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.
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:
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:
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.