Trade Analytics
Auto Components
India is expected to have the fourth largest auto components industry by 2025.

Auto Components Industry in India

Latest update: January, 2020

Growth

 

Last Updated: January, 2020

Indian Auto Components Industry Report  (Size: 783.09 KB ) (January, 2020)

Introduction

The Indian auto-components industry has experienced healthy growth over the last few years. The auto-component industry of India has expanded by 10.6 per cent to reach at a level of US$ 56.2 billion in FY19.

The auto-components industry accounts for 2.3 per cent of India’s Gross Domestic Product (GDP) and employs as many as 1.5 million people directly and indirectly each. 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.

India’s exports of auto components increased at a CAGR of 8.34 per cent, during FY14-FY19, with the value of auto component exports increasing from US$ 10.16 billion in FY14 to US$ 15.17 billion in FY19. This has been driven by strong growth in the domestic market and increasing globalisation (including exports) of several Indian suppliers. Growth is further expected to accelerate to 8-10 per cent in FY19 due to pick up in global scenario. ** Turnover of the aftermarket has increased at a CAGR of 11.35 per cent from US$ 5.90 billion in FY14 to US$ 10.10 billion in FY19 and expected to reach US$ 32 billion by 2026. The industry produced a total 14,427,724 vehicles including Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycle in April-September 2019.

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.

Investments

The Foreign Direct Investment (FDI) inflows into the Indian automotive* industry during the period April 2000–June 2019 were recorded at US$ 22.35 billion, as per data by the Department for Promotion of Industry and Internal Trade (DPIIT).

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

  • In August 2019, Eaton has partnered with Pune-headquartered technology firm KPIT.
  • In April 2019, Durr, a German automotive painting and sealing company, entered into a partnership with Patvin to provide automated painting solutions for two or three-wheelers and agricultural machinery for the Indian markets.
  • As of January 2019, Lite Auto Components Pvt Ltd, a part of Hindustan Magnesium Products Pvt Ltd plans to invest Rs 500 crore (US$ 69.30 million) to set up Magnesium-based manufacturing plant in Andhra Pradesh.
  • 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.
  • As of December 2018, German automotive major Continental has planned investments of Rs 180 crore (US$ 25.65 million) for setting up a premium surface materials facility in Pune. The facility will have an initial capacity of five million square metres and is expected to start production in 2020.
  • In October 2018, IMI Precision Engineering inaugurated its second largest manufacturing facility in the Asia Pacific region. The company is planning to expand its product and technical offerings over the course of the next few years.
  • As of September 2018, air-compressor manufacturer Elgi Equipments is going to invest Rs 18 crore (US$ 2.56 million) for setting up of a motor production facility in India. The facility is expected to be commissioned in Q1 FY20.

Achievements

Following are the achievements of the government in the past four years:

  • In April-September 2019, 365,282 units of passenger vehicles were exported from India.
  • The 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 electric vehicles and about 261,507 electric/hybrid vehicles were supported under the scheme up to December 6, 2018. In February 2019, the Government of India approved the FAME-II scheme with a fund requirement of Rs 10,000 crore (US$ 1.39 billion) for FY20-22.
  • Under National Automotive Testing and 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 & ARAI-Pune
  • To give a fresh thrust to e-mobility in public transport, Department of Heavy Industry announced the launch of public & 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 $300 billion by the year 2026 and will grow at a rate of CAGR 15 per cent from its current revenue of $74 billion.

As per the Union Budget 2019-20, government moved GST council to lower the GST rate on electric vehicles from 12 per cent to 5 per cent. Also, to make electric vehicle affordable to consumers, our government will provide additional income tax deduction of Rs 1.5 lakh (US$ 2,115) on the interest paid on loans taken to purchase electric vehicles.

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 per cent
  • 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 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.

National Electric Mobility Mission Plan aims at achieving sales of 6-7 million units of hybrid and electric vehicles by 2020. As per Automobile Component Manufacturers Association (ACMA) forecasts, automobile component exports from India are 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 exports potential could be increased by up to US$ 30 billion by 2021E.

Note:Conversion rate used as on September 2019, Re 1 = US$ 0.014019

Notes: ** As per CRISIL Research, * - 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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