Air bag makers on drive to up Indian capacity
14 Sep 2015
The world's largest air bag suppliers are setting up plants and ramping up capacity in India, eyeing a $2-billion opportunity thanks to tougher rules aimed at improving one of the world's worst road-safety records.
In India, a person is killed in a road accident every four minutes - 141,000 in 2014 - yet less than a third of the 2.6 million cars sold each year have air bags in this cost-conscious market.
But a proposed law that will impose crash test standards by 2017 is creating an opportunity for makers of safety equipment, as cars without air bags will achieve only the lowest safety ratings after tests.
That, for the first time, will force consumers to directly consider the risks they run by buying cheap.
By 2020, overall revenues from airbag sales in India are set to rise 11 per cent a year to hit $2 billion, outpacing the 9 per cent growth expected in China, according to data from Transparency Market Research.
By then, India is expected to be selling over 5 million cars a year.
Some of the world's largest air bag makers - Autoliv Inc, Takata Corp, TRW Automotive Inc and Toyoda Gosei Co - are already gearing up to cash in.
The company opened a new air bag assembly plant in August in southern India with capacity to make 500,000 units a year, investing Rs180 million.
It expects revenues from the air bag unit to hit Rs3.5 billion by 2020, from Rs400 million.
Toyoda Goesi Minda India, a joint venture between the Japanese company and India's Uno Minda, which has a 25 per cent market share, plans to increase its capacity by up to six times to 150,000 air bags over the next two to three years, group chairman N K Minda said.
Analysts say others will follow, setting up in India to keep costs as low as possible.
Air bags in India are expensive mainly because most of the parts, such as inflators, are imported. And without rules imposing their use despite often poorly maintained vehicles and overcrowded, badly lit and potholed roads, carmakers often opt not to add a costly component that could drive up prices.
The new rules, part of the Road Transport and Safety Bill, do not directly propose airbags, but instead make crash tests mandatory for new models sold in India from October 2017.
Quality issues will be a concern for carmakers, however. Japan's Takata hit headlines after carmakers recalled millions of cars to replace air bags made by the company after some exploded too violently, spraying shrapnel into passenger compartments. Eight deaths and more than 100 injuries have been linked to faulty Takata inflators.
In India, makers including Honda, Toyota and Nissan recalled cars after the Takata defect was reported.
Several carmakers in India, including No. 2 seller Hyundai Motor Co, still import air bags. But to be affordable, they will have to go local.
