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Dikshu C. Kukreja
Dikshu C. Kukreja
Mr. V. Raman Kumar
Mr. V. Raman Kumar
Ms. Chandra Ganjoo
Ms. Chandra Ganjoo
Sanjay Bhatia
Sanjay Bhatia
Aprameya Radhakrishna
Aprameya Radhakrishna
Colin Shah
Colin Shah
Shri P.R. Aqeel Ahmed
Shri P.R. Aqeel Ahmed
Dr. Vidya Yeravdekar
Dr. Vidya Yeravdekar
Alok Kirloskar
Alok Kirloskar
Pragati Khare
Pragati Khare
Devang Mody
Devang Mody
Vinay Kalantri
Vinay Kalantri

India's Auto Components Industry

India's Auto Components Industry

Introduction
In recent years, India's auto component industry has experienced immense growth. The industry can be broadly classified into various organised and unorganised sectors. The organised sector contains high-value precision instruments and services OEMs, while the unorganised sector primarily caters to the aftermarket and consists of low-value goods. The industry has been a major driver of macroeconomic growth and employment. India's auto component industry has contributed 2.3% of the Gross Domestic Production (GDP) and employed around 3 million people directly and indirectly. Rising incomes and a fast-growing economy aided the growth of India's auto component industry. India has also experienced a rise in the demand for automobiles. India has the fourth-largest automobile industry, and the country dominates in the two-wheeler and the three-wheeler segment. This rising demand for automobiles has greatly supported the demand for auto components.

Significance of India's auto component industry
India's auto components are well-known worldwide for their quality and their precision. India's auto component industry's turnover stood at Rs. 4.20 lakh crore (US$ 56.5 billion) as of FY22. The industry's turnover has grown significantly from US$ 39.05 billion in FY16 to US$ 56.50 billion in FY22, recording a CAGR growth of 6.35%. Demand from domestic OEMs has significantly contributed to the auto component industry at 81.1%. This demonstrates the correlation between India's automobile and auto component industries. This increase in turnover in FY22 can be largely attributed to shifting trends in market preferences towards larger and more powerful vehicles.

India's auto component exports stood at US$ 19 billion in FY22. The exports of auto components have increased from US$ 10.83 billion in FY16 to US$ 19 billion in FY22. North America dominates these auto component exports at 32%, Europe at 31% and Asia at 25%. India has also seen growing traction for two-wheeler auto components in Africa. This is due to rising incomes in Africa and the expertise of well-established OEMs in India with auto components suitable to the African market.


Source: ACMA

India's auto components aftermarket stood at US$ 10 billion in FY22. The industry grew at a CAGR of 8.02%, from US$ 6.80 billion in FY16 to US$ 10 billion in FY22. The auto component industry's aftermarket growth can be majorly attributed to engine components contributing a 24% share of the total aftermarket turnover, followed by Suspension and breaking at 15% and Drive emission at 14%.

Importance of Electric Vehicles in Auto components
India has experienced a growth in demand for electric vehicles. According to the Ministry of Heavy Industries, India has sold approximately 0.56 million electric vehicles in recent years. Most of India's electric vehicle markets are dominated by two-wheelers and three-wheelers. India's growing auto component industry aids this rise in demand for electric vehicles. India's electric vehicle auto component industry is divided into various component segments.

These components include various segments; these segments are:

  • Powertrain & Power Electronics:
    India's powertrain and power electronics are critical components for electric vehicle manufacturing. The share of these components is almost 20-30% of the cost for manufacturers. India's electric power and electronics will be valued at more than US$ 2.5 billion by 2030.
  • Battery And Battery-Related Components:
    Batteries contribute almost 40% share of the cost for electric vehicle manufacturers; it is one of the most expensive electrical components and has gained much traction in recent years. The government of India has introduced various policies to boost India's battery markets. These policies include the 'National Program on Advanced Chemistry Cell (ACC) Battery Storage (DHI) and the Battery swapping policy. India's EV battery market is expected to reach US$ 2 billion by 2026 and surpass US$ 3 billion by 2031.
  • Connectivity And Control Systems:
    These are the systems responsible for the electric vehicle intelligence, efficiency and safety while the vehicles are in motion or on charge. These systems are essential and will play an important role for electric auto components manufacturers. To improve vehicle characteristics, several 2W players have joined with technology providers; for instance, Ather partnered with Google Cloud for cloud solutions, and Okinawa partnered with Aeris to connect and control the system of electric vehicles.

Electric vehicles are expected to play a major role in the auto component industries. According to ICRA, India's auto ancillaries' revenue is expected to grow by 8-10% in FY23. This will be due to favourable auto component manufacturing policies and rising demand for electric vehicles.

Government Initiatives for the Auto component Industry
The Government of India has introduced various policies to boost the auto component manufacturing industry. These policies have aided the auto component industry significantly. Few of these policies include:

  • Production Linked Incentives (PLI) for the Automobile and Auto Component industry:
    In September 2021, India introduced the PLI scheme to boost automobile and auto component manufacturing. The scheme proposed financial incentives to boost domestic manufacturing of Advanced Automotive Technology (AAT) products and attract investments in the automotive manufacturing value chain. A total of 115 companies had filed applications under this PLI scheme, and it was able to attract proposed investments of Rs. 74,850 crores (US$ 9.38 billion) against the target of Rs. 42,500 crores (US$ 5.32 billion).
  • PLI Scheme for National Programme on Advanced Chemistry Cell (ACC) Battery Storage:  
    The scheme was notified in June 2022. The main aim of this scheme was to reduce the cost of battery manufacturing in India and make India globally competitive. The scheme will help the country transition from a fossil fuel-based automobile transportation system to electric vehicle-based transport. The government of India is expected to provide manufacturing incentives worth Rs. 18,100 crores (US$ 2.26 billion) to auto components manufacturers. In July 2022, the scheme received three bidders: Reliance New Energy Limited, Ola Electric Mobility Private Limited and Rajesh Exports Limited.
  • FAME INDIA II Scheme:
    Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) was introduced in India to promote India's transition from a fossil fuel-based automobile transportation system to electric vehicles. Phase II of this scheme had a total budget outlay of Rs. 10,000 crores (US$ 1.25 billion) from April 1, 2019 till the next three years. By supporting 7000 e-Buses, 5 lakh e-3 Wheelers, 55000 e-4 Wheeler Passenger Cars (including Strong Hybrid), and 10 lakh e-2 Wheelers, this phase attempts to create demand for electric vehicles.

Conclusion
The rapidly globalising world is opening up new prospects for the transportation business, particularly as the industry shifts toward electric, electronic, and hybrid vehicles, which are more efficient, safe, and dependable. This will increase verticals and possibilities for auto component producers during the next decade. The government of India has already granted several manufacturing incentives to assist businesses in adapting to the sector's changing dynamics. India is also aggressively investing in electric vehicle infrastructure. These investments, alongside rising incomes and growing demand for sustainable transportation, will significantly aid the auto component industry and help achieve new heights in the upcoming years.

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