As per Euromonitor International findings, Indian bearing, gear and driving elements industry grew by around 10 per cent in 2018 and is set to sustain strong growth over the upcoming years as well. The industry is highly dependent on its largest buyers – automotive industry, including not only motor vehicles, but also two-wheel of three-wheel transport equipment, agricultural and forestry machinery industry and machine tools industry. This article discuss about recent trends in the gears and bearings industry of India.

 

Indian bearing market is estimated at Rs 95 billion and it constitutes less than 5 per cent of global bearing demand. In terms of consumption, about 60 per cent requirement is catered through domestic production while remaining is met through imports. Indian market is dominated by international majors as well as indigenous players like NEI, NRB and others. While there are large numbers of players present in the industry, the competitive intensity is moderate as top 5 players constitute 80 per cent of market share. Major market holders are having robust technology collaborations with their parent foreign holding group which is strength as bearings require highest standards of quality because of their end use in critical machine parts.

 

Gear manufacturing market in India is expected to grow at a CAGR of 9.44 per cent. One of the key factors contributing to this market growth is the rapid infrastructure development across various states of India. The gear manufacturing market in India has also been witnessing an increased outsourcing of manufacturing activities. 

 

Factors driving demand

 

Demand for bearings and gears are stimulated by the expanding domestic manufacturing sector, especially automotive sector. For example, according to the India Brand Equity Foundation, sales of commercial vehicles grew by nearly 18 per cent in 2019 financial year, while three-wheelers went up by more than 10 per cent. In addition, Make in India programme is also set to have effect on the industry. The programme expects that manufacturing’s share of GDP will reach 25 per cent by 2022, compared with 15 per cent as of 2017. Some key industry categories and customers are specifically targeted by the initiative, including electric machinery, automotive components, construction and others, thus further driving demand for gears and bearings.

 

Key technologies

 

Technological developments in vehicle production with increasing importance for lower emission, lighter and more reliable vehicles also push bearings and gears manufacturers to search for new solutions and offer new products. Moreover, due to fluctuating steel prices, producers are also looking for ways and methods to improve their technical standards.

 

“If talking about the bearings, gears and driving elements industry, exports account for around one fifth of total product output. Therefore, the industry mainly relies on domestic rather than international demand. The USA remains by far the largest export partner, accounting for around 30 per cent of total exports, followed by Germany with 10 per cent share and Italy with around 7 per cent,” informs Vita Urbonaitiene, Senior Analyst Economies and Consumers, Euromonitor International.

 

Effects of automotive slowdown

 

Slowing not only local but also foreign automotive sector post challenges for bearings and gears industry, which is highly dependent on purchases from the automotive industry. Therefore, in the short term, bearings and gears producers are set to experience slowing revenue growth. Nevertheless, India’s government ambitions to increase production of electric vehicles and reach electric vehicles penetration of 30 per cent by 2030 are anticipated to create additional revenue sources for the bearings and gears in the longer run. In addition, other government initiatives such as Make in India is set to stimulate manufacturing sector. 

 

Challenges:

 

The gears and bearing manufacturers are battling through various challenges. Some primary challenges include those of lighweighting of vehicles and emission control. Regulatory requirements of emission rules and improved safety norms demands for reduced vehicle weight and lower friction technology. Customers require lighter weight, intelligent vehicle control and of course low noise and improved reliability from their vehicles. It requires companies to have R&D and new production facilities to cater such specifications.

 

“The companies with technological partnership with their foreign group entities do put forward as on stronger hold as compared to the Indian companies with no foreign collaborations as they have the advantage of tried and tested technical competencies before being brought into India,” states Urbonaitiene.

 

“Raw material cost accounts for around 60-62 per cent of bearings manufacturer’s revenue. Bearings are mainly manufactured using high grade steel or alloy steel, which exposes them to global steel price movement. Though the top players have the advantage of increasing prices on the back of technical know-how and quality standards, but still increasing input cost is a big hurdle to increase the margins beyond a constant level,” adds Urbonaitiene.

 

Industry segment at rescue

 

Anant Patel, Director, Subham Bearings, states, “Automotive slowdown may have affected suppliers of gears and bearings but industrial bearings and gears market in India very much growing. This growth is propelled by rise in urbanisation projects, infrastructure growth and many development projects being the at the centre overall growth and development of India.”

 

“Demand from the construction sector and big projects funded by government will keep a stable outlook till 2025. Post 2025, we may see some technology disruptions which Indian SMEs will have to work out in the near future,” adds Patel.

 

The companies with technological partnership with their foreign group entities do put forward as on stronger hold as compared to the Indian companies with no foreign collaborations as they have the advantage of tried and tested technical competencies before being brought into India.

 

Vita Urbonaitiene, Senior Analyst Economies and Consumers, Euromonitor International.