Air bag makers eye boost from new India road safety rules.

The world’s largest air bag suppliers are setting up plants and ramping up capacity in India, eyeing a USD 2 billion opportunity thanks to tougher rules aimed at improving one of the world’s worst road-safety records.

In India, a person is killed in a road accident every four minutes – 141,000 in 2014 – yet less than a third of the 2.6 million cars sold each year have air bags in this cost-conscious market. But a planned law that will impose crash test standards by 2017 is creating an opportunity for makers of safety equipment, as cars without air bags will achieve only the lowest safety ratings after tests. That, for the first time, will force consumers to directly consider the risks they run by buying cheap.

By 2020, overall revenues from airbag sales in India are set to rise 11% a year to hit USD 2 billion, outpacing the 9% growth expected in China, according to data from Transparency Market Research. By then, India is expected to be selling over 5 million cars a year. Some of the world’s largest air bag makers – Autoliv Inc, Takata Corp, TRW Automotive Inc and Toyoda Gosei Co – are already gearing up to cash in.

This is a good time to build capacity and the right time to invest to grow the business,” said Harish Lakshman, managing director of air bag maker Rane TRW Steering Systems Ltd, a joint venture between US-based TRW and India’s Rane Holdings Ltd.

The company opened a new air bag assembly plant in August in southern India with capacity to make 500,000 units a year, investing Rs 180 million. It expects revenues from the air bag unit to hit Rs 3.5 billion by 2020, from Rs 400 million. Toyoda Goesi Minda India, a joint venture between the Japanese company and India’s Uno Minda, which has a 25% market share, plans to increase its capacity by up to six times to 150,000 air bags over the next two to three years, group chairman NK Minda said. Analysts say others will follow, setting up in India to keep costs as low as possible. “We expect that within five years the large airbag makers will have a manufacturing hub in India,” said Ayay Bandopadhyay, automotive research analyst at Transparency Market Research

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