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Sectoral Presentation | April, 2014
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.
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.
Some of the most notable recent investments in India's auto components industry are as follows:
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:
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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