Indian auto component industry is robustly driven by the growth in demand for automobiles. The sector has become a lucrative business proposition for global players, majorly owing to two factors. First, needless to say, the demand for automobiles is increasing day by day in the country. India, a market with high potential for the automobiles sector, is expected to witness a three-fold increase in demand for automobiles by 2020. Secondly, all major global auto-makers are establishing their bases here due to highly positive business environment, favourable policies and government support.
According to a study by UK-based global financial advisory firm-Rothschild, India would become the third largest auto industry by volumes after China and the US by 2015. This would give immense support to the growth of ancillary sector as well.
Major developments, investments and Government initiatives relating to the sector are discussed hereafter.
According to a recent study by the Automotive Component Manufacturers' Association of India (ACMA), original equipment manufacturers (OEMs) account for 41 per cent of the auto components consumed in the Indian aftermarket.
The study estimated current size of Indian components business at Rs 24,800 crore (US$ 4.87 billion), 49.7 per cent of which is formed by two-wheeler segment. Passenger vehicles, commercial vehicles and three-wheelers follow with 24.7 per cent, 23.1 per cent and 2.5 per cent of the share respectively.
According to Arvind Kapur, President, ACMA, a large market in Indian spares business is dominated by organised, semi-organised and a number of small, unorganised players. He thus acknowledged the need for a process of accreditation to ensure better customer service.
The study further projected that OEM-authorised network of service stations would account for 20-30 per cent of the Indian auto components market by 2017 while that of multi-brand organised service chains would grow to 5-10 per cent from 1-2 per cent. Similarly semi-organised service centres’ and unorganised garages’ market share would be 20-30 per cent and 45-55 per cent, respectively, in 2017.
Canada is looking for substantial investment opportunities in Indian auto components market through the comprehensive economic partnership agreement (CEPA) which is being discussed and negotiated by the two Governments. The agreement is likely to get finalised by 2013. If fructified, the agreement would facilitate an annual increase of economic output in two countries by almost US$ 6 billion and boost the two-way trade by 50 per cent.
UK sees immense potential in the Indian auto ancillary sector, especially in the city of Rajkot as it is known for auto components manufacturing. Peter Beckingham, British Deputy High Commissioner for Western India, also indicated possible ventures between UK and Rajkot companies in near future.
According to industry sources, Rajkot's auto component industry, with over 500 manufacturers aggregating a net turnover of around Rs 1,500 crore (US$ 294.5 million), grows at an annual rate of 15-20 per cent.
Furthermore, 60 French automobile component suppliers are contemplating on business opportunities to set up a vendor park near Sanand in Ahmedabad district. The proposed vendor park would accommodate tier-1 and tier-2 auto-component suppliers who would supply spares to the recent auto entrants in the State and even to others.
Sanand is already home to a number of global auto-makers, like Ford and Peugeot.