A worker examines an air bag at a factory in Tamil Nadu, India

Airbag makers' $2bn windfall from India's safety rules

Tougher road-safety rules proposed by India have prompted the world's largest airbag suppliers to ramp up capacity in the country to meet a potential $2bn opportunity.

Despite having one of the world's worst road-safety records - 141,000 died in accidents in 2014 - less than a third of the 2.6 million cars sold each year have airbags, as there are no rules imposing their use and they are expensive due to most of their components being imported.

While manufacturers have been tempted to leave out a costly component that could drive up prices, new rules in the proposed Road Transport and Safety Bill will impose mandatory crash tests for new models by October 2017 that will see cars without airbags achieve only the lowest safety ratings.

"I think we have made automobiles in India too cheap," said Vijay Chhibber, secretary for the road transport and highways ministry. "In trying to make everything cheap, if we are going to reduce our safety standard it is not worth it."

With consumers confronted with the risks of buying cheaper models without the safety feature, revenues from airbag sales in India are predicted to rise 11 per cent a year to hit $2bn by 2020, according to data from Transparency Market Research.

Rane TRW Steering Systems, a joint venture between leading American airbag maker TRW Automotive and India's Rane Holdings, invested 180 million rupees (£1.8m) to open a new airbag assembly plant in southern India in August with capacity to make 500,000 units a year.

"(This is a) good time to build capacity and the right time to invest to grow the business," said managing director Harish Lakshman. The company expects revenues from the airbag unit to hit 3.5 billion rupees by 2020, from 400 million rupees today.

Toyoda Goesi Minda India, a joint venture between the Japanese company and India's Uno Minda, which has a 25 per cent market share, also plans to increase its capacity sixfold to 150,000 airbags over the next two to three years, group chairman N K Minda told Reuters.

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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