Airbag industry to grow to Rs 6,000-7,000 crore by FY27: ICRA
Airbag industry to grow to Rs 6,000-7,000 crore by FY27: ICRA
The government has mandated six airbags -- two front airbags, two side airbags and two side-curtain airbags -- for the M1 category of vehicles to be manufactured from October 2023.
· The airbag industry, which currently stands at Rs 2,400-2,500 crore, is expected to grow to Rs 6,000-7,000 crore by FY27 at a four-year CAGR of 25-30%, ICRA said on Tuesday. According to the rating agency, the airbag industry is expected to benefit from the increase in content per vehicle arising from higher regulatory requirements and a voluntary increase in the number of airbags per vehicle for enhancing safety.
· "Airbag component manufacturing is a part of the PLI scheme, for facilitating the increase in indigenous manufacturing. Given the potential for multifold increase in airbags volumes, most airbag manufacturers are in process of localising key components," ICRA said.
· According to ICRA, there is immense scope for localisation and development of tier-II vendor ecosystem in the airbag space and increasing volumes could make this economically viable. It can also improve margins through greater value addition and ease supply-chain challenges for airbag manufacturers.
· The airbag industry currently imports 60-70% of its components, primarily from overseas parents/joint venture partners, stemming from the lack of indigenous technological capability and absence of adequate volumes
· The government will now likely issue a new notification proposing mandatory fitment of six airbags in passenger vehicles from October 2023. “Considering the global supply chain constraints being faced by the auto industry and its impact on the macroeconomic scenario, it has been decided to implement the proposal mandating a minimum of 6 airbags in passenger cars (M-1 category) with effect from October 2023,” Union Minister for Road, Transport and Highways, Nitin Gadkari had announced in a tweet on September 29, 2022.
· While a dual-front airbag mandate for all new passenger vehicles was implemented in January 2022, with a passenger vehicle market size of about 3-million units in FY2022, a six-airbag mandate will multiply the industry’s requirement of airbags from the existing six million units to 18 million units by end-2023.
· Targeting key constituents
The airbag inflator makes about 50% of the total airbag cost, while cushion and other components form the remaining. The industry currently imports 60-70% of its components, primarily from overseas parents/joint venture partners, stemming from the lack of indigenous technological capability and absence of adequate volumes.
· As per the ICRA study, unless there is adequate backward integration for the incremental airbags expected to be produced, the import content would only increase further going forward.
· According to Suresh KV, president, ZF India, “Right now, we’re in the process of setting up an airbag inflator line at Trichy and it is slated to go onstream in the second quarter of next year.”
· The joint venture entity - ZF Rane Automotive India – is a key supplier of airbags and seatbelts to Indian OEMs from its plants in Chennai and Trichy.
· While seatbelts in its portfolio enjoy good localisation, in the range of 50-60 percent, airbags fall short in this regard. “Currently, localisation is not that high in airbags because the inflator itself is being imported,” KV had told Autocar Professional in an interaction earlier this year.
· “With fabric and inflator being the two key components of an airbag module, they play a huge role in determining its cost structure and eventually, pricing. Local manufacturing will enable companies to improve their cost competitiveness,” he had said.
· “The cost must come down with economies of scale, and productivity improvements too will play a big role. Though it is much improved compared to five years ago, the cutting and sewing of the airbag fabric still involves a lot of manual process. I am sure automation and artificial intelligence can play a vital role in enhancing productivity and in turn, lowering costs,” KV had remarked.
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