271110 C SS Standard Press Tools Market Evaluation V9

8/8/2019 271110 C SS Standard Press Tools Market Evaluation V9

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AVALONConsulting

2010 Avalon Consulting. All Rights Reserved

Report: 26 Nov 2010


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Consulting

Roadmap

Introduction

Demand Analysis: Auto Segment

Demand Analysis: Consumer

Durables

Opportunity for a Value Added Logistics Intermediary

Conclusions

Annexure

102/11/10 SS


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TVS Logistics is in the process of evaluating an acquisition option in the US. The target is involved in providing an

integrated logistics solution in the tool building value chain through efficient procurement, kitting and delivery of standard

press tooling elements

As part of the evaluation, TVS Logistics wishes to understand whether there is an opportunity to leverage some aspects of

the business model in the Indian market context

TVS Logistics has conducted a very preliminary investigation, and has gleaned that there could be a trend in favor of

standardization of press tools parts in India in the automotive market

TVS Logistics also believes that there could be a similar opportunity in the white goods segment given the magnitude of the

sales volumes

Some large press tools aggregators, such as Misumi and Fibro, have also recently started operations in India, indicating

that probably the market opportunity for standard press tools is emerging

However, the concept of a logistics intermediary kitting standard tooling elements appears to be relatively untested in India.

So, TVS Logistics wishes to test whether there is prima-facie interest among potential customers

Avalon Consulting was engaged by the TVS Logistics to do a quick evaluation of the above aspects

We have completed the engagement and this report captures the conclusions from our evaluation

02/11/10 SS

Study Background

TVS Logistics wishes to evaluate the opportunity for standard press tools in India


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Consumer DurablesAutomotive

Total Demand

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Replacement

DemandNew Tools

Replacement

DemandNew Tools

Overall Analysis Methodology

The press tools market consists of two segments - new press tools and replacement

spares


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14/11/10 SS

Analysis Methodology: New Tools

Our estimates of the addressable market were built from the demand side based on

demand drivers & consumption norms for press tools and tooling elements . . . 1

Analysis limited to

auto segment

No. of new Launches / Facelifts

Investments in New Tools per New Model Launch / Facelifts

Total Demand for New Tools in India

% Share ofStandardTools in New Tools

Demand forStandard Tools in New Tools

% Share of Domestically Produced New Tools

Estimate of the Addressable MarketOpportunity

x

=

=

x

=

x


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14/11/10 SS

Analysis Methodology: Replacement Demand

Our estimates of the addressable market were built from the demand side based on

demand drivers & consumption norms for press tools and tooling elements . . . 2

Spends on Standard Replacement Spares per ReplacementCycle

Average No. ofVehicles Produced per ReplacementCycle

Replacement Spends on Standard Spares perVehicle

No. ofVehicles Produced

Addressable Replacement Demand forStandard Spares

/

=

=

x


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Analysis

Data collected from various sources was analyzed to arrive at

an estimated size of the press tool and tool spares market

These insights were synthesized using Avalon Consulting

frameworks to arrive at conclusions forTVS

Primary ResearchSecondary Research

Automobile OEMs and Tier 1 suppliers across

car, CV, 2-wheeler, 3 wheeler and tractor segments

Interviews with consumer durables manufacturers

Interviews with focussed tool rooms

Interviews with Parts Suppliers

Internet research

Published documents

Avalons internal knowledgebase

Industry Association databases & others

Project Planning

Project Kick-off and detailed briefing

Problem Statement and Initial Hypothesis

Research Planning

Questionnaires & Checklists

Overall Project Approach

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We relied both on primary and secondary research to build the demand estimation

model


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14/06/10 GJ/pd

Primary Research Summary

Consumer Durables

Companies (8)Auto OEMs (14)

Total Respondents: 35

AL Nissan Bajaj

Force Motors

Ford

Hero Honda

Hyundai

Mahindra & Mahindra

Maruti

Piaggio

Swaraj Mazda

TAFE Tata Motors

TVS Motors

Renault Nissan

Blue Star Electrolux

Godrej & Boyce

IFB

National Panasonic

Onida

Samsung

Whirpool

Tier I & II Component

Suppliers (8)

ASAL Elgi

JBM Maruti

TATA Autocomp

Systems

JBM Ogihara

Delphi TVS

Aroma Industries

Wheels India

Focused Tool Rooms (3)

Godrej Nagata

NTTF

Tool PartsSuppliers (2)

Misumi India Fibro

As part of the data collection exercise, we have covered 35 respondents with fair

representation across the press tools value chain


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14/11/10 SS

Roadmap

Introduction


New Tools Demand

Replacement Demand

Overall

Demand Analysis: ConsumerDurables


ConclusionsAnnexure


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14/11/10 SS


We will start with the estimation of the demand for new tools in India in FY 2008-09







x

=

=

x

=

x


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No. of new launches and facelifts by Automotive Segments

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Source: Secondary Research, Avalon Consulting Analysis

New Launches and Facelifts by Automotive Segments (2009-10)

The share of

institutional segment

demand has diminished

over the last decade

Typically investment on new press tools precedes the launch by a year, so FY

2009-10 new product activity has been used to estimate the market for FY 2008-09

12 11

19

1 1

8

1

11

3

0

Car CV 2-Wheeler 3-Wheeler Tractor

New Launches Facelifts

FY 2009-10 witnessed significant new product activity both new launches and

facelifts

Note: List of Models Considered in Annexure


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14/11/10 SS

250

75

20 18

4

300

120

25 20

5

500

200

3530

8

1

2

4

8

16

32

64

128

256

512

PassengerCars CV 3-Wheeler Tractor 2-Wheeler

Minimum Investment Average Investment (Mode) Maximum Investment

Investments in Press Tools per Model Launch by Vehicle Type (Rs. Cr.)

Investments in Press Tools for a New Model

Average Investment (Mode) has

been considered for market

estimation

Source: Expert Interviews, Avalon Consulting Analysis

The investments on press tools and dies for new launches vary significantly by type

of vehicle; the investment for a car is the highest at about Rs 300 Cr.


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14/11/10 SS

35.8

12.5

3.2

5.0

1.0

43.0

20.0

4.1

5.6

1.3

71.7

33.3

5.7

8.3

2.1

1.0

2.0

4.0

8.0

16.0

32.0

64.0

128.0

PassengerCars CV 3-Wheeler Tractor 2-Wheeler

Minimum Investment Average Investment (Mode) Maximum Investment

Investments in Press Tools per Model Facelift by Vehicle Type (Rs. Cr.)

Investments in Press Tools for a Facelift

The investments for a facelift is

~40% for the A Class Parts, and 5-

10% for the B&C Class Parts*

*Note: Refer Annexure for Break-up of Investments for a new model by A, B & C Class

The investments in press tools for a model facelift ranges from 14% - 28% of the cost

for a new model

14%% Investment in

a New Model 16% 26% 16% 28%



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Auto Segment: Market for New Press Tools in India

Market for Press Tools in India (FY2009, Rs. Cr)

The market for auto press tools in FY 2008-09 is estimated to be ~ Rs. 5450 Cr. with

new car launches being the dominant segment

15/11/10- SS/pd

5450

Source: Avalon Consulting analysis

CVss

1,340 (25%)

1320

(99%)

20

(1%)

PassengerCars

3,944 (72%)

3600

(91%)

344

(9%)

109(2%)

Tractors

3-Wheelers2-Wheelers

New Launches

Facelift

390(7%)

5060 (93%)

The share of 2-wheelers, 3-wheelers and tractors is negligible


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Next, we will estimate the extent of standardization prevailing in new press tools







x

=

=

x

=

x


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Which are the parts that can be

standardized?

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Analysis Methodology: Demand for Standard Parts in New Tools

The methodology for this step requires some elaboration.

What is the share of these parts

in the investments in new tools

What is the total

standardizable market?

What is the extent of

standardization in these parts?

What is the overall market

opportunity for standard parts?

We will walk you though the findings in each step


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standardized?

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Lets start by understanding what is the standardizable market opportunity



What is the total






Please recall that the total market for

new press tools is estimated to be

~Rs. 5450 Cr. in FY09


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lassification of Press Tools Parts

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Components of Press Tools & Dies

Essentially customized parts Parts that can be standardized

Die Mould

Die Cavity

Back Plate

Bottom Plate

Pillar & Die Sets

Punches

Buttons

Nitrogen Gas Springs

Pillars

Die Cams

Guiding Components

Sliding Components

Clamps

Drill bushings

Retainers

Ball Cages

Utility springs etc.

50-80% 20-50%% Share of

Tool Cost

In press tool building, tooling elements are more amenable to standardization

Mostly Die PartsMostly Tooling

Elements

Illustrative List Only major parts as

per primary

interviews cited

The parts that can be

standardized are mostly the

tooling elements; pillar and die

sets can be standardized for

very small child parts, butthese parts are very few in auto

Source: Expert Interviews


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Share of Tooling Elements in Press Tools

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20% 20% 20%

25%

35%

30%

25%

20%

30%

45%

35%

30%

25%

35%

50%

30%

25%

20%

30%

40%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0%

10%

20%

30%

40%

50%

60%

Car CVs 2- Wheelers 3-Wheelers Tractors

Class A Class B1 Class B2 & C Overall

Share ofTooling Elements in Press Tools by Part Class (%) value terms

Share of tooling element in A class

parts is relatively low owing to the

considerably higher cost of dies for

these parts


The share of tolling elements is low for class A parts. Within vehicle categories, it is

high only for tractors


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Market for Press Tools in India

14/11/10 SS

Market forTooling Elements in India (FY 2009, Rs. Cr.)

Cars118376%

CVs335

21%

2-Wheelers231%

3-Wheelers111%

Tractors8

1%

Total: Rs. 1560 Cr.

Source: Avalon Consulting Analysis

Thus, the market for standardizable parts in new tools for auto segment in India is

considerably lower at ~Rs. 1500 Cr. in FY09

This constitutes ~29% of

the total new tools

market of Rs. 5450 Cr.


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standardized?

14/11/10 SS


Next, we will derive the overall opportunity for standard parts



What is the total






Overall New Tools

Market:

Rs. 5450 Cr. in FY09

Standardizable

Market:



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Usage of Standard Tooling Elements by Vehicle Type and Parts Class

Extent of Usage ofStandard Tooling Elements by Vehicle Type and Parts Class


Cluster Car CVs2-

Wheelers3-Wheelers Tractors

A Class 5 5 5 5 5

B1 Class 5 5 5 5 5

B2 Class 3 2 3 2 2

C Class 2 1 2 1 1

5 4 3 2 1

80-100% 60-80% 40-60% 20-40% 0-20%

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Usage of standard parts is relatively low in

CVs, 3-wheelers and tractors owing to the fact

that these segments are dominated by domestic

players who largely do not get involved in tool

design forB1 & C class parts

The extent of standardization is high in A & B1 class tooling elements

Denotes segments in which

Indian OEMs dominate


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Extent of Standardisation Across Vehicle Types

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70% 68%

85%

57%

75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Extent ofStandardization in Press Tools (% of tooling element spends)


Thus, the level of standardization in tooling elements varies from approx. 55% - 85%

depending on vehicle type


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Market for Press Tools in India

14/11/10 SS

Market forStandard Press Tools in India (2009, Rs. Cr.)

Cars82876%

CVs228

21%

2-Wheelers192%

3-Wheelers6

1%Tractors

60%

Total: Rs. 1087 Cr.

The share of 2-wheelers, 3-wheelers and tractors is negligible


Hence, the market for standard parts in new tools for the auto segment in India is

estimated at ~Rs. 1100 Cr. in FY09 and is mainly from cars and CVs

This constitutes ~70% of the

standardizable market of

Rs. 1560 Cr., and ~20% of

the total new tools market of

Rs. 5450 Cr.


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standardized?

14/11/10 SS


We thus arrived at the market opportunity for standard parts in new tools



What is the total






Overall New Tools

Market:


Standardizable

Market:


Market for Standard

Parts in New Tools:


There is a further sub classification within standard parts which is relevant


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Auto Segment: Demand for Standard Press Tools in New Tools

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Global standard parts constitute about two-thirds of the standard parts demand; the

share ofOEM standards is relatively high in cars

Demand forStandard Press Tools in New Tools in India (2008-09, Rs. Cr.)

1087

Tractors

696

(64%)

391

(36%)

3-Wheelers2-WheelersCVs

228 (21%)

161

(71%)

67

(29%)

Cars

829 (76%)

513

(62%)

316

(38%)

Global StandardOEM standard

19 (2%)6 (1%)

6 (1%)


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14/11/10 SS


The next level of analysis deals with estimating the addressable market opportunity







x

=

=

x

=

x


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14/11/10 SS

Comments from PrimaryInterviews

Our expert interviews indicate that only the Indian OEMs design their tools in India.

Thus, the imported new press tools opportunity is not addressable as the design is

done by the global parent and the tool is supplied to India in CKD / SKD form

Remarks Global OEMs

100% of our press tool requirement is imported from our

mother plant in South Korea

- Hyundai

We directly import our Class A and Class C parts from our

foreign plants because it is cheaper than procuring or

manufacturing press tools in India

- Ford

All our tools are developed outside India, and supplied to

MUL or its suppliers.. To the best of my knowledge only Tata

and M&M (in cars) do their tooling in India

- MUL

All the Nissan Micra tools were imported

- Renault Nissan

Remarks Indian OEMs

We have an in-house set-up for all our tooling requirements

- Force Motors

We have a dedicated tool room for all Classes of sheet

metal parts

- Tata Motors

We manage all our tooling requirements internally

- M & M

We outsource our tool building to JBM Ogihara but they

work on our designs

- Ashok Leyland


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12 11

19

1 1

8

1

11

3

0


Launches - MNC OEMs Facelifts - MNC OEMs

3

11 11

1 11 1

9

3

0


Launches - Indian OEMs Facelifts - Indian OEMs

14/11/10 SS

New Model Launches andFacelifts byIndianOEMs

Most of the new launches in the cars segment are by foreign OEMs; CVs, 3-wheelers

and Tractors are dominated by Indian players

Source: Secondary Research, Avalon Consulting Analysis

New Launches and Facelifts by Indian Vs. MNCOEMs (2009-10)

We consider only the launches and facelifts of Indian OEMs to estimate the

addressable market opportunity


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14/11/10 SS

Automotive Segment: AddressableOpportunity for Standard Tools in New Tools

Thus, the addressable opportunity for a new Indian entrant is about Rs 450 Cr. in

FY09

Addressable Opportunity forStandard Tools in New Tools (Rs. Cr., 2008-09)

Addressaable44941%

Imported asSKD/ CKD

Tools63859%

Total: Rs. 1087 Cr.



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14/11/10 SS

Automotive Segment: AddressableOpportunity for Standard Tools in New Tools

About two-thirds of the addressable market opportunity is in global standard tools

Addressable Demand forStandard Press Tools in New Tools in India (Rs. Cr.)

449

Tractors

301

(67%)

148

(33%)

3-Wheelers2-WheelersCVs

228 (51%)

161

(71%)

67

(29%)

Cars

198 (44%)

123

(62%)

75

(38%)

11 (2%)

Global StandardOEM standard


6 (1%)

6 (1%)


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14/11/10 SS

Roadmap

Introduction


New Tools Demand

Replacement Demand

Overall



Conclusions

Annexure


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% Spends on Standard Replacement Spares per ReplacementCycle

14/11/10 SS


The calculation of replacement spends per vehicle is the first step towards estimation

of the standard spares demand for replacements


Replacement Spends forStandardSpares perVehicle



/

=

=

x


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Types of Standardization in Tool Parts

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Type of Maintenance

Largely Repaired /

Reconditioned

Breakdown

Replacement

Cams

Nitrogen Gas Springs

Die Sets

Punches

Buttons

Pillars

Guiding Components

Sliding Components

Clamps

Retainers

Ball Cages

Very few of the standard parts are frequently replaced; the spends on parts

replacement is estimated to be only about 3% of the total investments on standard

press tools per replacement cycle

Frequently Replaced

Parts

Bushes

Springs

4 2 1

The parts which are usually replaced are low value parts like bushes

and springs cam is the most high value part, but its usually

reconditioned nitrogen gas springs are again refilled and

reconditioned in fact, even springs are serviced and refitted many

time so the spends on replacement parts is very low

- Renault Nissan

The spends on press tools

parts is hence only about3% of the investments in

standard tools per

maintenance cycle

List of Key

Parts

Share of

Investments

5 4 3 2 1

>80% 60-80% 40-60% 20-40%


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Maintenance Cycle and Average Spends per Cycle

14/11/10 SS

Maintenance Cycle (No. ofVehicles) and Average Spends perCycle (% ofStandard Spares)

Vehicle

Type

Initial

Investment

in Standard

Tools per

Model (Rs.Cr.)

Maintenance

Cycle (No. of

Vehicles)*

Average

Spends per

Cycle (% Value

ofStandardSpares)

Average Spend perVehicle

Produced (Rs. / Vehicle)

Global

StandardParts

OEM

StandardParts

Total

Cars 62.6 100,000 3% 116 72 188

CVs 19.8 50,000 3% 89 30 119

2-Wheelers 0.8 100,000 3% 2 1 3

3-Wheelers 4.1 100,000 3% 9 3 12

Tractors 5.9 15,000 3% 80 38 118

*Note: The maintenance cycle is based on number of stampings; a few key parts require multiple stampings, whereas a singlestamping can produce multiple (primarily non-critical) components. In the absence of a clear conversion norms, a 1:1 ratio of

stampings to no. of vehicles is assumed based on expert views


Hence, the average spends on standard replacement parts per vehicle produced is

very nominal


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14/11/10 SS


Next, we factor in the no. of vehicles produced to arrive at the total demand for

standard spares


Replacement Spends on Standard Spares perVehicle



/

=

=

x


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Vehicle Production in India

14/11/10 SS

Vehicle Production in India (000 Nos., 2008-09*)

2- Wheelers

842073%

Car183916%

3-Wheelers4974%

CVs4174%

Tractors3403%

*Note: We have considered 2008-09 production to maintain consistency with estimate of market for new tools

Source: SIAM, ACMA

Indias vehicle production in FY 2008-09* was about 11.5 million vehicles

Total: 11,512


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Market for Standard Press Tools Spares in India

14/11/10 SS

Replacement Market forStandard Press Tools

Spares by Vehicle Type (2008-09, Rs. Cr.)

Cars34.5

75%

CVs5.0

11%

Tractors4.09%

2-Wheelers2.14%

3-Wheelers0.61%

Total: Rs. 46.2 Cr.


Factoring the average spends per vehicle produced, the market for standard press

tools spares in India is estimated to be ~ Rs. 46 Cr.

Cars segment account for about three-fourths of the demand

Based on vehicle production, the

replacement market is expected to

have grown to Rs. 60 cr. in 2009-10


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Segment-wise Demand forOEM Vs. Global Standard Parts (Rs. Cr.)

Segment-wise Demand forOEM Vs. Global Standard Parts (Rs. Cr.)

15/11/10- SS/pd

Tractors

4.0

2.7

(67%)

1.3

(33%)

3-Wheelers

0.6

0.47

(75%)

0.2

(25%)

2-Wheelers

2.1

1.5

(69%)

0.6

(31%)

CVs

4.9 (11%)

3.7

(75%)

1.2

(25%)

Cars

34.5 (75%)

21.3

(62%)

13.2(38%)

Global Standard

29.6 (64%)

OEM Standard

16.6 (36%)

46.2


Over 60% of the demand is for global standard parts


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14/11/10 SS

Roadmap

Introduction


New Tools Demand

Replacement Demand

Overall



Conclusions

Annexure


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14/11/10 SS

Automotive Segment Summary: AddressableOpportunity for Standard Tools

The overall addressable opportunity for standard tools in auto segment is Rs. 495 Cr.;

replacement demand constitutes only about one-tenth of the opportunity


Addressable Opportunity forStandard Tools in Auto (Rs. Cr., 2008-09)

495

16.0

(35%)

30.0

(65%)

Replacement

46.0 (10%)

148.0

(33%)

301.0

(67%)

New Tools

449 (90%)

Global

Standard

331 (67%)

OEM

Standard

164 (33%)


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Introduction


Demand Analysis: Consumer Durables

New Tools Demand

Replacement Demand

Overall


Conclusions

Annexure

14/11/10 SS

Roadmap


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No. of new Launches

14/11/10 SS


We use the same methodology as auto segment to estimate the demand in consumer

durables

Investments in New Tools per New Model Launch

Total Demand for New

Tools in India



x

=

=

x

Lets start with estimating the demand for new tools in India


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No. of New Launches andFacelifts by White Goods Segments

14/06/10 GJ/pd

Source: Expert Interviews, Tracking ofNew Launches by Top 5 Players in each category, Avalon Consulting Analysis

No. of Launches by Segment (2009-10)

New

Launches

Total

Facelifts

The share of

institutional segment

demand has diminished

over the last decade

20

8

12

Refrigerators Washing Machines Air Conditioners

Considering only

20% of the new

launches are in

metal body as most

models have moved

to plastic

The base frame of

the AC hardly ever

changed

The refrigerator segment is estimated to have seen the highest number of new

launches in 2009-10

There is no concept of

facelift in consumer durables


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14/06/10 GJ/pd

1

1.5

1

1.5

2

1.25

3 3

1.5

Refrigerator Washing Machine Air Conditioner

Min Investment Average Investment Maximum Investment

Press Tool Investment Range for all segments (Rs. Cr.)

Investments in Press Tools for a New Model

Source: Expert Interviews

The investments on press tools and dies is substantially lower than in auto

segment, and does not vary significantly by type of product

The corresponding

investment in the auto

segment starts from Rs. 5 cr.

and can be > Rs. 300 cr.


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Market for White Goods Press Tools in India

14/06/10 GJ/pd

Market for White Goods Press Tools in India (2008-09, Rs.Cr.)

Refrigerator30.049%

Washing

Machine16.026%

Air Conditioner15.025%

Total: Rs. 61 Cr.

Consequently, the total market for press tools in the white goods segment in 2008-09

is estimated to be ~ Rs. 60 Cr.; refrigerators dominate with about 50% share



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Spends on Standard Tooling Elements Per Model

14/11/10 SS

22.50

30.00

18.75

0

5

10

15

20

25

30

35

Refrigerators Washing Machines Air Conditioners

Spends on Standard Tooling Elements Per Model (Rs. Lakhs)


These spends are substantially lower than investments in automotive products

The spends on standard tool parts is substantially low in consumer durables; the

average spends per model is the highest at Rs. 30 lakhs in washing machines

As an OEM, we only deal

with outer skin panels

which requires a high level

of customization, hence

standardization is low

only about 15% Whirlpool (Refrigerator

Division)

Standard parts is about 10-

15% of the total tooling cost

for a model.

- Godrej Appliances

Average standardization of 15% is

taken across all product lines


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Consumer Durables: Market for Standard Tools in New Tools Market

14/06/10 GJ/pd

Market forStandard White Goods Press Tools in India (2008-09, Rs. Cr.)

Refrigerator4.5

49%

WashingMachine

2.426%

Air Conditioner2.3

25%

Total: Rs. 9.2 Cr.

Hence, the total market for standard press tools in the white goods category is

estimated to be ~ Rs. 9.2 Cr.; Refrigerators dominate with about 40% share



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Introduction



New Tools Demand

Replacement Demand

Overall


Conclusions

Annexure

14/11/10 SS

Roadmap


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14/11/10 SS


Let us now assess what is the addressable replacement demand for standard spares

Average No. of Units Produced per ReplacementCycle

ReplacementS

pends onS

tandardS

pares per Unit Produced

No. of Units Produced


/

=

=

x


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Consumer White Goods Production in India

14/11/10 SS

Consumer White Goods Production in India (000 Nos., 2008-09)

7614

3836

1789

Refrigerator Washing Machines Air Conditioners

Source: CMIE, Press Clippings

The production volume of white goods is substantially higher than of vehicles

Refrigerators, Washing Machines and AirConditioners are the three major consumer

white goods using sheet metal parts


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Maintenance Cycle and Average Spends per Cycle

14/11/10 SS

Maintenance Cycle (No. of Units) and Average Spends perCycle (% ofStandard Spares)

Vehicle Type

Value of

Standard

Parts per

Model (Rs.

Lakhs)

Maintenance

Cycle (No. of

Units)

Average

Spends per

Cycle (% Value

ofStandard

Spares)

Average

Spend per

Unit

Produced

(Rs./ 100,000

units)

Refrigerators 22.50 500,000 3% 13,500

Washing Machines 30.00 200,000 3% 45,000

Air Conditioners 18.75 500,000 3% 11,250


However, the average spends per unit is negligible across products

The tools we use can stamp parts foraround 500,000 units without any

problems, so we dont incur much cost

on maintenance...

- Whirlpool (RefrigeratorDivision)

We barely spend on repair andmaintenance of our tools; even from

that spend we usually dont replace

any parts but carry out maintenance

activities like greasing etc...

- Blue Star


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AVALONConsulting

Market for Standard Press Tools Spares in India in the White Goods Segment

14/11/10 SS

Market forStandard Press Tools Replacement

Parts by Product Type (2008-09, Rs. Cr.)

Refrigerators0.130

41%

WashingMachines

0.17053%

AirConditioners

0.0206%

Total: Rs. 0.3 Cr.


Consequently, the market for standard press tools spares in India is estimated to be

just about Rs. 30 lakhs in the white good segment


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Introduction



New Tools Demand

Replacement Demand

Overall

Primafacie Opportunity for a Value Added Logistics Intermediary

Summary of Conclusions

Annexure

14/11/10 SS

Roadmap


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14/11/10 SS

Consumer Durables Segment: AddressableOpportunity for Standard Tools

Addressable Opportunity forStandard Tools in Consumer Durables (Rs. Cr., 2008-09)

New Tools9.2

97%

Replacement0.33%

Total: Rs. 9.5 Cr.


The overall opportunity for standard press tools in the consumer durables segment is

estimated to be about Rs. 10 Cr; replacement demand has negligible share


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Introduction




Conclusions

Annexure

14/11/10 SS

Roadmap

Disclaimer: The conclusions in this

section are based on a very high-level

analysis of available information and

limited additional research. Further

detailed evaluation is recommended

prior to making a business decision to

target this opportunity


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58

Consumer DurablesAutomotive

Opportunity Evaluation

14/11/10 SS

Replacement

DemandNew Tools

Replacement

DemandNew Tools

Overall Analysis Methodology

We have restricted the opportunity evaluation only to the automotive application

Overall

addressable

demand is about

Rs 450 Cr.(restricted to

Indian OEMs like

Tata, Mahindra,

AL, etc.)

Needs to be

evaluated further

Overall

addressable

demand is about

Rs 50 cr. May not be

worth pursuing

as a standalone

opportunity, but

can be pursued

if new tools

market is also

available

Overall

addressable

demand < Rs 10

Cr. Not worth

pursuing further

Overall

addressable

demand < Rs 0.5

cr. Not worth

pursuing further


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14/11/10 SS

Automotive Segment: AddressableOpportunity for Standard Tools

Both OEM standard parts and global standard parts are prima facie attractive

opportunities

Addressable Demand for Auto Standard Press Tools in India (Rs. Cr., 2008-09)

3.6

(27%)

Tractors

164.7

(71%)

68.2

(29%)

9.5

(73%)

88.2

(38%)

CVsCars

10.0

6.7

(67%)

3.3

(33%)

2-Wheelers

5.5

(82%)

1.2

(18%)

3-Wheelers

6.7

144.3

(62%)

13.1 495

Global standards

is anybodys

play, and players

like Misumi have

already built a

very strong

catalog

OEM standards of

domestic OEMs like

Tata, AL and M&M

are level fields for

existing and new

players to compete.

However, a strong

catalog in globalstandard parts

would be essential

to also tap this

segment

Global

Standard

331 (67%)

OEM

Standard

164 (33%)

232.9 (47%)232.5 (47%)



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14/11/10 SS

Supply Chain for the Addressable Standard Tool Parts in Automotive in India

The OEM standard parts are manufactured domestically, whereas the global standard

parts are largely imported through aggregators


Supply Chain for the Addressable Standard Tool Parts in India

Captive Tool

Rooms

Tool Rooms of

Component

Suppliers

FocusedTool

Rooms

Parts

Aggregators in

India like

Fibro, Misumi

etc.

Tooling

facilities of

select

aggregators

Foreign Parts

Aggregators

Eg. Misumi

(Thailand)

Independent

parts suppliers

Press Tool

Builders

GlobalStandard

Parts Aggregators

GlobalStandard

Parts ManufacturersOEM Standardparts are

largely

manufactured

by the tool

assemblers

For the

addressable

market, the

tool

assemblersare in India

The global

standard parts are

manufactured

outside India and

imported largelythrough

intermediaries

Tool assemblers

directly dealing with

foreign parts suppliers

independently is

limited, but possible


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AVALONConsulting

14/11/10 SS

Standard Press Tools Supply in Automotive Segment* (2008-09, Rs. Cr.)

Global Standard331

OEM Standard164

Aggregators in India

116

Foreign Aggregators166

Foreign PartsManufacturers

50

OEM's Captive ToolRooms

82

Component Supplier'sTool Rooms

49

Focused Tool Rooms33

Total Market Global Standard Parts OEM Standard Parts


Prima facie, the opportunity for global standard parts is more readily addressable by

an independent aggregator

Supply Scenario in Automotive Standard Press Tools Parts (2008-09, Rs. Cr.)

Aggregators such as Misumi and Fibro are already supplying global standard parts

to Indian tool builders

Tapping this opportunity

will require concept selling

to OEMs to move towards

global standards in their

design. Resistance from

existing tool builders is

expected

This is a more readily

accessible market, but

the competition from the

existing suppliers such

as Misumi and Fibro


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14/11/10 SS

Business Model : Misumi

Aggregators like Misumi have already brought about substantial improvements in the

SCM of global standard tools in India. . . 1

Source: Misumi Annual Report 2008

The Misumi like model

seems to have a similar

value proposition as

proposed by TVS

Logistics, except for the

kitting

we partnered with small scale

component manufacturers scattered

across Japan and began catalog

saleswe standardized many

components previously available only

through special orders and listed them in

our catalog

- Misumi Annual Report 2008


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14/11/10 SS

Business Model: Misumi

Source: Misumi Annual Report 2008

They also appear to have a powerful business model to deliver on their short lead

time proposition especially for the Japanese oriented Indian market

With India being predominantlyJapanese OEM dominated, the

advantage of Misumi over any

European or US-based aggregator

is high


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14/11/10 SS

Integrated Material Solutions Process ofKitting

Solutions Provider

We did a dip stick evaluation of the value added logistics intermediary proposition in

the press tools value chain (across new tool building and replacement spares)

Source: TVS Logistics Inputs

Component

Supplier

Kitting Service

Provider

New Tool

Assembly

Replacement

Demand

Supply

Management

Supplier

Collaboration

Order

Management

Build-pack

Assembly

JITDelivery

One stop shop for on-time delivery of all parts as per

specifications and as per schedule

Significant reduction in cycle times for parts

procurement

Reduced inventory carrying costs

Savings in storage space / rent

Reduced down time

Reduction in labor hours

Increase in throughput

Cost reduction in parts procurement

Technical inputs to increase standardization and reduce

parts cost

Value Proposition forCustomer


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14/11/10 SS

We get the dies imported from Japan the tooling is 50% in-house, and 50% outsourced since the die takes 4 months for

delivery, the tooling elements procurement has not been a bottleneck there was only one case of part misalignment about 2

years back which created a problem, but otherwise we do not have an issue

- Mahindra

We develop our tools in-house the dies are outsourced most of the elements except Pillars, Bushes, Nitrogen Gas Springs

and Ball Cages are non-standard, and we make it in-house these parts are also supplied by players like Fibro and Misumi

their serv ice is good the non-standard parts are made in-house or procured locally we havent felt any need to

standardize our operations do not require an aggregator- Wheels India

We take about 18-24 months to develop our tools but the long lead time is due to the simultaneous engineering in our new

models the parts procurement lead time is not a constraint as we do most of our tooling in-house since many of our

parts are non-standard designs, the concept of an aggregator will not work for us

- Tata Motors

We get many of the parts from Misumi earlier we used to deal with Misumi Japan now they are present in India Misumi

India takes longer than Misumi Japan, but the lead times are manageable we dont see a major gap in product / service

offering- JBM Ogihara (manages tooling for AL)

We do not have any tools in our facili ty the tools for our pressed parts are developed by our suppliers they mostly develop

the tools in-house the standardization is low we also push them to lower costs so the opportunity for premium services is

low

- Delphi TVS

Respondent Voices: Concept of Press Tools Kits for New Tools

Our interviews indicate that the concept will take time to catch up in India owing to

largely internally developed parts and existing supplier relationships

Source: Avalon Consulting Research


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14/11/10 SS

I dont think we would like to use such a service at least for now the spares we carry is very low only about

Rs. 2 crores and depending on an external supplier for such critical parts would not be acceptablethe cost of

downtime is very high we prefer to hold stocks of spares

-Renault Nissan

The concept of standard spares kits is interesting but the suppliers might face the entry barriers to this as the

market is already established for such standard spares. the OEMs will not directly build the trust on such

new suppliers. -Maruti Udyog Ltd.

We do most of our tooling in-house not sure such a concept will work

- Tata Motors

Most of our tooling is done at the JBM unit they (tool supplier) also take(s) care of the parts supply

-Ashok Leyland

Our consumption is less, but the standardization potential is high a kit aggregator could be useful in the

future -TAFE

-We have already established relations with tools suppliers over the years. an intermediary like an

aggregator/ kit supplier is not very useful

-- TVS Motor Company

Respondent Voices: Concept of Press Tools Kits for Replacement

In the replacement application too, customers are holding spares stocks and appear

less inclined to use an aggregator



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AVALONConsulting

However, there could be an opportunity in working with Indian OEMs to drive the

conversion ofOEM standard tooling elements to global standard elements

68

The genesis of global standard parts is from the OEM standard parts:

the origin of the standards is usually the OEMs. Once they develop a new dimension, it is known in the

market as a particular part number (usually provided by the OEM) then its for anybody to use thats how we

have also developed our products..

- Misumi

Players like Misumi were instrumental in developing the standard parts as a separate business opportunity

Three or four decades ago... Component procurement required long lead times and entailed considerable lead

times small lot production made component manufacturing inefficient and quite costly Misumis business

model revolutionised component procurement we partnered with small scale component manufacturers

scattered across Japan and began catalog saleswe standardized many components previously available

only through special orders and listed them in our catalogs

- Misumi Annual Report 2008

While players like Misumi have signif icant f irst mover advantage in global standard parts, there could beopportunity for a new player to replicate the model in India by cataloging the Indian OEM standard parts

Opportunity in Indian OEM Standard Parts



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14/11/10 SS

All the press tools components forNissan cars come from Japan, Thailand and China these countries even

service our US and Europe operations they are not likely to shift out tooling from these countries till there is cost

advantage

-Renault Nissan

We have got Renault press tools components from France, Japan and ThailandAsia is increasingly supplying

press tools for Renaults global operations including Europe and US the focus is on cost reduction, and these

countries provide equivalent quality at significantly lower costs

- Renault Nissan

Honda has a dedicated tool room in Thailand.. They cater all the major tooling requirements across the globe out

ofThailand

- Honda Siel India Ltd.

Respondent views on Asia as a supply hub for press tools parts

Our quick research also indicates that Asia is emerging as a supply hub for tooling

elements



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14/11/10 SS


While US Companies supply approximately 70% of the domestic demand for industrial tools, dies, and molds, foreign

competition, primar ily from Japan, Canada and Germany, as well as China is shrinking the domestic demand for US

productsa large challenge faced by the US tooling firms is the continued weakness of US automakers, particularly GM and

Ford about 50% of all domestic tooling is produced for the Big Threei t has been difficult for US companies to enter the

supply chain of foreign carmakers

-International Trade Administration, Department of Commerce, USA, 2009

Americas tool and die industry is in danger of going the way of our shrimping industry. our tool and die industry is rapidly

disappearingIn Michigan, about 34,000 tooling jobs have vanished in the last five years, according to state labor dataThe

National Tooling & Machining Association (NTMA) reports that about 30 percent of the countrys toolmakers have gone out ofbusiness since 2000 and many more are expected to follow.

- Losing Americas Livelihood, by William F Jasper, The New American, 2004

Domestic TDM (tools, dies and molds) sources are being pressed to meet the world price for tools or risk losing their bids

winning bids often include tools made in low cost countries (LCCs).. The price advantage of outsourcing tools (is) 20 to 35%

lower than prices offered by Michigan tool shops.most notably, costs are reported to be lower in China, Korea and

Thailand new cost reduction targets (for tooling by OEMs) are approaching 50% (from 5-10% earlier)

-Study titled The World Class Tools Shop and its Prospects in Michigan, Center for Automotive Research, Michigan

Manufacturing Technology Center, 2006

In the recent years, the long established European Tooling Industry has been facing a fierce competition from new emerging

export oriented manufacturing countries (notably from Asia) Most important driving factor has been lower production costs

-Eduardo J C Biera, Joaquim Menezes, The Tool, Mould and Die Sector and the Automotive Industry, 2005

Prominent Trends in North American and European Tooling Industry

This is also corroborated by the feedback available from the Western tool building

industry on the Asian threat

Thus, an Asia presence will be valuable for a US based aggregator to diversify the

business in line with emerging growth trends. However, there needs to be adequate

protection for the base US business while this diversification happens


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Introduction




Conclusions

Annexure

14/11/10 SS

Roadmap


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14/11/10 SS

The overall market for press tools in India is about Rs. 5550 Cr.; automotive segment dominates with 99% share

The standardizable components in press tools is largely limited to the tooling elements; a significant part of the

tooling elements is still customized

Consequently, the addressable market for standard press tools in the automotive and consumer durables

application in India is valued at over Rs. 500 Cr. Of this, the opportunity in consumer durables is negligible, and

not worth pursuing

The automotive segments addressable opportunity is ~ Rs. 500 of which almost 90% (Rs. 450 Cr.) is in newtools

About one-third of this opportunity is in OEM standard parts, whereas the rest is in global standard parts

The trends in the industry favor standardization and the opportunity for standard tools is likely to increase in the

future

Thus, the market opportunity for standard press tool parts in India is attractive

Key Conclusions MarketSize

The opportunity to supply standard press tool parts to support new tool building in

the Indian automotive segment appears to be attractive

The proposition of an aggregator for global standard parts is alread being


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AVALONConsulting

14/11/10 SS

The market for OEM standard parts (about Rs. 160 cr.) is currently being served by:

Captive production by OEMs (for OEM standard parts, especially the Indian OEMs)

Tool rooms of component suppliers

Focused tool rooms

The larger opportunity (Rs. 330 cr.) in global standard parts is being serviced by:

Focused tool rooms/

aggregators in India Imports by foreign aggregators such as Fibro, Misumi etc.

The competition from players like Misumi is formidable considering the strength of their catalog (300,000

parts), and their first mover advantage in India, which is primarily a Japanese OEM market

The customers of standard parts already have established relations with these suppliers and there is no

apparent gap felt in the market

Hence, the concept of kitting and aggregation did not find resonance based on our preliminary interviews with

OEMs and tool rooms

Thus, this concept may require to be better articulated in terms of the benefits after a more in-depth analysis ofcustomer needs and practices and inputs from the US entity

However, there is a large enough market for standard parts which is being serviced by third party aggregators

and hence prima facie, India is an attractive market

Preliminary Conclusions Opportunity for the TVS Proposition

The proposition of an aggregator for global standard parts is already being

addressed in the Indian market and TVS will need to compete and take a share of this

opportunity preliminary feedback on kitting has not been encouraging


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Introduction




Conclusions

Annexure

1. Investment break-up for a new model by parts class

2. New Models and Facelifts in 2009-10

14/11/10 SS

Roadmap


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14/11/10 SS

Investments in Press Tools for a New Model by Parts Class

27%33%

60%

32%

65%

60% 50%

30%

35%

25%

13% 17%10%

32%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Class A Class B Class C

Investment in Press Tools by Class of Part (%)


Annexure 1: Break-up of investments on press tools for a new model by A, B and C

Class parts


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Introduction




Conclusions

Annexure

1. Investment break-up for a new model by parts class

2. New Models and Facelifts in 2009-10

14/11/10 SS

Roadmap


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Annexure 2A: Launches and Facelifts in 2009-10: Cars*

77

Car Model Launches and Facelifts 2009OEM Model Launched Facelifts

Maruti

Ritz

A-star

WagonR

Swift (domestic)

Alto(domestic)

Tata Motors

Nano (Launched in March 2009 considered for estimation)

Aria

Indigo Manza

M&M Scorpio

Hyundai

I20

Verna

GM Beat

Cruze

Ford Figo Endeavor

Honda Jazz City

Civic

Nissan Micra

Mitsubishi Lancer

Total 12 8

Total Domestic 3 1

16/11/10 RS/pd

* Note: Only models manufactured or assembled in India have been considered

Source: Annual Reports, Company Web Sites, Press Reports


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78

Two wheeler Model Launches and Facelifts 2009

OEM Model Launched Facelifts

Bajaj

Pulsar 135CC

XCD 135 DTS-i

Discover 100 CC

Pulsar 150CC

Pulsar 220

Hero Honda Passion Pro

Karizma Fi

CBZ Xtreme

Splendor NXG

Pleasure

Yamaha

R6

Fazer

FZ-S

R125

TVS

TVS SR125

TVS wego

TVS Jive

Apache RTR Menace

Scooty streak

Honda

Activa 110

Aviator 110

CBTwister

CBF Stunner

M & M

Rodeo

Duro

FlyteSuzuki Suzuki GS150R

Royal Enfield Bullet Electra 350cc Classic 350 CC

Classic 500 CC

Total 19 11

Total Domestic 11 9

16/11/10 RS/pd

Annexure 2B: Launches and Facelifts in 2009-10: Two-wheelers*

* Note: Only models manufactured or assembled in India have been consideredSource: Annual Reports, Company Web Sites, Press Reports


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79

3 wheeler Model Launches and Facelifts 2009


Atul Auto Atul Gem

Bajaj RE600

M&M Alfa

Champion

Total 1 3

Total Domestic 1 3

16/11/10 RS/pd

Annexure 2C: Launches and Facelifts in 2009-10: 3-Wheelers*




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80

CVs Model Launches and Facelifts 2009


M&M

Maxximo

Gio

Mahindra-Navistar range of trucks (domestic)

Tata Motors

Magic

"World Truck" range of trucks (4 models)

Tata 407 Pickup

Super Ace Xenon XT (domestic production)

Marcopolo buses

AL Ultra low entry (ULE) bus

3116

Eicher E2 Plus series of light and medium duty trucks.

Total 11 1

Total Domestic 11 1

16/11/10 RS/pd

Annexure 2D: Launches and Facelifts in 2009-10: CVs*




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81

Tractors Model Launches and Facelifts 2009


M&M Yuvraj-215

Total 1 0

Total Domestic 1 0

16/11/10 RS/pd

Annexure 2E: Launches and Facelifts in 2009-10: Tractors*




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END OF PRESENTATION

Documents

271110 C SS Standard Press Tools Market Evaluation V9