Makers of safety-critical parts on capex drive to get set for new rules

Not much gain for seat belts, which are a standard feature in several vehicles; but the airbag rule--as and when it takes effect--will have a multiplier effect on safety-critical components

Manufacturers of airbags, advanced driver assist systems (ADAS), and electronic stability control (ESC) are investing in capacities and localisation of technologies to capitalise on the upcoming stringent legislation related to passenger safety and strong demand for feature-rich premium cars.

Joyson Anand Abhishek Safety Systems — an Anand Group company that makes airbags, seatbelts, crash sensors, and child restraint systems —has earmarked an investment of around Rs 250 crore for production ramp-up and localisation. The company has invested around Rs 100 crore in research and development, said Mahendra S Rajawat, president and managing director at the firm.

 “With the new regulations, we expect our business to increase three times than what we are today. From two airbags to six airbags itself means a threefold increase,” said Rajawat.

Subhabrata Sengupta, executive director at consulting Avalon Consulting, pegs the current market size of airbags in revenue terms at around $350 million and expects it to catapult to $1 billion if the six airbag regulation takes effect. 

There will also be an incremental $600-million opportunity for those involved in the supply of sensors, ECUs (electronic control units), etc, he said.

Days after the high-profile car crash that claimed the lives of two, including ex-Tata Sons chairman Cyrus Mistry, Nitin Gadkari, minister of road transport and highways at a Business Standard event, said that a fine would be imposed if those on the rear seat of a car were found not wearing seatbelts.

This, however, may not mean much for seatbelt makers, said Sengupta. “Seatbelts have been standard for more vehicles for some time now, even in the lower segment. Therefore, it’s not such a big opportunity but the airbag regulation -- as and when it takes effect -- will have a multiplier effect on the safety critical components,” he said.

In January this year, the Ministry of Road Transport & Highways (MoRTH) issued a draft notification that sought to make it mandatory for cars manufactured after October 1, 2022, to be fitted with two side/side-torso airbags, one each for the persons occupying the front row outboard seating positions, and two side curtain/tube airbags, one each for the persons occupying the rear seat.

In a note submitted to the government, automakers have said that additional airbags will jack up the costs of cars, especially small cars, making them out of reach for first-time buyers. Moreover, additional airbags won’t alone help in reducing road accidents.

Additional airbags are expected to raise the cost of safety equipment per car, said Rajawat. Depending on the segment, on an average, the airbag cost will increase to around Rs 30,000- 40,000 per car, from around Rs 15,000-20,000 now,” he pointed out.

Auto-part manufacturers are bracing for newer regulations, too.

Continental India, manufacturer of safety-critical parts, systems and electronics, sees penetration of ESC (electronic stability control) in passenger cars increase to 75-80 per cent from the current 20 per cent in a year even without a mandatory requirement for the technology, said.

 “We are fully geared up for the upcoming regulations and shift in consumer preferences, and have made enhanced investments -- be it for ESC, for which we have a capacity of 4 million units, or airbag control units,” said Prashanth Doreswamy, president and CEO, Continental India.

The company is also the largest supplier of ESCs, airbag control units, and ADAS (advanced driver-assistance systems) globally. It shall invest in localising ADAS once volumes in India reach a critical mass, he said. It recently got into a joint venture to localise ESC manufacturing; it shall help the company reach 100 per cent localisation of the safety-critical technology.

In July this year, the local arm of the German manufacturer got into an agreement with the Karnataka government and committed to investing Rs 1,000 crore in the state to further the growth of its technical centre in India for innovation around automotive software development and connected technologies.

 Doreswamy expects ESC to go the anti-lock braking system (ABS) way. ABS was made mandatory in the passenger vehicle segment in 2018. “This is a much superior technology compared to ABS and is likely to become mandatory sometime in 2024,” he said.

 While ABS helps prevent the wheels from locking up during braking, ESC helps get back firmly onto the road preventing the vehicle from veering and skidding off the road or toppling when one is driving at high speeds. It also enhances the ability to negotiate sharp corners without a mishap. Mahindra XUV700, MG Hector and Gloster, are some of the models that have ESC and it will be soon seen in more models.  

Several manufacturers are going to offer the feature as there is a lot of demand from car buyers as the latter are becoming more conscious of safety, said Doreswamy.

Automakers are now focusing on a uniform standard for vehicles for domestic, as well as export markets. A strong preference for safety features by younger buyers and up-trading from small cars to SUVs are also fuelling demand for safety-critical parts, said industry officials.

Betting On Safety

• Rs 1,000 crore Continental to invest in Karnataka for automotive software development and connected tech
• Rs 250 crore Joyson Anand Abhishek Safety System to put in for production ramp-up and localisation
• $1 billion the expected market size of airbags following the implementation of new rules; it is $350 bn currently
• $600-million opportunity for those involved in supply of sensors, ECUs, and other safety equipment