Last Updated: November 05, 2015
Group CEO,Renault-Nissan Alliance
Last Updated: November, 2015
Sectoral Presentation | August, 2015
The Indian auto-components industry has experienced healthy growth over the last few years. Some of the factors attributable to this include: a buoyant end-user market, improved consumer sentiment and return of adequate liquidity in the financial system.
The auto-components industry accounts for almost seven per cent of India’s Gross Domestic Product (GDP) and employs as many as 19 million people, both directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an everincreasing development in infrastructure have made India a favourable destination for investment.
The Indian auto-components industry can be broadly classified into the organised and unorganised sectors. The organised sector caters to the Original Equipment Manufacturers (OEMs) and consists of high-value precision instruments while the unorganised sector comprises low-valued products and caters mostly to the aftermarket category.
Revenues of the Indian auto-components industry grew by 11 per cent over the past year to Rs 2.34 lakh crore (US$ 34.7 billion) in FY 14-15. This growth was primarily driven by healthy recovery for major Original Equipment Manufacturers (OEMs) in the medium and heavy commercial vehicles (M&HCV) and Passenger Vehicle (PV) segment.
According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is expected to register a turnover of US$ 66 billion by FY 15–16 with the likelihood to touch US$ 115 billion by FY 20–21 and US$ 200 billion by 2026. In addition, industry exports are projected to reach US$ 12 billion by FY 15–16 and add up to US$ 30 billion by FY20–21, further rising to US$ 80 billion by 2026. The sector’s contribution to manufacturing GDP is expected to double from 5 per cent in 2015 to 10 per cent in 2026.
The cumulative Foreign Direct Investment (FDI) inflows into the Indian automobile industry during the period April 2000 – June 2015 were recorded at US$ 13.5 billion, as per data by the Department of Industrial Policy and Promotion (DIPP).
Some of the major investments made into the Indian auto components sector are as follows:
The Government of India’s Automotive Mission Plan (AMP) 2006–2016 has come a long way in ensuring growth for the sector. It is expected that this sector's contribution to the GDP will reach US$ 145 billion in 2016 due to the government’s special focus on exports of small cars, multi-utility vehicles (MUVs), two and three-wheelers and auto components. Separately, the deregulation of FDI in this sector has also helped foreign companies to make large investments in India.
“The government has instilled confidence in the market with assurance of positive policy changes" said Mr Harish Lakshman, President, ACMA.
The rapidly globalising world is opening up newer avenues for the transportation industry, especially while it makes a shift towards electric, electronic and hybrid cars, which are deemed more efficient, safe and reliable modes of transportation. Over the next decade, this will lead to newer verticals and opportunities for auto-component manufacturers, who would need to adapt to the change via systematic research and development.
The Indian auto-components industry is set to become the third largest in the world by 2025. Indian auto-component makers are well positioned to benefit from the globalisation of the sector as exports potential could be increased by up to four times to US$ 40 billion by 2020.
Exchange Rate Used: INR 1 = US$ 0.0151 as on November 15, 2015
References: Media Reports and Press Releases, Department of Industrial Policy and Promotion (DIPP), Automotive Component Manufacturers Association of India (ACMA), Union Budget 2014-15
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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