Auto Components
India is emerging as a global hub for auto component sourcing.

Auto Components Industry in India

Latest update: July, 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

Investments in Indian auto component sector

Investments in the auto components sector increased at a CAGR of 28.4 per cent to US$ 2.3 billion in FY11.

Investments in Indian auto component sector

Auto component production in India

Engine parts account for 31 per cent of the entire product range of the auto components sector.

Auto component production in India

Updated: July, 2014

Sectoral Presentation | April, 2014

Introduction

The Indian auto component industry is one of the country's rising industries with tremendous growth prospects. From a low-key supplier providing components exclusively to the domestic market, the industry has emerged as one of the key auto components centres in Asia and is today seen as a significant player in the global automotive supply chain. India is now a supplier of a range of high-value and critical automobile components to global auto makers such as General Motors, Toyota, Ford and Volkswagen, amongst others.

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.

Market size

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 of 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.

Exports in the sector grew by 4.4 per cent to touch US$ 9.69 billion in 2013, as per data provided by ACMA.

The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period April 2000 - May 2014 was recorded at US$ 9,885.21 million, as per data published by the Department of Industrial Policy and Promotion (DIPP), Government of India.

Investments

Some of the most notable recent investments in India's auto components industry are as follows:

  • BMW Group has launched the third generation of its sports utility vehicle (SUV), the X5 xDrive30d, which will be Rs 1 million (US$ 16,632.18) cheaper than the previous version, as the model will now be assembled at the company's Chennai plant rather than being imported fully assembled.
  • Motherson Sumi Systems Ltd has acquired Ohio-based Stoneridge Inc's wiring harness business for US$ 65.7 million. The acquisition is expected to close in the third quarter of 2014.
  • Bharat Forge Aluminumtechnik GmbH & Co KG (BFAT) has won a multiyear contract worth €250 million (US$ 336.25 million) from a German original equipment manufacturer (OEM). The contract is for the supply of suspension components based on a special technology industrialised by BFAT.
  • 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.
  • German auto maker Volkswagen plans to expand production capacity and introduce a host of new models, to boost sales in India. The Group is also looking to invest Rs 1,500 crore (US$ 249.53 million) over the next five years to set up a diesel engine manufacturing facility.
  • Indian Angel Network (IAN) has joined hands with tyre-maker Michelin to start a logistics initiative which aims to make movement of produce from farms to markets more efficient. The initiative - Farm to Market Logistics (F2ML) - is an incubator managed by IAN and supported by Michelin.

Government Initiatives

The Government of India has allowed 100 per cent FDI in the automotive industry through automatic route. With a special focus on exports of small cars, multi-utility vehicles (MUVs), two and three-wheelers and auto components, the automotive sector's contribution to the GDP is expected to double reaching a turnover worth US$ 145 billion in 2016, according to the AMP 2006-2016.

In recent news, it has been reported that Ms Elizabeth Thabethe, Deputy Minister of Trade and Industry, South Africa, accompanied by a delegation of 27 companies, met the delegates of Indian companies in a recent trade summit to seek for partnerships.

The Interim Budget 2014-15 has added some incentives to the auto industry. To give relief to the automobile industry, excise duty has been reduced till June 30, 2014 for the following segments:

  • For small cars, motorcycle, scooters -duty has been reduced from 12 per cent to 8 per cent.
  • For commercial vehicles and SUVs -duty has been reduced from 30 per cent to 24 per cent.
  • Duty has also been reduced from 27 per cent to 24 per cent for large-segment cars, and from 24 per cent to 20 per cent for mid-segment cars.

Road Ahead

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.

By 2020, it has been estimated that nearly 90 per cent of vehicles on the road will be wired. While the connected car market is expected to touch US$ 600 billion, the automotive component industry is predicted to reach US$ 113 billion.

Exchange Rate Used: INR 1 = US$ 0.0166 as on July25, 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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