Homegrown credit rating agency ICRA, on Tuesday, revealed that the airbag industry is one of the fastest-growing auto component segments in India. It further stated that the domestic airbag industry is likely to benefit from the increase in content per vehicle largely because of the higher regulatory requirements and voluntary increase in the number of airbags per vehicle.
The rating agency expects the airbag industry to grow up to Rs 7,000 crore by FY27, from the current Rs 2,500 crore. It also claimed a 4-year compounded annual growth (CAG) of 25-30 percent.
These higher regulatory requirements came into effect in July 2019 as the government had mandated at least one airbag per car (driver airbag) as a precautious safety initiative.
However, this was later increased to two airbags (dual front airbags) for the M1 category vehicles, which can seat up to eight passengers and weigh less than 3.5 tonnes, from January 2022. Later from October 2023, the government further asked to provide four additional airbags -- two side airbags and two side-curtain airbags -- for the M1 category vehicles.
The government’s this mandate was aimed at preventing torso injury for passengers in front-row outboard seating positions and head injury for occupants in the outboard seating positions. As a result of this mandate, the airbag manufacturing industry is expected to grow from currently Rs 3,000-4,000 crore to Rs 8,000-10,000 by October 2023.
Currently, the domestic airbag industry imports around 70 percent of its components from overseas parents/joint venture partners due to the lack of capability in terms of indigenous technologies and the absence of adequate volumes.
ICRA also expects that “there is immense scope for localisation and development of tier-ll vendor ecosystem in this space and increasing volumes could make localisation economically viable.” Airbag component manufacturing is also a part of the Production Linked Incentive Scheme (PLI) scheme.
To meet regulatory requirements, the capacity for manufacturing airbags would need to increase significantly in the next year. This has led several players to start undertaking capacity enhancements in the last 6-8 months to gradually scale up their facilities. ICRA expects a capital expenditure of around Rs 1,000-1,500 crore in the next 12-18 months for capacity enhancements.
Following this update, Rane Madras, which is among the leading airbags manufacturers in the country, saw its shares trade higher by as much as 12 percent on Wednesday.
(Edited by : Abhishek Jha)
First Published: Dec 27, 2022 4:07 PM IST
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