Indian turbocharger industry to grow at CAGR of 14% to 2020: ICRA
In India, turbochargers are present in over 90% of diesel vehicles, though its penetration level in petrol vehicles is relatively low. In the backdrop of changing customer preference towards petrol engines in the passenger vehicle (PV) segment, the domestic turbocharger industry, which is attuned to the diesel turbocharger, could face some temporary readjustment pains, especially for supplies to the passenger vehicle industry. Nevertheless, increasing acceptance of turbocharged petrol engine would support demand for the turbocharger industry over the medium-term.
A turbocharger is a device which improves power output of engines using exhaust gas to increase overall air intake in the combustion chamber. Fuel combustion is dependent on the quantity of fuel and the amount of air available in the combustion chamber. Turbocharger allows more compressed air inside the engine’s intake manifold, resulting in more efficient fuel combustion and hence superior power output, improved fuel efficiency and lower exhaust emission.
ICRA expects market potential for the domestic turbocharger industry to grow to about Rs 2,800 crore by FY2020, registering CAGR of 14%. While volume growth could be modest at around 8-9% CAGR, value growth will be healthy as higher value added solution (VGTs, twin spool turbo) as well as new products to meet stricter regulatory requirements drive higher contentper-vehicle. While the share of diesel vehicles in India is expected to moderate, increasing share of turbocharged petrol engines as well as superior realisation will drive the overall turbocharger market. Considering, gross margins of 45% and sizable raw material requirements (55% of the industry’s turnover), primarily sourced from Tier II/III ancillaries, demand for turbocharger components is expected to drive Rs 1,300-1,400 crore of revenue for Tier II/III ancillaries by FY 2020.
On an average, for a passenger vehicle, a diesel turbocharger costs Rs 4,000 – 5,000 whereas petrol turbocharger is priced at Rs 15,000 per unit. Petrol turbochargers are designed to operate at much higher RPMs (as compared to diesel counterparts) which require the components to withstand high temperature; this explains the cost difference between petrol and diesel turbochargers. Cost also varies depending on the type of turbocharger i.e. a twin scroll turbocharger-will cost almost double a single scroll turbocharger, whereas relatively complex variable geometry turbocharger could be even more costly. Realisation of turbocharger for trucks is in the range of Rs 10,000 to Rs 12,000.
Turbochargers in petrol vehicles
Corporate Average Fuel Efficiency (CAFÉ) norms notified by the Government of India in April 2015 mandate a 14% improvement in fuel efficiency by FY18 and 38% improvement after FY22 for OEMs. In order to meet the stipulated target by April 2017, fleet fuel efficiency for petrol and diesel vehicles should improve to 18.2 Kmpl and 20.41 Kmpl, respectively, from the current average of 16 Kmpl and 18 Kmpl, respectively. Turbocharger, cost effectively, could drive a 20% plus improvement in fuel efficiency, as