The Indian auto component industry is one of India's sunrise industries with tremendous growth prospects. From a low-key supplier providing components to the domestic market alone, 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.

As per an Automotive Component Manufacturers Association of India (ACMA) report, the turnover of the auto component industry was estimated at over US$ 18 billion in 2007-08, an increase of 27.2 per cent since 2002. It is likely to touch US$ 40 billion, increasing India’s share in the global auto component market from 1 per cent to 3 per cent by 2015-16.

Aided by a 7 per cent growth in the original equipment manufacturers (OEM) segment and an 8.5 per cent rise in exports and after-market segment, it is expected that auto ancillary production would grow by 8.2 per cent in 2009-10, according to a report by the Centre for Monitoring Indian Economy (CMIE).

Investments in the auto component industry were estimated at US$ 7.2 billion in 2007-08 and are likely to touch US$ 20.9 billion by 2015-16. In Tamil Nadu alone, nearly US$ 1 billion have been invested by some of the major trye companies, such as Apollo Tyres, ATC Tires, MRF, Dunlop and TVS Srichakra.

Exports of auto components grew at the rate of 35 per cent during 2002-07 and touched US$ 3.6 billion in 2007-08. It is estimated to reach around US$ 20 billion-US$ 22 billion by 2015-16. During April-January 2008-09, exports grew by 27.3 per cent to US$ 2.12 million. A majority of Indian exports are sent to Europe and North America.

India will be the next destination for the Automotive Testing Expo to be hosted by UKIP Media at Hyderabad next year. The expo will now be an annual event for the country and will showcase latest technologies, including simulation, for new automotives and components.

Indian companies are also expanding their footprints abroad. For instance, TVS Logistics, a part of the TVS group, acquired one of the largest after market logistics companies in the UK. The company will undertake an investment in excess of US$ 26.77 million in Multipart Holding in the next 18 months in order to expand its operations in the UK and rest of Europe.

Further, Coimbatore-based Elgi Rubber Company has formed a fully owned subsidiary company in Texas, US under the name of Elgi Rubber Company LLC, investing upto US$ 5 million on the venture.

Destination India

According to the Investment Commission of India, global automobile manufacturers see India as a manufacturing hub for auto components and are rapidly increasing the value of components they source from India due to:

• India's cost competitiveness in terms of labour and raw material.
• Its established manufacturing base.

Makers of luxury cars are increasingly looking at making India a sourcing hub for components, besides using more local components in cars for the Indian market. BMW is likely to sign the first direct sourcing deal with local vendors by the end of this year. Skoda Auto India is looking at increasing localisation for its small car Fabia to over 50 per cent over the next two years. Mercedes Benz India expects growth in sourcing from India to continue at 10 per cent.

Foreign Investments

India enjoys a cost advantage with respect to casting and forging as manufacturing costs in India are 25 to 30 per cent lower than their western counterparts. Seeing the growing popularity of India in the automotive component sector, the Investment Commission has set a target of attracting foreign investment worth US$ 5 billion for the next seven years to increase India's share in the global auto components market from the existing 0.9 per cent to 2.5 per cent by 2015.

• Swiss auto clamps maker, Oeitker Group, has inaugurated the first phase of its manufacturing facility in India. It has invested US$ 12.58 million in Phase I and hopes to start work on the second phase by the end of next year.
• The Tamil Nadu state cabinet recently gave clearance to the French tyre major, Michelin’s proposal to set up a US$ 851.5 million greenfiled project near Chennai, Tamil Nadu.
• A memorandum of understanding (MoU) has been signed by the US auto giant, Ford Motors, with the Tamil Nadu government to set up a unit with a capacity of 250,000 engines a year.
• German auto company, Volkswagen has commenced sourcing components from India for its Russian plant and is also looking at sourcing light systems, plastic-related items and metals for its European plants.