INDIAN AUTOMOBILE COMPONENTS INDUSTRY
AUTOMOBILE COMPONENTS
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.
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. 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.
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 FY20, up from US$ 39.05 billion in FY16 and is expected to reach
US$ 200 billion by FY26. Export of auto components grew at a CAGR of
7.6% to reach Rs. 102,623 crore 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-December 2020 stood at US$
25.39 billion as per the data released by Department for Promotion
of Industry and Internal Trade (DPIIT).
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.
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 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 in phase 1 of the India
project.
In October 2020, Japan Bank for International Cooperation (JBIC)
agreed to provide Rs. 7,400 crore to SBI (State Bank of India) for
funding the manufacturing and sales business of suppliers and
dealers of Japanese automobile manufacturers as well as providing
auto loans for the purchase of Japanese automobiles in India.
In October 2020, the government of Tamil Nadu signed 14 memorandum
of understandings (MoU) worth Rs. 10,055 crore that will generate
69,712 jobs in the state.
In September 2020, off-highway tyre-maker Alliance Tire Group
(ATG), owned by the Japanese major Yokohama Group, announced plans
to set up its third plant in the country in Visakhapatnam, with an
investment of Rs. 1,240 crore. The proposed plant will add over
20,000 tonnes per annum (55 tonnes per day rubber weight) capacity
to the 2.3-lakh-tonne annual production from two India plants and
will be commissioned by the first quarter of 2023.
In September 2020, Toyota Kirloskar Motors announced investments of
Rs. 2,000+ aimed towards electric components and technology.
In February 2020, National Engineering Industries Ltd (NEIL)
announced investment of Rs. 100 crore over the next three years for
producing needle roller bearing at its Jaipur facility.
In January 2020, Tata AutoComp Systems entered a joint venture (JV)
with Beijing-based Prestolite Electric to enter the electric vehicle
(EV) components market.
Production of two wheelers, passenger vehicles, commercial vehicles
and three wheelers reached 21.03 million, 3.43 million, 0.75
million, and 1.13 million, respectively, in FY20.
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 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 power train.
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.
Contribution of auto industry in the country’s GDP will rise to
over 12%.
Around 65 million incremental numbers of direct and indirect jobs
will be created.
End of life Policy will be implemented for old vehicles.
The rapidly globalizing 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.
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 globalization of the sector as export
potential could be increased by up to US$ 30 billion by 2021.
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