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Auto Components

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Auto Components

April, 2011

Poised to grow by over four-fold to US$ 113 billion by 2020, the Indian auto component industry is one of the front runners for grabbing the global auto components outsourcing market.

The total passenger car production in the country will jump four times to reach 9 million cars by 2020, according to Automotive Component Manufacturers' Association (ACMA). Although a major chunk of this will come from the fast growing domestic market, exports are likely to form around 35 per cent of the total market by 2020.

"India would be among the top-five vehicle producing countries in the world by 2020," said Vinnie Mehta, Executive Director, ACMA.

A recent ACMA report puts the turnover of the auto component industry at about US$ 26 billion in 2010-11, up 18 per cent from US$ 22 billion in 2009-10. The report states that 40 per cent of the auto component industry was dominated by body and structural products in 2009, 20 per cent by engines and exhaust, and 10 per cent each by suspension and braking parts, transmission and steering parts, electronics and electrical and interiors. By 2015, body and structural will account for 35 per cent of the auto component industry, engines and exhaust 20 per cent, suspension and braking parts, transmission and steering parts and electronics and electrical will account for 13 per cent each and interiors 9 per cent.

The potential compound annual growth rate (CAGR) of the auto component industry is estimated to be around 18 per cent in the period 2010-11. Exports from the auto component industry are estimated to be worth US$ 5 billion in 2010-11, according to the ACMA report.

Europe is likely to have accounted for 36.9 per cent of India's auto components exports in 2010-11, followed by Asia with 28.1 per cent and North America with 24 per cent. The industry has witnessed a shift in the composition of exports over the years. Investments in the auto component industry are estimated at US$ 12 billion in 2010-11, according to ACMA.

Destination India

India has proven product-development capabilities and proximity to emerging markets. The Asian country is also turning out to be an attractive destination as a global outsourcing hub and manufacturing base for original equipment manufacturers (OEMs), especially after the global economic downturn.

With the finalisation of the Automotive Mission Plan (AMP) India is expected to become a preferred destination for design and manufacture of automobile. The plan envisaged an investment of US$ 40 billion and provided a road map to help transform India into a global automobile player. The AMP proposed a 25-point plan that included making India a manufacturing and export hub for small cars, multiutility vehicles, two and three-wheelers, tractors and components.

Furthermore, Indian companies are compliant with global automotive standards, e.g. the Japanese Industrial Standard Committee (JISC) and DeutschesInstitutfürNormung (DIN). India offers the advantage of low manufacturing costs due to economies of scale, low design, research and labour costs, and local sourcing of tools and components. Large Indian players contribute around 43 per cent of the total production, while foreign companies such as Magna, Visteon, Valeo, Bosch, Federal-Mogul Corporation and Denso contribute 15 per cent.

Auto component exports are expected to grow to US$ 30 billion by 2020. India’s share in the global auto components market is expected to rise from 0.9 per cent in 2008–09 to 2.5 per cent in 2015.