exports pie. The key exported auto components include engine parts, transmission parts, brake systems and components, bumpers, exhaust systems, turbochargers, etc. Did we say bumpers?


Bumpers and its parts for motor vehicles is one category where India is emerging as a strong competitor to China in global export markets. Having said that, in CY2015, while India exported bumpers and its parts for motor vehicles worth $196 million, China's exports of the products stood at $369 million for the same period. But that's not a bad number for a country where the automotive aftermarket is dominated by unorganised segment. Further, although exports of bumpers has seen a decline in line with the general decline in exports over the last two years (exports of bumpers declined from $213 million in FY2015 to S179 million in FY2016), exporters expect a decent growth in the near future based on the strengths of the industry. “Indian suppliers are up-to-date with the latest trends and demands across the globe and that always sets us apart,” says Ashok Oberoi, Director, Yaduvanshi Polymers Pvt. Ltd., an automotive aftermarkets manufacturer and exporter based out of Kondli in East Delhi.
Cost-effective and diversified product offerings of global standard, ranging from aftermarkets for the entry level segments to parts of the much-touted premier vehicle brands across the globe, is yet another factor that makes India a preferred sourcing destination for auto components. “We upgrade our facilities at regular intervals. I think, the diversified product portfolio of Indian suppliers has many takers in the international market due to its quality material, durability, latest designs, perfect finish and supreme reliability,” adds Oberoi.
Rajneesh Kumar, Managing Director of KMC Enterprises, another auto components exporter from Delhi, is of the view that clients nowadays demand products that are compact, made of high-quality materials, easy-to-install, designed for longer service life and are   light-weight. Kumar is, at present, witnessing significant demand for bumpers specifically designed for BMW 3-Series, 5-Series, 7-Series, BMW X5 and BMW Z3/Z-Coupe. For Ford, he is exporting bumpers for models such as Contour, Crown Victoria, Econoline Van and Escape. When it comes to Honda, he is manufacturing and exporting bumpers for hot-selling Accord and Civic models.


As demand for passenger cars is likely to grow at a faster pace with the economy picking up in both domestic and global markets, a higher growth is expected in times to come. According to ACMA, the Indian auto components industry is expected to post a turnover of $100 billion by 2020 and exports are expected to clock between $80-100 billion by 2026, up ten-fold from the current $11.2 billion. The industry body also believes that Indian auto components industry is set  to become the third largest in the world by 2025.
ICRA, the premier credit rating agency, also expects the auto components industry to continue sustaining growth and clock 8-10% growth in FY2017. “Indian auto component makers are well positioned to benefit from globalisation as exports potential could go up by up to four times to $40 billion by 2020”, states the report.
Biggest overseas destinations for

The car manufacturing industry and the allied components manufacturing hubs, the mainstay of the growth, seem to be evenly divided into three clusters. Southernmost (and the largest auto hub) is located in and around Chennai. It contributes 35% of total revenue and accounts for 60% of the country’s total automotive exports. The city is home to many auto majors such as Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, etc.
Closer to Mumbai, in Maharashtra, along the Chakan corridor near Pune, is the western cluster, with 33% of the market share. The cluster has manufacturing facilities of companies like Audi, Volkswagen and Skoda. In addition, General Motors, Tata Motors, Mercedes Benz, Land Rover, Jaguar Cars, Fiat and Force Motors have set up assembly plants in the area.
The northern cluster, which is around the National Capital Region has two big manufacturing hubs, in Gurgaon and Manesar, in Haryana. “These manufacturing hotspots, along with many Tier 2 and Tier 3 suppliers to original equipment manufacturer (OEM), have in a way contributed in kick-starting a sort of engineering manufacturing revolution across the country,” says Vinnie Mehta, Director General, ACMA.

speed breaker

The Indian auto components industry has carved a niche for itself globally with deep forward and backward linkages with several key segments of the economy. However, manufacturers are grappling with some issues, which if addressed can catapult the industry's growth to next level. For instance, high cost of die casting machine, used for manufacturing bumpers, is acting as a deterrent in the growth of the product's exports from India making it uncompetitive in global markets. “Today the cost of a die for bumpers for a specific auto brand costs a few lakhs. So, if we manufacture a bumper here for one particular car variant using a particular die, we cannot use that die for newer variants with different bumper specifications. Hence, for us, in some cases, importing bumpers from Malaysia is a cost-effective proposition,” says Oberoi. This is due to inverted duty structure prevailing in the country where raw materials are taxed at a higher rate than finished goods.

safety FIRST

According to some industry experts, India presently lacks mandatory safety standards for a large number of aftermarket products. Consequently, it has become impossible not only to check the import of counterfeit products, but also to accurately gauge the standard of domestic production. The same also causes a lack of trust among importers and hampers export prospects of the industry. It’s high time both policymakers and industry work in collaboration to eradicate this menace by strengthening the legislative framework.

smooth ride ahead

With rapid strides recently made by Indian exporters in this segment, it looks like Indian aftermarket manufacturers including that of bumpers will soon be a leading force to reckon with globally. Further, with exports showing signs of revival and some major markets for bumpers like US and Europe starting to pick up steam, it's quite plausible to assume that Indian manufacturers with their inherent frugal manufacturing strengths are on course to emerge as a preferred suppliers in all major auto hotspots across the globe. As far as margins in this trade are concerned, exporters of bumpers enjoy double-digit profit margins, anywhere between 15% and 25%. However, supplies to OEMs, because of higher volumes, garner slightly lesser percentage returns.
With product standardisation, pro-manufacturing policy, a fairly attractive margin, and hopefully a more rational duty structure soon, it seems, Indian  bumper manufacturers and exporters are in for a smooth ride.


“The industry needs to capitalise on its USPs”
Vinnie mehta Director general, automobile Component manufacturers Association of india (acma)
Vinnie mehta Director general, automobile Component manufacturers Association of india (acma)

TDB: How has Indian automotive industry evolved over time? Has it benefitted auto component manufacturers?

Vinnie Mehta (VM): We have all the big auto manufacturers operating out of India, making Indian manufacturers well exposed to global standards and norms. Most major OEMs (Original Equipment Manufacturers) and their tier-1 suppliers have their IPOs (International Procurement Office) in India and they identify the requirement of components as needed by the parent company. I believe they have pushed the growth of exports of Indian auto component manufacturers.
We aim to make India a global export hub, banking on our inherent strengths of frugal engineering, cost advantages and quality benefits. The auto component industry is all set to be one of the foremost drivers of India’s economic growth in the times ahead. In fact, the Indian automotive industry is the sixth largest in the world with deep forward and backward linkages with several key segments of the economy. What has strengthened India’s position is the quality and cost competitiveness of its products vis-à-vis its competitors.

TDB: How do you plan to counter competition from China?

VM: China’s know-how lies in mass production. We have to find areas where China is not strong. We need to have a greater value proposition to compete with China. In recent times, our strengths in suspension and braking, engine parts, drive transmission and steering parts, along with rubber and plastics products used in aftermarket components industry have made us stand tall in the world. In short, we need to capitalise on our unique selling propositions (USPs).

TDB: What opportunities do you foresee for exporters of auto components amid prevailing economic scenario?

VM: Global opportunities at the moment are quite huge. Global exports market for auto components is valued at $1.3 trillion and our exports currently stand at barely $11 billion. Although, the last few years were quite challenging and the market may have shrunk a little, the overall scope in various emerging and newer market remains extremely large.
The traditional advantages of low cost and highly skilled engineering manpower backed by a robust domestic demand have stood us in good stead so far. Going forward, in order to remain globally competitive, we need to focus on research and development, design capabilities, product differentiation and improved quality to meet the evolving needs of customers who are increasingly preferring more value-added products.

TDB: How is ACMA helping Indian manufacturers tap new markets?

VM: We are quite active in this regard. Apart from helping them participate in various trade expos, we carry out detailed researches. Recently, we carried out a comprehensive research on aftermarkets in emerging markets. The research analysed many newer markets such as African, CIS and South American countries. We have identified 20 countries as focus countries. In addition, last year, we organised 12-15 automotive expos, offering our manufacturers an ideal platform to learn from the latest business practices and standards being implemented elsewhere in the world.

TDB: Are you satisfied with the export incentives provided to your industry?

VM: We are very happy with the incentives being provided to us under the MEIS scheme. Besides, the Ministry of Commerce has been supporting ACMA by way of offering Market Assistance programmes (MAP), which help our members attend various trade expos.


“One can expect an export margin of 15-25%”
Rajnish kumar Managing director, Kmc enterprises
Rajnish Kumar Managing Director, Kmc Enterprises 

TDB: Tell us about your company’s export operations.

Rajneesh Kumar (RK): We have been manufacturing and exporting automotive aftermarkets including all auto related rubber and plastic auto products such as bumpers, headlamps, grille, fenders, etc., since 2005.  

TDB: What kind of margins can one expect in this business?

RK: A lot of factors affect the profitability in the aftermarket categories. As per the prevailing demands, one can expect an export margin of 15-25%.

TDB: How do you counter Chinese competition in overseas markets?

RK: In various foreign markets, particularly in EU and US markets, we are facing stiff competition from Chinese suppliers. In order to counter that, we are focussing more on offering our products at a much lower price than theirs, and at the same time, maintaining the quality. I believe offering cost-effective, yet quality product will prove to be the success mantra for all Indian manufacturers and exporters now. The ‘Make in India’ programme has brought down our costs in many stages of our operations.

TDB: How are you promoting your products, particularly bumpers, in various international markets?

RK: We get useful competition-related insights from automotive industry bodies such as Automotive Component Manufacturers Association of India (ACMA). I believe ACMA has done a great job in assisting exporters and helping them face the challenging business enviornment prevalent in various markets across the globe. ACMA organised  trade shows have also helped us gain useful insights on latest demand trends across the globe. In addition, we use online trade portals to showcase our  products to global customers and connect with them.

TDB: While exporting, do you restrict your supplies to aftermarkets for 'Made-in-India' vehicles or do you also cater to aftermarket of vehicles manufactured outside India?

RK: Our global business strategy does not differentiates between the two. We manufacture products for both – India made cars as well as cars manufactured outside India.

TDB: How lucrative are traditional markets like US for bumper exporters? Are you exploring any new market?

RK: Currently, US is coming out of recession. And we are quite optimistic about the trade potential in North America. The other adjoining markets, such as Central and Latin America, also offer great opportunities. Indian automotive products are quite in demand in these markets. In fact, we have already started focussing on these emerging markets.

TDB: What are the challenges that the industry is currently facing?

RK: We are facing a number of challenges – from counterfeit products to long procedural delays at the Customs. We need to curb the bureaucratic hurdles and red-tapism prevalent in the entire supply chain. We are urging the government and industry to initiate collaborative efforts to eradicate the counterfeit menace by strengthening the legislative framework. Also, Indian manufacturers need to intensify their focus on innovation and R&D to beat the competition.

TDB: What are your expectations from the government?

RK: The government should provide more marketing support so that we can  compete in global markets.  China is very aggressive in Africa and Latin America and to counter that, we require more
incentives from the government.