The Indian auto-components industry has experienced healthy growth over the last few years. The auto-components industry expanded by a CAGR of 6% over FY16 to FY20 to reach US$ 49.3 billion in FY20.
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.
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.
Automobile component industry’s revenue stood at US$ 49.3 billion in FY19, up from US$ 35 billion in FY14. Export of auto components grew at a CAGR of 7.6% to reach Rs. 102,623 crore (US$ 14.5 billion) during the same time. 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.
The Foreign Direct Investment (FDI) inflow into Indian automotive* industry during the period April 2000-June 2020 stood at US$ 24.53 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:
Following are Government’s achievements in the past four years:
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.
As per the Union Budget 2019-20, Government moved GST council to lower the GST rate on EVs from 12% to 5%. Also, to make EVs affordable to consumers, Government will provide additional income tax deduction of Rs. 1.5 lakh (US$ 2,115) on the interest paid on loans taken to purchase EVs.
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: -
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.
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), Union Budget 2019-20
Note: Conversion rate used in April 2020, Rs. 1 = US$ 0.013123
Note: * - Includes automobile and auto-components, E - Estimated, SAMARTH - Smart & Advanced Manufacturing and Rapid Transformation Hub
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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