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Auto Components Industry in India

January, 2015


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-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.

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.

Auto component makers expect robust growth in the months to come with continued rise in car sales in the past five months.


The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period April 2000 – November 2014 were recorded at US$ 11,351.26 million, as per data published by the Department of Industrial Policy and Promotion (DIPP).

Some of the major investments made into the Indian auto components sector are as follows:

  • Motherson Sumi Systems Ltd has acquired assets of German auto parts maker Scherer & Trier GmbH & Company KG, which includes two factories. The acquisition will be made through its Netherlands-based subsidiary Samvardhana Motherson Automotive Systems Group BV for Rs 285.10 crore (US$ 46.24 million).
  • Nittan India Tech, the Indian subsidiary of the Japanese auto major Nittan Valve, has inaugurated its production unit at Sri City.
  • Automotive supplier Uno Minda and Japan’s Toyoda Gosei Co Ltd have announced a joint venture (JV) partnership to manufacture and sell rubber hoses to automobile makers in India. The JV will be set up with a total investment of Rs 85.3 crore (US$ 13.83 million) in a phased manner.
  • RSB Transmissions has signed a Technical Assistance Agreement with Jidosha Buhin Kogyo, Japan to manufacture and sell propeller shafts for SCV/SUV/LCV segment for the domestic and export market.
  • Minda Corp Ltd has purchased 2 per cent equity from its Japanese joint venture (JV) partner Furukawa Group to increase its holding to 51 per cent in Minda Furukawa Electric Pvt Ltd (MFE).
  • Honeywell Turbo Technologies has entered into an agreement with Tata Group to develop their first ever petrol turbocharged engine.

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 is 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.

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 automakers for partnerships.

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$ 0.0162 as on January 21, 2015

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)