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Indian Auto Components Industry Analysis

August, 2013

India is emerging as a global hub for auto component sourcing and is set to break into the league of top five vehicle producing nations worldwide.

Total market size of India's auto components sector is expected to reach US$ 113 billion by FY21 from US$ 43.5 billion in FY12. The domestic market is expected to account for 80 per cent of total sales by 2020 with a total market size of US$ 80 billion.

India's exports of auto components increased at a compound annual growth rate (CAGR) of 17.4 per cent during FY07-12 to touch US$ 6.9 billion. Europe accounts for the largest share of Indian auto components exports (36 per cent) followed by Asia (28 per cent) and North America (23 per cent).

The country is also emerging as a sourcing hub for engine components. Major global original equipment manufacturers (OEMs) plan to make India a component sourcing hub for their global operations. Several global Tier-I suppliers have also announced plans to increase procurement from their Indian subsidiaries.

The Department of Heavy Industries and Public Enterprises has created a US$ 200 million fund to modernise the auto components industry by providing an interest subsidy on loans and investment in new plants and equipment. It has also provided export benefits to intermediate suppliers of auto components against the Duty Free Replenishment Certificate (DFRC). Under the Union Budget 2013-14, concessional excise duty of 6 per cent has been extended up to March 31, 2015 for manufacturers of batteries supplying to producers of electrically operated vehicles.

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