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India’s export of auto components increased at a CAGR of 7.6% during FY16-FY20 as the value increased from US$ 10.83 billion in FY16 to US$ 14.5 billion in FY20.

Auto Components Industry in India

    Last updated on Dec, 17 2021

Indian Auto Components Industry Report  (Size: 1.11 MB ) (November, 2021)

Introduction

The Indian auto-components industry has experienced healthy growth over the last few years. The auto-components industry expanded by a CAGR of 3.28% over FY16 to FY20 to reach US$ 45.90 billion in FY21. The industry is expected to reach US$ 200 billion by FY26.

Due to high development prospects in all segments of the vehicle industry, the auto component sector is expected to rise by double digits in FY22.

Auto-components industry account for 2.3% of India’s Gross Domestic Product (GDP) and employs as many as 1.5 million people directly and indirectly. A stable government framework, increased purchasing power, large domestic market, and an ever-increasing development in infrastructure have made India a favourable destination for investment.

Market Size

The industry can be broadly classified into organised and unorganised sectors. The organised sector caters to original equipment manufacturers (OEMs) and consist of high-value precision instruments while the unorganised sector comprises low-valued products and caters mostly to the aftermarket category.

The automobile component industry's turnover was Rs 3.40 lakh crore (US$ 45.9 billion) in FY21, a 3% decrease from the previous year and is expected to reach US$ 200 billion by FY26. Exports of auto components declined by 8.28% to Rs. 0.98 lakh crore (US$ 13.3 billion) in FY21, from Rs. 1.02 lakh crore (US$ 14.5 billion) recorded in FY20. As per Automobile Component Manufacturers Association (ACMA), automobile components export from India is expected to reach US$ 80 billion by 2026. The Indian auto components industry is expected to reach US$ 200 billion in revenue by 2026.

Strong international demand and resurgence in the local original equipment and aftermarket segments are predicted to help the Indian auto component industry grow by 20-23% in FY22.

Investments

The Foreign Direct Investment (FDI) inflow into Indian automotive* industry during the period April 2000-June 2021 stood at US$ 30.51 billion as per the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

Some of the recent investments made/planned in the Indian auto components sector is as follows:

  • In October 2021, Wheels India announced that it would invest an additional Rs. 37 crore (US$ 4.95 million) this year, to support the global service demand.
  • In October 2021, Lucas TVS announced a 20% capacity expansion of its auto and non-auto businesses by the end of 2021.
  • In October 2021, Hero Motor (HMC) got into a joint venture partnership with Japanese two-wheeler major Yamaha, to make electric motors for e-bicycles for the global market.
  • In October 2021, Maharashtra government signed an MoU with Causis E-Mobility Pvt. Ltd., a joint venture of the UK-based Causis Group, to set up a zero-emission electric vehicle (EV) manufacturing facility at Talegaon, near Pune, with an investment of Rs. 2,800 crore (US$ 317.96 million).
  • In October 2021, Sona BLW Precision Forgings Limited, through its wholly owned subsidiary company, Sona Comstar eDrive Private Limited (Sona Comstar), entered a collaboration agreement with IRP Nexus Group Ltd., Israel, to develop, manufacture and supply magnet-less drive motors and matching controller systems for electric two and three-wheelers.
  • In October 2021, auto components manufacturer MM Forgings Ltd. (MMF) acquired CAFOMA Autoparts for Rs. 33 crore (US$ 4.38 million).
  • In October 2021, TVS Motor Company, collaborated with Tata Power, to boost the comprehensive implementation of electric vehicle charging infrastructure (EVCI) across India and deploy solar-powered technologies at various TVS Motor locations.
  • At the Investment Conclave - 2021 in Chennai, the Tamil Nadu government stated that it got investment commitments totaling Rs. 28,508 crore (US$ 3.85 billion) from 49 different companies. Electronics, automotive components, industrial parks, information technology and manufacturing are among sectors where these investments are expected to generate ~83,482 jobs in the state.
  • The Indian government has outlined US$ 7.8 billion for the automobile and auto components sector in production-linked incentive schemes under the Department of Heavy Industries.
  • In May 2021, the Government of India approved a PLI scheme for manufacturing advanced chemistry cell battery at an estimated outlay of Rs. 18,100 crore (US$ 247.3 million).
  • In March 2021, the government announced to offer fresh incentives to companies making electric vehicles (EVs) as part of a broad auto sector scheme. The scheme is expected to attract US$ 14 billion of investment in the next five years.
  • In February 2021, Vedanta Resources launched its newest product—aluminium cylinder head alloy, a crucial raw material for manufacturing cylinder heads and other automotive components.
  • A cumulative investment of ~Rs. 12.5 trillion (US$ 180 billion) in vehicle production and charging infrastructure would be required until 2030 to meet India’s electric vehicle (EV) ambitions. This is likely to boost the demand of auto components from local manufacturers.
  • In January 2021, Suzuki Motor Corp. and Hyundai Motor Co. announced plans to explore ways to make India a key global hub for sourcing components and facilitate sharp rise in vehicle exports from the country.
  • In January 2021, French battery system supplier Forsee Power committed to invest Rs. 82 crore (US$ 11.18 million) in phase 1 of the India project.

Achievements

Following are Government’s achievements in the past four years:

  • Production of two wheelers, passenger vehicles, commercial vehicles and three wheelers reached 18.34 million, 3.06 million, 0.62 million, and 0.61 million, respectively, in FY21.
  • FAME - India Scheme formulated by Department of Heavy Industry, led to a continuous increase in registered OEMs and vehicle models. Also, the scheme enhanced the sales of EVs and about 261,507 electric/hybrid vehicles were supported under the scheme up to December 6, 2018. In February 2019, the Government approved FAME-II scheme with a fund requirement of Rs. 10,000 crore (US$ 1.39 billion) for FY20-22.
  • Under National Automotive Testing and research and development (R&D) Infrastructure Project (NATRiP), various facilities including passive safety labs comprising of crash core facility and crash instrumentations including dummies were established at ICAT-Manesar and ARAI-Pune.
  • To give a fresh thrust to E-mobility in public transport, Department of Heavy Industry announced the launch of public and shared mobility based on electric powertrain.

Government Initiatives

The Government of India’s Automotive Mission Plan (AMP) 2006-2016 has come a long way in ensuring growth for the sector. Indian Automobile industry is expected to achieve a turnover of US$ 300 billion by 2026 and will grow at a CAGR of 15% from its current revenue of US$ 74 billion.

In November 2020, the Union Cabinet approved PLI scheme in automobile and auto components with an approved financial outlay over a five-year period of Rs. 57,042 crore (US$ 8.1 billion). In September 2021, the Indian government issued notification regarding a PLI scheme for automobile and auto components worth Rs. 25,938 crore (US$ 3.49 billion). This scheme is expected to bring investments of >Rs. 42,500 (US$ 5.74 billion) by 2026.

Government has come out with Automotive Mission Plan (AMP) 2016-26 which will help the automotive industry to grow and will benefit Indian economy in the following ways: -

  • Contribution of auto industry in the country’s GDP will rise to over 12%.
  • Around 65 million incremental number of direct and indirect jobs will be created.
  • End of life Policy will be implemented for old vehicles.

Road Ahead

The rapidly globalising world is opening newer opportunities for the transportation industry, especially while it makes a shift towards electric, electronic and hybrid cars, which are deemed more efficient, safe, and reliable mode of transportation. Over the next decade, this will lead to newer verticals and opportunities for auto-component manufacturers, who would need to adapt change via systematic R&D.

As per ACMA forecasts, automobile component export from India is expected to reach US$ 80 billion by 2026. With shift in global supply chains, the Indian global automotive component trade is likely to expand at ~4-5% by 2026.

In December 2020, Power PSU JV EESL announced plan to install ~500 electric vehicle (EV) charging stations in the country in fiscal 2020-21. As of March 2021, there were 1,800 charging stations and this is expected to reach 4 lakh by 2026.

The Indian auto-components industry is set to become the third largest in the world by 2025. Indian auto-component makers are well positioned to benefit from the globalisation of the sector as export potential could be increased by up to US$ 30 billion by 2021E.

References: International Organization of Motor Vehicle Manufacturers, Media Reports, Press Releases, Department for Promotion of Industry and Internal Trade (DPIIT), Automotive Component Manufacturers Association of India (ACMA), Society of Indian Automobile Manufacturers (SIAM)

Note: Conversion rate used in November 2021, Rs. 1 = US$ 0.01336

Note: * - Includes automobile and auto-components, E - Estimated

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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