Auto Components
The turnover of India auto components sector is expected to reach US$ 115 billion by FY21.

Auto Components Industry in India

Latest update: October, 2014

Revenue of Indian auto component sector

Revenues have risen from US$ 26.5 billion in FY08 to US$ 40.6 billion in FY13 - a CAGR of 8.9 per cent.

Revenue of Indian auto component sector

Domestic market share of Indian auto component industry

Two wheelers is the largest domestic customer segment for the Indian auto components industry.

Domestic market share of Indian auto component industry

Auto components exports from India

India's exports of auto components increased at a CAGR of 19.6 per cent to US$ 9.3 billion during FY08-13.

Auto components exports from India

Auto components sector contribution to GDP

Contribution to GDP will account to as much as 3.6 per cent by 2020 from 2.1 per cent in 2009.

Auto components sector contribution to GDP

Updated: October, 2014

Sectoral Presentation | October, 2014

Introduction

The Indian auto components industry is one of the fastest growing industries and is riding on the success of the automobile sector. Coupled with growing demand and technological advancements, the auto components industry in India has emerged as a key market in Asia as well as the world. The country currently supplies auto components to a number of international automobile makers, such as General Motors, Toyota, Ford and Volkswagen, amongst others.

A joint report of Automotive Component Manufacturers Association of India (ACMA) and McKinsey forecasts automotive component to be a US$ 100 billion industry by 2020, compared with about US$ 35.1 billion today. The report predicts revenue to come from both local sales and exports.

Currently, India is ranked 22 among global component exporting countries. China is at the third spot on the list led by Germany and the US. According to the McKinsey report, India will jump to 9th spot in exports by 2020.

Market size

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.

Majority of Indian auto component exports are to countries in Europe, which account for 35 per cent followed by countries in North America with 26 per cent.

The export of auto components showed a great deal of improvement registering a growth of 16.7 per cent to Rs 61,487 crore (US$ 10.04 billion) in 2013-14 from Rs 52,690 crore (US$ 8.61 billion) in 2012-13. Also, with the automotive sector being a key driver of the economy and growth returning to vehicle consumption in the past few months, ACMA expects the industry to grow by 4–6 per cent in FY15.

The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period April 2000 – August 2014 was recorded at US$ 10,119.68 million, as per data published by the Department of Industrial Policy and Promotion (DIPP), Government of India.

Investments

The investments and developments in the automobile components sector in the past few months are as follows:

  • Honeywell Turbo Technologies has entered into an agreement with Tata Group to develop its first ever petrol turbocharged engine. The new Tata Revotron 1.2T engine launched in the 2014 Tata Zest delivers improved power and torque and a multi-drive mode.
  • TE Connectivity, a manufacturer of connectors for electric, electronic and internet systems, is establishing an integrated manufacturing facility in Bengaluru at an investment of Rs 300 crore (US$ 49.03 million). The plant, measuring 280,000 sq ft, will create jobs in areas of assembly, packaging, moulding, stamping, tooling machine components, cable processes, etc.
  • Volkswagen India plans to export half the cars it will make at its Chakan plant this year, after having sold 100,000 units in the previous year with exports standing at 25 per cent.
  • Tata Cummins, a joint venture (JV) between Cummins Inc and Tata Motors, inaugurated its third manufacturing facility at the Cummins Megasite in Phaltan, Maharashtra to manufacture diesel engines. The new plant will build the ISL and QSL 8.9 litre engines to cater to the global power generation, industrial and automotive markets.
  • TVS Group Company Sundram Fasteners Ltd has reported a 29 per cent increase in net profit at Rs 38 crore (US$ 6.21 million) during the quarter ended June 30, mainly on increased exports. A drop in finance charges and a rise on operating margin supported profit margins has been attributed to the increase of exports.
  • Varron Group, which specialises in manufacture of aluminium ingots, has planned an aggressive roadmap with the commissioning of a Rs 700 crore (US$ 114.41 million) facility in Nagpur. The new integrated plant in Nagpur will have a capacity to produce 30,000 tonnes of ingots each month which will give Varron an opportunity to supply directly to OEMs.
  • Precision manufacturing firm Aequs has opened a new automotive components plant at its 250- acre Special Economic Zone (SEZ) in Belgaum to support its expansion plans in the US and European markets. The plant will roll out engine and transmission parts, sub-assemblies, assemblies as well as add machining capacity of over 100,000 hours annually.

Government Initiatives

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 has been expected that this sector's contribution to the GDP will double reaching a turnover worth 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 in 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," according to Mr Harish Lakshman, President, ACMA.

The Government of India is in talks with ACMA and several industry bodies to extend the current excise duties concession beyond December 2014. Under the scheme, excise duties have been reduced for the following segments:

  • For small cars, motorcycle, scooters and commercial vehicles – duty has been reduced from 12 per cent to 8 per cent.
  • For mid-sized cars – duty has been reduced from 24 per cent to 20 per cent.
  • For large cars – duty has been reduced from 27 per cent to 24 per cent.

Road Ahead

According to ACMA, the Indian auto components industry is likely to grow to US$ 150 billion by 2020 with domestic market share of about US$ 85 billion. The Indian auto components industry is well poised to achieve strong growth in the coming years owing to rising domestic demand in the OEM market. Also, the decline in raw material cost, such as decrease in cost of rubber, will help in improving the operating margins and consequently aid in increasing the exports from the auto components sector in India.

Exchange Rate Used: INR 1 = US$ 0.0163 as on October 28, 2014

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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