Uno Minda says airbags localised, barring inflator; expects revenue bump

Auto components maker Uno Minda pegs its airbags vertical to potentially rake in annual revenue of as much as ₹1000 crore post the government mandate to fit six airbags in all passenger vehicles, Sunil Bohra, executive director and group chief financial officer, tells Fortune India. Currently, Uno Minda generates revenue of ₹350-400 crore annually.

"We are getting good traction in some of our businesses. We should be able to increase the share of our business," says Bohra. Uno Minda has a significant presence in the A and B-segment of passenger vehicles—where the transition to six airbags has not taken place—and that is what the auto components maker wants to tap.

Speaking on the capacity, Bohra says that the company currently has headroom to increase its manufacturing, in the wake of this incipient demand. "We have incremental capacity available, in terms of the new plant we have put up in Gujarat—where we have a joint venture. We have that flexibility, but we will need some equipment. Some of them have already been ordered, and some we will order based on the confirmed orders we get from OEMs," he explains. The Ministry of Road Transport and Highways (MoRTH) said that the existing airbag manufacturing capacity in the country is 22.7 million, and an estimated increase in production for next year is 37.2 million while quoting data from the Society of Indian Automobile Manufacturers (SIAM).

Even putting up the additional pieces of equipment into the manufacturing process will not take time, because component makers like Uno Minda were expecting a mandate to come into effect for the past three to four years. "All this talk in the public discourse, about implementing such a regulation, has come up recently. We were expecting this regulation to come up for some time, and planned our last expansion accordingly. It was only a matter of time," says Bohra. Therefore, the primary investment, in infrastructure, has been already made. On the supply chain, Bohra says that apart from the airbag inflator, everything has been localised. "We have localised even the cloth that is used in the airbag, right from the stitching process." He adds that there is also no visible disruption in the supply of the inflator, at least for the confirmed orders.

The transition to six airbags, according to Bohra, will not be a 'sudden jump'. "Because this regulation was about to come, and there have been multiple extensions, the new launches already have six airbags as standard. People are not waiting for this regulation to implement. It will not be like suddenly we will migrate to six airbags from October," he says.

Carmakers like Kia India have already made six airbags standard across all variants and models. However, the MoRTH has said that currently, only 17% of cars sold in India have six airbags. "The customer is being given the flexibility to opt for trims with six airbags, whereas the top-spec variants already have six airbags," says Bohra.

Nitin Gadkari, the union minister of road transport and highways, deferred the installation of six airbags in all passenger vehicles to October 1 of this year. On January 14, 2022, the government proposed that vehicles of category M1 that are manufactured after October 1, 2022 shall be fitted with six airbags. The comments and suggestions by various stakeholders of the automotive industry are under consideration before the ministry. "What we have suggested to OEMs is to at least fit the new launches with six airbags, so that at least there, the design changes can be done before the vehicle goes into production," says Bohra.

The mandate has attracted a skewed response. While a section of carmakers has welcomed the government's determination to introduce six airbags, Gadkari has been vocal about some companies were "constantly making opposition."

RC Bhargava, chairman of Maruti Suzuki India Limited (MSIL), India's largest carmaker, has said that the narrative which is built around safety entails installing more passive safety systems in vehicles—the brunt of which is borne by the customer.

Notwithstanding, the airbag industry is expected to benefit from the increase in content per vehicle arising from higher regulatory requirements and voluntary increases in the number of airbags per vehicle. Rating agency ICRA expects the industry to grow to ₹6,000-7,000 crore by FY27, from the current levels of ₹2,400-2,500 crore, at a four-year CAGR of 25-30%.

"The mandatory content per vehicle for airbag manufacturers is expected to rise from ₹3,000-4,000 currently to ₹8,000-10,000 by October 1, 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 1, 2023. The cost for OEMs could increase further depending on modifications required in cars' structural changes and deployment of additional sensors," explains Vinutaa S, vice president and sector head, ICRA.