Air bag makers eye boost from new India road safety rules

Rane Holdings

13/09/2015 22:00

(Repeats Sunday story with no changes) 
    * 141,000 road deaths in India last year 
    * Government plans tougher rules to improve road safety 
    * Air bag revenues in India to grow faster than in China 
    * TRW, Toyoda Gosei setting up plants, increasing India 
capacity 
    * Quality of made-in-India air bags a concern for carmakers 
 
    By Aditi Shah 
    NEW DELHI, Sept 13 (Reuters) - 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 planned 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 percent a year to hit $2 billion, outpacing the 9 
percent 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 
 ALV.N , Takata Corp  7312.T , TRW Automotive Inc and Toyoda 
Gosei Co  7282.T  - are already gearing up to cash in. 
    "(This is a) good time to build capacity and the right time 
to invest to grow the business," said Harish Lakshman, managing 
director of air bag maker Rane TRW Steering Systems Ltd, a joint 
venture between U.S.-based TRW and India's Rane Holdings Ltd. 
    The company opened a new air bag assembly plant in August in 
southern India with capacity to make 500,000 units a year, 
investing 180 million rupees ($2.7 million). 
    It expects revenues from the air bag unit to hit 3.5 billion 
rupees by 2020, from 400 million rupees today. 
    Toyoda Goesi Minda India, a joint venture between the 
Japanese company and India's Uno Minda, which has a 25 percent 
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 told Reuters. 
    Analysts say others will follow, setting up in India to keep 
costs as low as possible. 
    "We expect that within five years the large airbag makers 
will have a manufacturing hub in India," said Ayay Bandopadhyay, 
automotive research analyst at Transparency Market Research. 
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    CRASH TESTS 
    Air bags in India are expensive mainly because most of the 
parts, such as inflators, are imported. And without rules 
imposing their use in a country of poorly maintained vehicles 
and overcrowded, badly lit and potholed roads, carmakers often 
opt not to add a costly component that could drive up prices. 
    "I think we have made automobiles in India too cheap," said 
Vijay Chhibber, secretary for the road transport and highways 
ministry. 
    "In trying to make everything cheap, if we are going to 
reduce our safety standard it is not worth it." 
    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. 
    "An air bag is only an instrument of road safety," Chhibber 
said. The new rules will be discussed in India's upper house of 
parliament this year before they become law. 
    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.  ID:nL1N11G217  
    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  005380.KS , still import air bags. 
    But Kaushik Madhavan, automotive head at Frost & Sullivan, 
said even cautious carmakers would eventually have to go local. 
    "Carmakers have to realise that if they have to offer 
competitively priced products with all the safety technology, 
they have to be sourced locally," he said. 
 ($1 = 66.3360 Indian rupees) 
 
 (Editing by Clara Ferreira Marques and Will Waterman) 
 ((aditi.shah@thomsonreuters.com; +91-11 4178 1031; Reuters 
Messaging: aditi.shah.thomsonreuters.com@reuters.net; twitter: 
@aditishahsays)) 
 
Keywords: INDIA SAFETY/AIRBAGS