The Indian market conditions are acting as a catalyst for luxury and premium carmakers, which receive a boost from new launches and numerous offers from carmakers, thereby giving impetus to the auto components industry. The industry is expected to invest around Rs 70 billion (US$ 1.17 billion) over the next three years on new projects, as per rating agency ICRA’s estimates. The investments are foreseen on back of auto manufacturers, such as Maruti Suzuki, Hero MotoCorp and Ford, planning to establish greenfield facilities in Gujarat, prompting component makers to invest around these facilities.
In addition, the automotive aftermarket is poised for robust growth, as per a McKinsey & Co report titled, ‘Scaling the Indian Automotive Aftermarket: Path to Profitable Growth’. The report highlighted that the growth outlook continues to be positive, driven by sustained increase in vehicle population and a shift towards higher-end vehicles.
The Indian auto component industry’s turnover is reported to be US$ 40.6 billion in 2012-13 and is projected to touch US$ 115 billion by 2020-21, according to data provided by Automotive Component Manufactures Association (ACMA). The industry is estimated to grow at a compound annual growth rate (CAGR) of 14 per cent during 2013-21. Moreover, the industry’s exports were recorded at US$ 9.3 billion in 2012-13 and are projected to touch US$ 30 billion by 2020-21, as per ACMA.
Moreso, the tyre production in India is anticipated to reach 191 million units by the end of FY 2016, highlighted an RNCOS research report titled, 'Indian Tyre Industry Forecast to 2015'. The manufacturers are expected to invest huge amount into the industry over the next few years, with a major proportion of this investment directed towards the radial tyre capacity expansion.
Indicative of growing relevance of Indian technological expertise; Pratt & Whitney, the US-based aerospace engine manufacturer, is exploring opportunities to source components for its global operations from India.
Furthermore, the amount of cumulative FDI inflow into the Indian automobile industry during April 2000 to April 2013 was worth US$ 8.32 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce, Government of India.