auto ancilliory could follow it , pharma in slowdown
Auto ancillary companies supplying to global OEM’s could face a sharp slowdown in growth as Electric Vehicles replace ICE vehicles in the production line. Investors should carefully analyse which companies will face slowdown while looking at investments in auto ancillary stocks.
Tesla is over 10 years old while Ford is 100 years plus old and the smaller and futuristic company Tesla has already overtaken Ford in terms of Market capitalization. In short, the returns on Tesla have far outweighed returns on Ford and this is a wake up call for Auto ancillary companies.
As the OEMs are witnessing a disruption in the Internal Combustion Engines (ICE) category the Auto Component manufacturers which supply parts specific to internal combustion engines would also witness a huge disruption as their business depends on the demand for ICE vehicles.
Incrementally all major OEM’s are investing in electric vehicles as it is expected that many developed countries will completely replace ICE vehicles with electric vehicles.
India is a global hub for manufacturing of Auto Components and any disruption in the traditionally driven vehicles would largely affect the export business in the near future.
Indian Auto Component Industry
The Indian auto-components industry can be broadly classified into the organized and unorganized sectors. The organized sector caters to the Original Equipment Manufacturers (OEMs) and consists of high-value precision instruments while the unorganized sector comprises low-valued products and caters mostly to the aftermarket category.
The Auto components market is split into Six Product Segments.
Engine Parts – Piston and Piston Rings, Engine Valves and Parts, Fuel Injection Systems and Carburettors, Cooling System and Parts and Power Train Components.
Drive Transmission and Steering Parts – Gears, Wheels, Steering Systems, Axles and Clutches.
Body and Chassis
Suspension and Braking Parts – Brake and Brake Assemblies, Brake Linings, Shock Absorbers, Leaf Springs.
Equipments – Headlights, Halogen Bulbs, Wiper Motors, Dashboard Instruments, Other Panel Instruments.
Electrical Parts – Starter Motors, Spark Plugs, Electric Ignition Systems, Flywheel Magnetos, Other Equipment.
Others – Sheet Metal Parts, Hydraulic and Pneumatic Instruments, Fan Belts and Pressure Die Castings.
Engine parts accounts for 31% of the entire product range of the auto components sector followed by drive transmission & steering parts at 19%, Body and Chassis at 12%, Suspension and Braking Parts at 12%, Equipments at 10%, Electrical Parts at 9% and other parts at 7%.
Two Wheeler segment is the largest domestic customer segment for the auto components industry in India with a share of 78.59% followed by Passenger Vehicles at 14.25%, Commercial Vehicles at 3.27% and Three Wheelers at 3.9%.
Domestic and Export Business
Over the last decade, the automotive components industry has scaled three times to US$ 39 billion in 2015-16 while exports have grown even faster to US$ 10.8 billion. This has been driven by strong growth in the domestic market and increasing globalisation (including exports) of several Indian suppliers.
Engine parts accounts for 31% of the entire product range of the auto components sector followed by drive transmission & steering parts at 19%, Body and Chassis at 12%, Suspension and Braking Parts at 12%, Equipments at 10%, Electrical Parts at 9% and other parts at 7%.
Two Wheeler segment is the largest domestic customer segment for the auto components industry in India with a share of 78.59% followed by Passenger Vehicles at 14.25%, Commercial Vehicles at 3.27% and Three Wheelers at 3.9%.
Domestic and Export Business
Over the last decade, the automotive components industry has scaled three times to US$ 39 billion in 2015-16 while exports have grown even faster to US$ 10.8 billion. This has been driven by strong growth in the domestic market and increasing globalisation (including exports) of several Indian supplier.
Tesla is over 10 years old while Ford is 100 years plus old and the smaller and futuristic company Tesla has already overtaken Ford in terms of Market capitalization. In short, the returns on Tesla have far outweighed returns on Ford and this is a wake up call for Auto ancillary companies.
As the OEMs are witnessing a disruption in the Internal Combustion Engines (ICE) category the Auto Component manufacturers which supply parts specific to internal combustion engines would also witness a huge disruption as their business depends on the demand for ICE vehicles.
Incrementally all major OEM’s are investing in electric vehicles as it is expected that many developed countries will completely replace ICE vehicles with electric vehicles.
India is a global hub for manufacturing of Auto Components and any disruption in the traditionally driven vehicles would largely affect the export business in the near future.
Indian Auto Component Industry
The Indian auto-components industry can be broadly classified into the organized and unorganized sectors. The organized sector caters to the Original Equipment Manufacturers (OEMs) and consists of high-value precision instruments while the unorganized sector comprises low-valued products and caters mostly to the aftermarket category.
The Auto components market is split into Six Product Segments.
Engine Parts – Piston and Piston Rings, Engine Valves and Parts, Fuel Injection Systems and Carburettors, Cooling System and Parts and Power Train Components.
Drive Transmission and Steering Parts – Gears, Wheels, Steering Systems, Axles and Clutches.
Body and Chassis
Suspension and Braking Parts – Brake and Brake Assemblies, Brake Linings, Shock Absorbers, Leaf Springs.
Equipments – Headlights, Halogen Bulbs, Wiper Motors, Dashboard Instruments, Other Panel Instruments.
Electrical Parts – Starter Motors, Spark Plugs, Electric Ignition Systems, Flywheel Magnetos, Other Equipment.
Others – Sheet Metal Parts, Hydraulic and Pneumatic Instruments, Fan Belts and Pressure Die Castings.
Engine parts accounts for 31% of the entire product range of the auto components sector followed by drive transmission & steering parts at 19%, Body and Chassis at 12%, Suspension and Braking Parts at 12%, Equipments at 10%, Electrical Parts at 9% and other parts at 7%.
Two Wheeler segment is the largest domestic customer segment for the auto components industry in India with a share of 78.59% followed by Passenger Vehicles at 14.25%, Commercial Vehicles at 3.27% and Three Wheelers at 3.9%.
Domestic and Export Business
Over the last decade, the automotive components industry has scaled three times to US$ 39 billion in 2015-16 while exports have grown even faster to US$ 10.8 billion. This has been driven by strong growth in the domestic market and increasing globalisation (including exports) of several Indian suppliers.
Engine parts accounts for 31% of the entire product range of the auto components sector followed by drive transmission & steering parts at 19%, Body and Chassis at 12%, Suspension and Braking Parts at 12%, Equipments at 10%, Electrical Parts at 9% and other parts at 7%.
Two Wheeler segment is the largest domestic customer segment for the auto components industry in India with a share of 78.59% followed by Passenger Vehicles at 14.25%, Commercial Vehicles at 3.27% and Three Wheelers at 3.9%.
Domestic and Export Business
Over the last decade, the automotive components industry has scaled three times to US$ 39 billion in 2015-16 while exports have grown even faster to US$ 10.8 billion. This has been driven by strong growth in the domestic market and increasing globalisation (including exports) of several Indian supplier.
KA
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 auto-component manufacturers, who would need to adapt to the change via systematic research and development.
source- zephyr financial