The Indian bearing industry is estimated at Rs30bn.

The Industry has established a highly diversified product range of around 1000 types of bearings, having high volume demand. The domestic industry caters to almost 70% of total demand for common varieties and sizes of bearings. The remaining demand to the tune of 30% is being imported, essentially for industrial applications and special purpose. Bearing Industry in India can be divided into three segments the organized sector, unorganized sector and imports. The organized sector primarily caters to the OEM segment, which are predominantly automotive, railways and other industrial users. The replacement, market is dominated by unorganized sector. Exhibit1 shows the industry structure of bearing industry. Organized Sector The organized sector comprises of 12 leading manufacturers who contribute to over 55% of the total turnover. The total investment in the organized sector is about Rs17bn with an annual installed capacity of 234mn bearings and employs more than 14000 people. Most of the big players are having either technical or financial collaboration with leading auto manufacturers. International collaboration gives access to best technology in the world. Exhibit 2 represents the strong domestic presence and international collaboration of few big domestic players. Huge Unorganized Sector The unorganized sector includes the small-scale manufacturers and manufacturers of spurious bearings. The unorganized sector contributes to almost 15% of total industry turnover. The unorganized sector players have a strong regional presence and mainly cater to the needs of the replacement market. Imports 30% of total demand for bearing industry is met by imports. While a part of the imports come through official channels, there is also a huge volume of illegal imports. Legal Imports generally represent the specialized bearings not manufactured in India. There are a large variants of imported bearings, each holding a small market share in India. Though, the quality of bearings manufactured by large players in India is comparable to world standards, domestic manufacture is not viable due to the small size of the market segment. It becomes uneconomical to manufacture such type of bearings as it includes huge capital expenditure. Illegal imports generally represent the entry of spurious imports of bearings. In the past, the Indian bearings industry was highly protected on account of very high import duties ranging from 150% to 240% ad valorem. As a result, an illegal import via smuggling and under invoicing of imports was the order of the day, accounting for a high 45-50% of total imports. While duty rates have come down over the last few years, a few countries like China, Russia, Eastern Europe dump their excess production at a very low rate. This leads to a huge price differential between domestic and imported bearings (almost 40-50%), encouraging imports. Exhibit3 shows the current duty structure on bearings. Exhibit: Present Duty Structure Category Rate of Duty Ball bearings 30% Tapered roller bearings, including cone and tapered 30% roller assemblies Spherical roller bearings 30% Needle roller bearings 30%

Other cylindrical roller bearings Other, including combines ball/roller bearings Balls, needles and roller Other Source: nic.in.budget

30% 30% 30% 30%

2. Market Dynamics
Original Equipment Manufacturers (OEM) Market: The OEM market for bearing represent the demand arising out of the original vehicle and industrial manufacturers. The demand for the OEM market directly depends upon the growth in user industry. OEM market accounts for 40% of total demand of bearing industry. This market is characterized by requirements of high quality, stringent delivery norms and lower margins. OEMs have been facing price competition in their own markets, continue to exert price pressure on the local bearing suppliers. The bearing capacity available in the country is in excess of demand, resulting in price reduction. The OEM bearing market is likely to witness better days ahead on account of up swing in automobile industry and manufacturing sector. Replacement Market: The replacement market represents the demand arising on account of replacing the used and worn-out bearings. The size of replacement market is dependent on equipment population and frequency of maintenance. Replacement market accounts for 40% of total demand for bearing industry. The margins in this market are relatively higher placed as compared to OEM market. The replacement market is highly price sensitive and has higher share of unorganized players and cheaper imported bearings. Exhibit4 represent the bearing demand per sector. In the last two years, Indian automobile and industrial sectors were facing a slowdown. This has led to lower growth in OEM segment and higher growth in replacement demand. The organized players have been concentrating on improving share in the replacement market.

3. Key Industry Players

The bearing industry in India is dominated by 12 organized players accounting around 55% of industry sales. SKF Bearing is the major player in the Indian bearing industry with a market share of 12%. However, as seen from the table, the share of major players has been declining, indicating entry of small payers and imports into the industry. Exhibit5 represents the trend in market share of leading bearing manufacturers.

4. Growth Drivers
The demand for bearing industry is derived from demand in two key user segments automobile and industrial sector growth. The automobile industry is the largest growth driver for OEM market as it accounts for almost 45% of total bearing market.

Engineering sector, which accounts for 28% of total share, holds the second growth driver. Considering the high reliance of bearing industry on automobile sector, the fate of bearing industry is largely dependent on production of vehicles. The demand of bearing is also linked to heavy-duty industrial application in rolling stock, rolling mills, heavy earth moving equipments and other heavy machinery, accounting for 21% of total bearing market. However demand in the latter category is met through imports and theref