Last Updated: June 10, 2015
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Updated: April, 2015
Sectoral Presentation | March, 2015
The Indian auto components industry has experienced healthy sequential growth over the last one-and-a-half years. The growth can be attributed to factors such as strong buoyancy in the end-user industry, recovery of the global economy, improved consumer sentiment and return of adequate liquidity in the financial system. The revival of the auto industry was initially driven by the fiscal stimulus programme of the government.
The industry currently accounts for almost seven per cent of India’s gross domestic product (GDP) and employs about 19 million people, both directly and indirectly. The ever-increasing development in infrastructure, big domestic market, increasing purchasing power and stable government framework have made India a favourable destination for investment, as per the vision of Automotive Mission Plan (AMP) 2006–2016.
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.
The Indian auto component 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 depending on favourable conditions, as per the estimates by Automotive Component Manufacturers Association of India (ACMA). In addition, industry exports are projected to reach US$ 12 billion by FY 15–16 and add up to US$ 30 billion by FY 20–21.
Revenues for the auto industry in 2014-15 are expected to grow by 11-12 per cent supported by healthy recovery by major original equipment manufacturers (OEMs) in the medium and heavy commercial vehicles (M&HCV) and passenger vehicle (PV) segment.
The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period April 2000 – February 2015 were recorded at US$ 12,232.06 million, as per data published 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 the growth of this sector in the global market. It is expected that this sector's contribution to the GDP will double reaching a turnover of 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. Also, the deregulation of FDI in this sector has helped foreign companies to invest huge amounts in India.
“The government has instilled confidence in the market with assurance of positive policy changes. We hope that by the fiscal year 2014–15, capacity utilisation will go up to 90 per cent," said Mr Harish Lakshman, President, ACMA.
The rapidly globalising world is opening new avenues for the transportation industry, generating the need for more efficient, safe and reliable modes of transportation, which is subsequently adding to the auto component industry’s growing opportunities. According to a report by the Confederation of Indian Industry (CII), the Indian auto component industry is set to become the third largest in the world by 2025. Also, by that time, newer verticals and opportunities for component manufacturers will open up as the automobile market will shift towards electric, electronic and hybrid cars, and newer technologies will have to be adopted via systematic research and development.
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$ 0.0157 as on April 28, 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, Confederation of Indian Industry (CII)
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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