Boost for safety business as Govt makes airbags must in new cars from Oct

Govt has mandated that all new cars will have to be equipped with airbags

“What have you done today to save more lives?” This message welcomes entrants to the Manesar factory office of Autoliv, the Stockholm-headquartered manufacturer of airbags and other automotive safety systems. The business of saving lives by making safer vehicles is getting bigger in India, the fifth-largest car market, because of new regulations. 

Take the case of Autoliv, which claims to be the largest player in the domestic airbag market. Its Indian subsidiary has seen revenue from airbags jump 88 per cent to Rs 400 crore in the year ended December 31, 2016. The contribution of airbags to the company’s revenue jumped from 31 per cent in 2015 to 42 per cent in 2016. Airbags also became the largest contributor and overtook seat-belts, the other key product. The increase in airbags revenue helped its total revenue grow 40 per cent in 2016 to Rs 956 crore. 

Autoliv’s growth from airbags is a good proxy for the expansion that other airbag makers would be seeing in India. Almost every new car that has been launched in the past one year has at least one airbag (driver side), while some also have passenger airbags. 

The government has mandated that from October 2017, all new car models will have to be equipped with airbags to meet crash test norms. Existing models need to meet these norms from October 2019. Dual airbags in a car roughly costs Rs 15,000. Manufacturers say they will meet the norms ahead of the deadline.

Autoliv India has airbag manufacturing units at Manesar (Haryana) and Bengaluru (Karnataka). “India is our next big market from the business perspective. The legislation is supporting growth,” said Sivakumar S, director (engineering & development), Autoliv India. 

In 2016, the company manufactured and sold 2.6 million airbags in India — 73 per cent more than in 2015 — and claims to have a 45 per cent market share. 

The company says it saves over 30,000 lives globally every year and prevents over 300,000 severe injuries. The 146 million airbags it sold in 2016 brought over 50 per cent of its $10-billion global revenue.  

Airbags have been used in India-made cars meant for export markets for long, but the current growth is coming from the vehicles sold locally. Other airbag makers operating in India are Toyoda Gosei Minda, Ashimori, Rane TRW, etc. 

“The availability of airbags is no longer an issue. Every supplier has been given volume indication for near future, and a plan has been worked out,” said C V Raman, executive director (engineering) at Maruti Suzuki, the country’s largest carmaker and a key customer of Autoliv. 

The challenge, however, is to increase localisation to bring down costs. “Inflator and bag are the major constituents in price and they are still imported. Our effort will be to localise. We are discussing how to localise the bag. These are made in millions outside. An economy of scale has to come to justify investments,” said Raman.

Autoliv made its first airbag in India almost nine years ago. But, it was just an assembly of parts imported from its overseas suppliers. With time, it has managed to move the needle on localisation, currently at 50 per cent. Sivakumar said the company was doing a pilot to locally manufacture the nylon bag. Once that is done, localisation will move up to 70 per cent. 

The local manufacturing of inflator (which inflates the bag during a crash) might take some time. The selection of suppliers for an airbag is much more critical than selecting vendors for other auto components. This is because an airbag is a life-saving device and has to deploy within seconds of a crash. “We are building capabilities of suppliers here,” he said. 

Autoliv conducts a random deployment test on every lot of airbags it makes. One test is mandatory after every 5,000 units, if the lot size is bigger.  

Raman said the first point of safety in a vehicle was the use of seat-belts by all the occupants. “That will reduce the injury predominantly. Airbags can only improve it by 10 per cent. If you don’t wear a seat belt and the vehicle has an airbag, the consequences are going to be more fatal. No number of airbags can save you,” he said.