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Auto Components

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Auto Components

June, 2010

The Indian auto component industry is one of India's sunrise industries with tremendous growth prospects. From a low-key supplier providing components to the domestic market alone, the industry has emerged as one of the key auto components centres in Asia and is today seen as a significant player in the global automotive supply chain. India is now a supplier of a range of high-value and critical automobile components to global auto makers such as General Motors, Toyota, Ford and Volkswagen, amongst others.

Further the segment has created a niche by diversifying its portfolio into aerospace, power segments and prosthetics. The strategy and plan to look into newer markets outside the country also helped the auto component manufacturers to survive the global recession. Acquisition by automotive major such as Mahindra and Mahindra helped the sector in expanding its technology and providing value-added services to the customers. The evolution of the Euro emission norms also made the manufacturers rethink their business plans to meet the demand for improved products.

The entry of new generation vehicles and demand for genuine spare parts also helped in adding to the sales for the companies. Industry experts opine that growing demand for genuine spare parts would strengthen the sector. Brakes India VP-marketing Mukund Raghavan said, "The aftermarket service segment showed a huge potential for sustaining profits despite the slowdown in global automobile sector."

As per a report by the Automotive Component Manufacturers Association of India (ACMA), the turnover of the auto component industry is being estimated at around US$ 19.2 billion in 2009-10. The report states that 31 per cent of the auto component industry is dominated by engine parts, 19 per cent by drive transmission and steering parts, and 12 per cent each by suspension & braking parts and body & chassis, while equipments and electrical parts capture 10 and 9 per cent, respectively.

The potential compounded annual growth rate (CAGR) of the auto component industry is estimated to be around 19.2 per cent in the period 2009-10. Exports from the auto component industry are estimated to be worth US$ 3.2 billion in 2009-10, according to the ACMA report.

Europe accounted for 40.4 per cent of India's auto components exports in 2009-10, followed by Asia with 23.8 per cent and North America with 22.6 per cent. The industry has witnessed a shift in the composition of exports over the years, with the original equipment manufacturer (OEM/TIER 1) segment accounting for 80 per cent of exports in 2009-10. The share of the aftermarket segment in auto component exports stood at 20 per cent in the same year. Investments in the auto component industry are estimated at US$ 7.4 billion in 2009-10, according to ACMA.

Destination India

According to the Investment Commission of India, India is among the most competitive manufacturers of auto components in the world. India is also becoming a global hub for research and development (R&D). Companies like Daimler Chrysler, Bosch, Suzuki and Johnson Controls have set up development centres in India. Many international auto-component majors including Delphi, Visteon, Bosch and Meritor have set up operations in India. Auto manufacturers including GM, Ford, Toyota, etc. as well as auto component manufacturers have set up International Purchasing Offices (IPOs) in India to source their global operations.

Further, increased demand for the passenger vehicles in the country created positive impact for the auto component manufacturers. The component manufacturers registered 55 per cent growth on a year-on-year basis during the quarter ending March 2010. The growth was attributed to the increasing demand of the original spare parts by the customer. On an overall basis, 30 component makers saw rise in revenue in spite of global slowdown in the auto sector. Major players like Bosch, Motherson Sumi and Amtek Auto reported nearly 50 per cent growth in topline, with double-digit surge in profit.