The airbag industry is one of the fastest-growing auto component segments. It is expected to benefit from the increase in content per vehicle arising from higher regulatory requirements and a voluntary increase in the number of airbags per vehicle for enhancing safety. Accordingly, ICRA expects the industry to grow to INR 6,000-7,000 crore by FY27, from the current INR 2,400-2,500 crore, at a four-year CAGR of 25-30%.
Only one airbag per car (driver airbag) was mandatory from July 2019. However, this increased to two airbags (dual front airbags) for category M1 vehicles (vehicles that can seat up to eight passengers and weigh less than 3.5 tonne) manufactured from Jan 01, 2022. Currently, for M1 category vehicles that will be manufactured from October 1, 2023, two side airbags and two side curtain airbags have been mandated to prevent torso injury for people occupying front row outboard seating positions and prevent head injury for people occupying the outboard seating positions.
Vinutaa S, Vice President and Sector Head, ICRA, said, “The mandatory content per vehicle for airbag manufacturers is expected to rise from INR 3,000-4,000 currently to INR 8,000-10,000 by October 01, 2023. The average number of airbags per car sold is about three currently, and this is expected to increase significantly post the mandatory implementation of six airbags per car from October 01, 2023. The cost for OEMs could increase further depending on modifications required in cars’ structural changes and deployment of additional sensors.”
Scope For Localisation, Development
The inflator forms about 50% of the total airbag cost, while the cushion and other components form the remaining. The industry currently imports 60-70% of its components, primarily from overseas parents/joint venture partners, stemming from the lack of indigenous technological capability and the absence of adequate volumes. According to ICRA, the import content would only increase further going forward unless there is adequate backward integration for the incremental airbags expected to be produced.
There is immense scope for localisation and development of the Tier-2 vendor ecosystem in this space, and increasing volumes could make this economically viable. It can improve margins through greater value addition and ease supply-chain challenges for airbag manufacturers. Airbag component manufacturing is a part of the PLI scheme for facilitating an increase in indigenous manufacturing. Given the potential for a multifold increase in airbag volumes, most airbag manufacturers are localising key components.
Vinutaa added, “Capacity building in the next one year is critical to meet regulatory requirements in a timely manner. Several players have started undertaking capacity enhancements in the last 6-8 months to scale up their facilities gradually, and ICRA expects a capex of ~INR 1,000-1,500 crore in the next 12-18 months for capacity enhancements and localisation measures.”
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