India is emerging as a global hub for auto component sourcing due to its close proximity to key automotive markets such as the Middle East and Europe.
Total market size of India's auto components sector is expected to reach US$ 115 billion by FY21 from US$ 40.6 billion in FY13. The domestic market is expected to account for 74 per cent of total sales by 2021 with a total market size of US$ 85 billion.
India's exports of auto components increased at a compound annual growth rate (CAGR) of 19.6 per cent during FY08–13 to touch US$ 9.3 billion. Europe accounts for the largest share of Indian auto components exports (35 per cent) followed by North America (26 per cent) and Asia (25 per cent).
The growth of global original equipment manufacturer (OEM) sourcing from India and the increased indigenisation of global OEMs is turning the country into a preferred designing and manufacturing base. 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 FY13–14, 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.
The Government of India has played a major role in the development of the Indian auto component industry through its policy support in the form of Auto Policy 2002 and National Automotive Mission Plan 2016. It has also set up National Automotive Testing and R&D Infrastructure Project (NATRiPs) with an investment of US$ 388.5 million to enable the industry to adopt and implement global performance standards.
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