GENERAL SCENARIO Although the development of India's ball and roller bearing industry is not quite enviable, it can

be said without contradiction that India has relatively strong base for the manufacture of bearings. There are about 12 large and medium units which together turn out over 100 million bearings every year. Almost all the units have foreign collaboration. The Indian Bearing industry makes around 500 types of bearings as against over 30,000 types of bearings being used by the Indian industry. Bulk of these are only of standard types and are used mostly in low-technology areas like fans, electric motors, water pumps, and by the automotive sector. The current Indian bearings industry is worth Rs.3500 crore. In this, automotive segment accounts for 45 percent of the revenues, which amount to Rs 1,350 crores and the remaining 55 percent of revenues are being contributed by industrial demand. In the automotive bearings market, the organized segment manufactures cater to 50 percent of the demand. About 15 percent of the production is by the unorganized segment in India, and the remaining 35 percent of demand is fulfilled through imports. Out of the total revenues in the automotive segment, 60 percent of the revenues are contributed by the OEMs and the remaining 40 percent is by the demand from the aftermarket. There has been a growth of 15 percent in the aftermarket segment and OE demand has increased by more than 25 percent from the financial year 2005-06. The market for automotive bearings is growing at a rate of almost 27 percent per annum in the year 2005 - 06. This is mainly because of multiple models in every vehicle segment entering the market. The overall automotive industry has grown at the rate of 34 percent per annum from the year 2004. Hence, a definite increase in the demand for bearings in the OE segment is anticipated. Aftermarket demand for automotive bearings is increasing, but at a slower rate as compared to the growth in vehicle population. Manufacturers are expecting sustained growth of 15 percent in the aftermarket mainly due to increase in population of two wheelers, passenger cars, and utility vehicle segments. Some of the restraints faced by the bearings manufacturers are longer life due to improved technology, improved fuel quality, and better maintenance of the vehicles. This reduces the replacement rate, which in turn leads to slower growth in the aftermarket demand. Increase of imports due to a 5 percent decrease in duty rates is affecting the market for the domestic participants. Vehicle owners prefer imported bearings due to lower costs. Cost difference is almost 50 percent between the domestic bearings and the imported bearings. For example, the bearings manufactured in India are priced at Rs.25 and the bearings imported from China are priced at Rs.12 in the year 2004 - 05. There is

an increase in imports from China and South Korea due to lower costs and greater demand. The major applications are as follows:
Automobiles Railways Electrical

Motors Electric Fans Diesel Engines Pumps Machine Tools Textile machinery and Other heavy industries o Steel Plants o Sugar Plants o Process Plants o Heavy Engineering Industries o Heavy Earth Moving Equipment o Cement Plants o Power Generation Units The demand for bearings cane be clubbed under following Categories: A. 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. B. Replacement Market OEM demand is mostly generated in Automobile, Machine manufacturer , Plants manufacturers, where in the bearings is used as part of the new equipment or machinery. Replacement Demand is the after demand where as a part of the maintenance of the machines or rotating machine , the bearings are replaced by new bearings after it is failed as natural life deterioration / wear or tear or due to premature failures and need replacement 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. Figure : Bearing Demand Per Sector. In the last two years, Indian automobile and industrial sectors are facing a increased market and economy growth. This has led to higher growth in OEM segment and higher growth in replacement demand. The organized players have been concentrating on improving share in the replacement market, which earlier was dominated mostly by the small scale and cottage industries. INDUSTRY STRUCTURE AND DEVELOPMENTS Indian bearing market size is estimated at Rs.54 billion. Approximately 45% of this demand is met through imports and the balance is met through indigenous products. The bearing industry recorded a growth of 7% during the year 2007 in terms of sales value. FAG India total sales during the year 2007 shot by 17%. FAG Indias share in the total market is around 17% as stated below.

Company SKF NBC FAG TATA TIMKEN NRB Others

Market share 28% 20% 17% 8% 10% 12% 5%

The fortunes of the bearing industry in India are linked to the growth of automotive industry. The overall growths in commercial vehicle industry was at 9.7 % in 2007.OEM industry, such as two-wheeler, are facing price competition in their own markets and continue to exert price pressure on local bearing suppliers. The growth of Indian middle class with increasing purchasing power along with strong growth of economy over the past few years will accelerate demand from the automotive industry and other sectors like steel, power & heavy engineering, thus providing a favorable market environment for the bearing industry. THREATS TO INDUSTRY Over the last few years, there has been sharp increase in the prices of steel which forms the basic material for bearings and also currently increase in fuel prices which has affected to the demand of automobiles and indirectly to the bearing industry. The overall margins of bearings manufacturer are under severe pressure. The company expects that there will be a risk on its margins on account of intense competition from the unorganized sector in the domestic industry and flow of cheap imports of bearings from china and other low cost countries. To dilute this risk besides any cyclic fluctuations in bearing demand from Automotive or various other industries, the company will focus on technologically advancement and more profitable products/market segments. The company will continue to work in the areas of higher productivity, better efficiency and cost reductions in order to grow.