Automobile components industry

The automotive industry occupies a significant place in the Indian economy. The well developed industry acts as a catalyst and gives impetus to economic growth by producing numerous vehicles. It is also widely preferred by major industrial players for supply of auto components. The Indian auto component sector covers a wide range of industries.

India is emerging as a global hub for auto component sourcing and is set to break into the league of the top five vehicle producing nations worldwide. The country is also emerging as a sourcing hub for engine components. Major global original equipment manufacturers (OEMs) plan to make India a component sourcing hub for their global operations.

The auto components industry is expected to invest around Rs 70 billion (US$ 1.13 billion) over the next three years on new projects, as per rating agency ICRA’s estimates.

The Indian auto component industry’s turnover is projected to touch US$ 115 billion by 2020-21. The industry is estimated to grow at a compound annual growth rate (CAGR) of 14 per cent during 2013-21. In addition, the industry’s exports are projected to touch US$ 30 billion by 2020-21, according to Automotive Component Manufactures Association (ACMA).

The cumulative FDI inflow into the Indian automobile industry during April 2000 to July 2013 was recorded at US$ 8,932 million, amounting to 4.5 per cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce, Government of India.

Additionally, the Automotive Mission Plan (AMP) 2006-2016, aim to develop India as the destination of choice in the world for design and manufacture of automobile and auto components, with output reaching US$ 145 billion.

The ever increasing development in infrastructure, huge domestic market, increasing purchasing power and stable government framework have made India a favourable destination for investment, as per the vision of AMP (2006-2016).

Over the medium term, factors such as growing thrust on localisation and expanding businesses in new geographies should allow the automobile components industry to grow at a relatively faster pace than the auto OEM segment, according to a study by ICRA.

References: Media Reports, ICRA, Department of Industrial Policy and Promotion (DIPP), Automotive Component Manufacturers Association of India (ACMA), Union Budget 2013-14 analysis by Deloitte