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Indian Auto Components Industry: an overview

October, 2013


The automotive industry occupies a significant place in the Indian economy. The well developed industry acts as a catalyst and gives impetus to the economic growth by producing numerous vehicles. It is also widely preferred by major industrial players for supply of auto components. The Indian auto component sector covers a wide range of industries.

India is emerging as a global hub for auto component sourcing and is set to break into the league of the top five vehicle producing nations worldwide. The country is also emerging as a sourcing hub for engine components. Major global original equipment manufacturers (OEMs) plan to make India a component sourcing hub for their global operations.

India has an important role in the Bosch global roadmap. The company recently opened an office in Bangladesh, for which product support will come from the Indian operations, as per Mr Steffen Berns, MD of Bosch Ltd and President of Bosch Group India.

Market Structure

The auto components industry is expected to invest around Rs 70 billion (US$ 1.13 billion) over the next three years on new projects, as per rating agency ICRA's estimates.

The Indian auto component industry's turnover is projected to touch US$ 115 billion by 2020-21. The industry is estimated to grow at a compound annual growth rate (CAGR) of 14 per cent during 2013-21. In addition, the industry's exports are projected to touch US$ 30 billion by 2020-21, according to Automotive Component Manufactures Association (ACMA).

India: The Global Auto Hub

  • The automotive supplier firm Cooper Standard inaugurated a manufacturing facility at Bawal in Haryana, which will initially manufacture rubber sealing and trims for Volkswagen models in India, at an investment of around US$ 7 million. The total estimated market for sealing and trim in India is estimated to reach US$ 180 million and fuel and brake delivery market is estimated to be worth US$ 125 million. “The Indian automotive industry is robust and we foresee higher demand for our products” said Mr Jeff Edwards, Chairman & CEO, Cooper Standard
  • NMB-Minebea India Pvt Ltd, a wholly-owned subsidiary of Minebea Co Ltd (Minebea), a global manufacturer of miniature and small-sized bearings and precision components, announced commencement of its operations in Gurgaon, India. The component maker foresees large market potential for its products range
  • Tenneco, a US$ 7.4 billion firm headquartered in Lake Forest-Illinois in the US, opened its DynaChrome high speed hard chromium plating facility for piston rods at its Hosur plant in Tamil Nadu (TN)
  • Malaysia's Petronas is setting up a lubricants' plant near Mumbai with the aim of capturing a greater share of the growing Indian lubes market that is expected to touch nearly US$ 8 billion by 2017. India is the fifth largest lubricants market in the world
  • Tide Water Oil has decided to re-launch the brand Veedol in European markets, including Germany, Austria and Switzerland

The cumulative FDI inflow into the Indian automobile industry during April 2000 to July 2013 was recorded at US$ 8,932 million, amounting to 4.5 per cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce, Government of India.

Key Developments & Investments

  • Auto component major Anand Automotive plans to invest Rs 1,200 crore (US$ 194.45 million) over the next five years on new product development and capacity expansion
  • Base Batteries plans to spend Rs 1,000 crore (US$ 162.07 million) over four years to set up new plants and expand existing ones at Hosur, TN and Solan, Himachal Pradesh. The organised automobile batteries market is estimated at Rs 4,000 crore (US$ 648.28 million)
  • KLT Automotive & Tubular Products, manufacturers of chassis and related components, will invest over Rs 320 crore (US$ 51.86 million) in setting up two chassis manufacturing units in Chennai and Sri City and will also expand their existing unit. The Sri City unit will meet the needs of the Japanese OEMs setting up manufacturing units there
  • ARaymond inaugurated its first plant in India, at Chakan, Pune with an investment of US$ 7 million. The new plant will manufactures various plastic fasteners like rib locks, trim clips, cable straps etc. All these components will primarily cater to the Indian and global passenger car and utility car segment
  • Greaves Cotton Ltd will supply single cylinder diesel engines to power TVS Motor's three-wheeler auto-rickshaws

Government Initiatives

The Union Budget 2013-14 presented by Mr P Chidambaram, the Union Finance Minister, Government of India, had a few add-ons for the industry. The analysis by Deloitte on the Union Budget highlighted the following:

  • The period of concession available for specified part of electric and hybrid vehicles till April 2013 has been extended upto March 31, 2015
  • The basic customs duty (BCD) on imported luxury goods such as high-end motor vehicles, motor cycles, yachts and similar vessels was increased. The duty was raised from 75 percent to 100 percent on cars/ motor vehicles (irrespective of engine capacity) with CIF value more than US$ 40,000; from 60 percent to 75 percent on motorcycles with engine capacity of 800 cc or more and on yachts and similar vessels from 10 percent to 25 percent
  • An increase in excise duty from 27 to 30 per cent has been allowed for SUVs with engine capacity exceeding 1,500 cc, while excise duty was decreased from 80 to 72 per cent, in case of SUVs registered solely for taxi purposes
  • An exemption from BCD on lithium ion automotive battery for manufacture of lithium ion battery packs for supply to manufacturers of hybrid and electric vehicles
  • The excise duty on chassis of diesel motor vehicles for transport of goods reduced from 14 per cent to 13 per cent

Additionally, the Automotive Mission Plan (AMP) 2006-2016, aim to develop India as the destination of choice in the world for design and manufacture of automobile and auto components, with output reaching US$ 145 billion.

Road Ahead

The ever increasing development in infrastructure, huge domestic market, increasing purchasing power and stable government framework have made India a favourable destination for investment, as per the vision of AMP (2006-2016).

Over the medium term, factors such as growing thrust on localisation and expanding businesses in new geographies should allow the components industry to grow at a relatively faster pace than the auto OEM segment, according to a study by ICRA.

Exchange Rate: INR 1 = US$ 0.01620 as on Oct 22, 2013

References: Media Reports, Department of Industrial Policy and Promotion (DIPP), Automotive Component Manufacturers Association of India (ACMA), Union Budget 2013-14 analysis by Deloitte