Analysis of the Automobile Ancillary and Spare Parts Market in India

The automobile ancillary and spare parts market relates to those components which appear as a part of the automobiles, after either assembly (ancillary) or repair (spare parts). The following graph illustrates the growth and forecasts for the Indian automobile ancillary and spare parts market size. Data taken from reports available online.

It can be seen that the market is poised to grow from under 500 crores presently to over twice that much in the five year period from 2016 to 2021. So this presents a great opportunity for ancillary companies like Bosch as well as the automobile OEMs to grow their revenue through sale of ancillaries and spare parts. Now I explore the trends in the sale of ancillaries and spare parts by Bosch and various automobile OEMs.

Bosch India Automotive Sales Trends 

Bosch classifies its independent auto parts sales under its mobility solutions division. Automotive sales constituted 87% of Bosch's sales in FY16, so it is the most important market for the company to play in. The graphic below shows that while Bosch has been steadily increasing its sales, this increase is not keeping pace with the burgeoning market size and hence the market share is reducing.

Various factors have been pointed out by the management as leading to the sales increase in FY16. In the diesel systems category, in which the company was reported to have a 70% market share in 2015, growth has been led by new generation technologies such as common rail systems and distributor pumps. The growth of this division in FY15 was attributed to the company's localisation approach. In the gasoline segment, increased market share in the domestic passenger car segment drove growth for the company in FY16. In the previous year, there had also been an expansion of the sales network through the addition of 300 new distributors.

But why is the overall market expected to increase so drastically that Bosch's market share estimated based on projected 2016 figure drops so much? Although the growing automobile market is cited as one of the reasons for the burgeoning ancillary market, Bosch seems to have outpaced this growth. Hence it has to be reasons other than this. One of them could be the fact that global OEMs are increasingly sourcing from India, meaning that other global OEMs start encroaching into Bosch's turf in India. 

Automobile OEM Spare Parts Sales Trends                         

The sales trends for automobile OEMs spare parts sales shows that all the OEMs considered except Tata have been growing their spare parts sales at a healthy rate. This could be because Tata Motors' market share in both the passenger and commercial vehicles have declined in the past two years. It stands to reason that the more of your vehicles are on the road, the more spare parts are also demanded for their repair. Although this seems to have affected M&M less, because it can seen to have increased its spare parts sales despite having lost market share in all the sub-segments it competes in that I have explored in my earlier posts, except the commercial vehicles sub-segment. 

Bajaj Auto, while holding its market share in the two wheeler market just about steady, has been gaining in the three wheeler market, hence its spare parts sales ought to increase. Hero has been showing a good growth in spare parts sales despite losing market share in the two wheeler market, which could be because its large number of vehicles on the road demand significant spare parts, since it has over a 35% market share in the two wheeler sub-segment. Maruti too has lots of vehicles on the road, so with a roughly 50% market share in the passenger vehicles sub-segment it too would be expected to grow its spare sales significantly, which it can be seen to have done.

Eicher Motors reports spares and services sales in a consolidated manner while following a calendar year convention (until recently) in some years, so it has been represented separately below. Since Royal Enfield has been increasing its market share, it stands to reason that their spares sales too would increase, which can be seen to be the case.

It's of course not that simple since pricing too adds to the sales. All OEMs seek to opportunistically charge a higher price for their spares, and this too would add to sales. I may explore this aspect in more detail while covering the companies individually.  

Summary   

To sum this article up:

1. The automobile ancillary and spare parts market has seen high growth in the past few years and is expected grow much faster going ahead. 
2. Bosch is a significant player in the market, which has grown its sales significantly, but has been seeing a decrease in its market share due to the far higher market growth rate.
3. Almost all auto OEMs are growing their spare parts sales as well, with the exception of Tata Motors.