Indian Auto Components Industry Analysis

The Indian auto-components market contributes almost seven per cent to India’s GDP and employs as many as 19 million people. The auto components sector has been observing robust growth, and turnover is anticipated to reach US$ 200 billion by FY26 from US$ 43.5 billion in FY17. Turnover of auto-components industry is expected to grow to US$ 47-49 billion in FY18. India's exports of auto components could account for as much as 26 per cent of the market by 2021. Auto-component production in 2018-19 is expected to increase 12-14 per cent in FY19, on the back of robust growth in domestic and export markets.&

Favourable government policies such as Auto Policy 2002, Automotive Mission Plan 2016-2026, National Automotive Testing and R&D Infrastructure Projects (NATRiPs), have helped the Indian auto components industry achieve considerable growth. The government has also extended the FAME Scheme from March 2018 to September 2018.

India is emerging as global hub for auto component sourcing. A cost-effective manufacturing base keeps costs lower by 10-25 per cent relative to operations in Europe and Latin America. Relative to competitors, India is geographically closer to key automotive markets like the Middle East and Europe. Global auto component players are increasingly adopting a dual-shore manufacturing model, using overseas facilities to manufacture few types of components and Indian facilities to manufacture the others.

Investments and expansions in the Indian Auto component sector-

• As of June 2018, Faurecia Interior Systems has started construction of its Rs 50 crore (US$ 7.46 million) instrument panel plant. The greenfield plant is being set up over an area of 12 acres and Start of Production (SOP) will be initiated from the third quarter of 2019.
• Hitachi Automotive Systems has set up a new technical centre in Delhi in 2018 which will help the company grow in the North India market. The company also plans to step-up its production in India by 2020.
• As of April 2018, Honda has decided to invest Rs 8 billion (US$ 124.13 million) in India to introduce new products in the market and improve efficiency at its existing plants.
• Bosch has decided to invest Rs 500 – Rs 800 crore (US$ 77.58 – 124.13 million) over the next two years (FY19 and FY20) to expand operations in India and increase R&D to develop products for the global market.
• In April 2018, Motherson Sumi Systems signed a deal to acquire Reydel Automotive for US$ 201 million. The acquisition will help the company to enter new geographies and get new customer portfolios.
• Friction materials maker ASK Automotive has signed an agreement with Fras-le of Brazil to set up a joint venture of a brake pads and linings facility for commercial vehicles in Haryana at an investment of over US$ 15.6 million.
• Schaeffler India, the Indian arm of Germany’s automotive and industrial parts maker, is planning to invest Rs 300 crore (US$ 46.66 million) per annum over FY18-19.
• Major auto component firms such as Krishna Group, Minda Industries, Lumax Industries, Subros Ltd, etc are planning to invest over US$ 233.31 million over the next 2-3 years.
• Exhaust system and ride control major, Tenneco Automotive India is going to set up a greenfield facility in Gujarat by investing US$ 6-8 million in different phases.
• Setco Automotive is going to invest Rs 250 crore (US$ 38.62 million) over the next two to three years for capacity expansion and modernisation.

Note: ^As per rating agency ICRA, &As per CRISIL Research