Safety standards for cars to boost airbag industry

New safety standards for passenger vehicles formulated by the government could potentially boost the airbag market to about ` 1,900- 2,300 crore by FY2019, says rating agency ICRA.

In a report, the agency said foreign players in the Indian market are most likely to be the major beneficiaries, even though some India component makers have entered this space recently.

The new norms, where passenger vehicles receiving star ratings based on how they perform under various crash tests and associated parameters, will come into effect from October 2017 for the new models and October 2018 and 2019 for all the existing models. In order to achieve adequate safety ratings for frontal collision, ICRA said airbags would become a necessary fitment.

“We believe this will also open up a sizeable market opportunity (` 1,900-` 1,300 crore by FY2020) for airbag suppliers as its penetration in PVs could increase exponentially from over 30- 35 per cent at present.

The rating agency observed that the value addition for domestic suppliers would be low in the near- term due to limited scope for backward integration and the lack of technological capabilities.

The import content in airbags currently stands at 60- 80 per cent as the key components — inflator and sensors are required to be imported.

“Developing these locally in the country would require scale and technical capabilities,” the rating agency said.