Trade Analytics
Auto Components
The turnover of India auto components sector is expected to reach US$ 115 billion by FY21.

Auto Components Industry in India

Latest update: May, 2018

  • Revenues have risen from US$ 26.5 billion in FY08 to US$ 43.5 billion in FY17 at a CAGR of 5.66 per cent during FY08-17.
  • The market size for auto component sector increased by 11.5 per cent reaching to US$ 43.5 billion in FY17 from US$ 39 billion in FY16.
  • As per Automobile Component Manufacturers Association (ACMA) forecasts, automobile component exports from India are expected to reach US$ 70-billion by 2026 from US$ 10.9 billion in FY17. The Indian auto component industry aims to achieve US$ 200 billion in revenues by 2026.
  • The industry is expected to post a 13-15 per cent growth rate in FY18, on the back of robust growth in domestic passenger vehicle, commercial vehicle, tractor and two-wheeler segments.^
Growth

Note: CAGR – Compound Annual Growth Rate, *Turnover data covers supplies to OEMs , aftermarket sales and exports, ^ As per ratings agency ICRA
Source: ACMA

Last Updated: May, 2018

Introduction

The Indian auto-components industry has experienced healthy growth over the last few years. Some of the factors attributable to this include: a buoyant end-user market, improved consumer sentiment and return of adequate liquidity in the financial system. The auto-component industry of India has expanded by 14.3 per cent because of strong growth in the after-market sales to reach at a level of Rs 2.92 lakh crore (US$ 43.52 billion) in FY 2016-17.

The auto-components industry accounts for almost seven per cent of India’s Gross Domestic Product (GDP) and employs as many as 25 million people, both 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 Indian auto-components industry can be broadly classified into the organised and unorganised sectors. The organised sector caters to the Original Equipment Manufacturers (OEMs) and consists of high-value precision instruments while the unorganised sector comprises low-valued products and caters mostly to the aftermarket category.

The total value of India’s automotive aftermarket stood at Rs 56,098 Crore (US$ 8.4 billion) in FY 2016-17 and exports were at Rs 73,128 crore (US$ 10.9 billion) as compared Rs 70,916 crore ($10.8 billion) in the year 2015-16, up by 3.1 per cent whereas imports in the year 2016-17 has decreased from Rs 90,662 crore (US$ 13.5 billion) to Rs 90,571 crore (US$13.81 billion), down by 0.1 per cent. This has been driven by strong growth in the domestic market and increasing globalisation (including exports) of several Indian suppliers.

The Indian automotive aftermarket is expected to grow at a CAGR of 10.5 per cent and reach Rs 75,705 crore (US$ 13 billion) by the year 2019-20, according to the Automotive Component Manufacturers Association of India (ACMA). These estimates are in sync with the targets of the Automotive Mission Plan (AMP) 2016-26.

The Indian Auto Component industry is expected to grow by 8-10 per cent in FY 2017-18, based on higher localisation by Original Equipment Manufacturers (OEM), higher component content per vehicle, and rising exports from India, as per ICRA Limited.

According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is expected to register a turnover of US$ 100 billion by 2020 backed by strong exports ranging between US$ 80- US$ 100 billion by 2026, from the current US$ 11.2 billion.

Investments

The Foreign Direct Investment (FDI) inflows into the Indian automobile industry during the period April 2000 – December 2017 were recorded at US$ 18.41 billion, as per data by the Department of Industrial Policy and Promotion (DIPP).

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

  • 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.
  • 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.

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 $300 billion by the year 2026 and will grow at a rate of CAGR 15 per cent from its current revenue of $74 billion.

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

  • Contribution of auto industry in the country’s GDP will rise to 13 per cent, currently which is less than 10 per cent
  • More than 100 million jobs will be created in the economy
  • Companies will invest around US $80 billion as a part of their capital expenditure.
  • End of life Policy will be implemented for old vehicles

Some of the other government initiatives are listed below:

  • Electric cars in India are expected to get new green number plates and may also get free parking for three years along with toll waivers.#
  • The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in the country for introduction of electric vehiscles (EVs) in their public transport systems under the FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme.

Road Ahead

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

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 exports potential could be increased by up to four times to US$ 40 billion by 2020.

Exchange Rate Used: INR 1 = US$ 0.015 as of March 01, 2018

Notes: # - as per the draft policy on e-vehicles prepared by NITI Aayog, Government of India

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

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