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Auto components industry In India to grow to US$ 100B by 2020

The Indian auto-components industry is expected to become the third largest in the world by 2025. This industry is expected to register a turnover of US$ 100 billion by 2020, according to the Automotive Component Manufacturers Association of India.

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Definition / Scope

The segments of auto components are as follows:

  • Engine parts: pistons & pistons rings, engine valves & parts, fuel-injection systems & carburetors, cooling systems & parts, power train components
  • Drive transmission & steering parts: Gears, Wheels, steering systems, axles, clutches
  • Suspension and braking parts: Brake and brake assemblies, brake linings, shock absorbers, leaf springs
  • Equipment: Headlights, halogen bulbs, wiper motors, dashboard instruments, other panel instruments
  • Electrical Parts: Starter motors, spark plugs, electric ignition systems, flywheel magnetos, other equipment
  • Others: Sheet metal parts, hydraulic pneumatic instruments, fan belts, pressure die castings

Market Overview

  • The Indian auto components industry is divided into the organized and unorganized sectors. The organized sector consists of high-value precision instruments and caters to the Original Equipment Manufacturers while the unorganized sectors consists of low-valued products and caters to the aftermarket category.
  • The auto components industry contributed 2.3 per cent in India’s GDP in 2017-18.
  • Around 1.5 million people directly and 1.5 million people indirectly were employed in auto-components industry during 2017-18.
  • By 2020, India is expected to become the 4th largest automobiles producer globally after China, US and Japan.
  • By 2025, the auto components industry is expected to become the 3rd largest in the world.
  • The automotive components industry has record a CAGR of 6.83 per cent and has reached to US$ 51.20 billion in 2017-18.

Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Top Market Opportunities

  • By 2021, the domestic market in India is expected to have a total market size of US$ 115 billion while the export is estimated to have market size of US$ 30 billion.
  • The domestic and export markets are similar in terms of potential share by different product types. For instance, engine and exhaust components and body and structural parts are expected to make up 50 per cent potential sales as well as exports in 2020.
  • The share of the replacement market in sub-segments such as clutches is likely to grow in account of rising traffic density.
  • The metal manufacturers are likely to benefit from increasing demand for body and chassis, sheet metal parts, hydraulic pneumatic instruments, pressure die castings, mainly in 2 wheelers industry.
Export mkt potential.PNGDomestic mkt potential.PNGPotential by comp.PNGPotential by export.PNG

Market Drivers

Policy Support

100 per cent FDI is allowed under automatic route for auto component sector. In September 2015, Automotive Mission Plan 2016-26 was disclosed which aims a fourfold growth in auto component sector. The government is going to come out with a National Automotive Policy for boosting the growth of India’s automotive sector. The government has also established special auto parks and virtual SEZs for auto components.

Demand-side drivers

The growing working population and middle class are expected to remain the key demand drivers. Over 500 million people will be living in Indian cities by 2030.India is the fourth largest automobile market. The passenger vehicles, commercial vehicles and 2&3 wheelers are expected to increase from 4,010, 895, 24,169 thousand units in FY18 to 10,000, 2,350, 30,231 thousand units respectively in FY21. Further, the reduction in excise duties in motor vehicles will increase the demand for auto components.

Supply-side drivers

The competitive advantage in India is facilitating India to emerge as outsourcing hub. Hyundai plans to source gasoline and diesel engines from its Indian manufacturing operation for its domestic and global operations. Ford expanded its retail distribution network of genuine parts in Gujarat, Daman and Diu and Silvasssa. Honda has an export base for certain key engine components in India.

Vehicle production.PNGVehicle prob units.PNG

Industry Challenges

  • The vehicle penetration is very low in India as compared to other countries. Only 18 people per 1000 owns vehicles in India as opposed to 809 people per 1000 in the US, 519 people per 1000 in the UK and 101 people per 1000 in China.
  • The custom duty on specific parts has increased from 7.5 per cent to 15 per cent. Further, there is also 5 per cent increment in the imported duty on truck and bus radial tyres.
  • BS VI norms is all set to implement in India in April 2020. This will bring challenge for the auto after-makers as they would have to update themselves technologically to manufacture components complying with BS VI standard.
  • There has been delay in releasing of spare parts from custom office. The release time has increased from two days to two weeks, thus which has affected the timely service and delivery to customers. Further, this also may give rise to use of fake products and parts.

Technology Trends

  • Autonomous vehicles, connected vehicles, electrification and shared mobility (ACES) is expected to change the future of the mobility industry. India has more around more than 50 start ups companies that are working on innovative ACES technologies across two-wheelers, commercial vehicles and cars.
  • The minuscule share of vehicles in India come up with factory-fitted connectivity features such as basic in car entertainment, in-care connectivity and navigation system.
  • Augmented Reality is used in the automotive industry. Augmented Reality is used to help in navigation for drivers by superimposing navigational images on what the driver sees through the windshield.

Regulatory Trends

The GOI’s Automotive Mission Plan 2006-2016 ensured the growth for the auto components industry. Government has come out with another Automotive Mission Plan 2016-26 which aims to help the automotive industry to grow and benefit Indian economy in the following ways:

  • Contribution of auto industry in India’s GDP will rise to over 12 per cent.
  • The additional number of around 65 million direct and indirect jobs will be created.
  • The end of life policy will be implemented for old vehicles.

Other Key Market Trends

  • The major global OEMs have made India a component sourcing hub for their global operations. India has established itself as a global hub for small engines for companies like Ford, Fiat, Suzuki and General Motors.
  • India’s second largest auto-components producer, Varroc Engineering, is aiming to attract business from sales of electric vehicle components such as electronics, motors and battery management system.
  • Many multinational companies like Ford, Hyundai, Toyota and GM are launching new vehicle models in Indian market due to their earlier success here.

Market Size and Forecast

  • The revenue has increased at a CAGR of 6.83 per cent from US$ 26.44 billion in FY08 to US$ 51.20 billion in FY18.
  • The domestic OEM supplies contribute 55.97 per cent of the auto components industry turnover followed by exports and aftermarket
  • In FY18, the exports of automobile components stood at US$ 13.5 billion. The exports increased at a CAGR of 11.42 per cent during FY09-FY18.
  • Europe accounted for a volume share of 34 per cent during FY8 IN Indian auto components exports followed by North America and Asia with 28 and 25 per cent respectively.
  • The turnover of the aftermarket has increased at a CAGR of 9.67 per cent to US$ 9.20 billion in FY18 from US$ 5.80 billion in FY13.
  • The ‘Driving Transmission and Steering’ product category accounted for the largest part of the aftermarket at 21 per cent, followed by ‘Engine Components’ and ‘Electricals’ at 18 per cent and ‘Suspension and Braking’ at 15 per cent.
  • In 2017-18, the production of two wheelers, passenger vehicles, commercial vehicles and three wheelers reached 23.15 million, 4.01 million, 0.89 million, and 1.02 million respectively.
  • The passenger vehicles had the highest share of total auto components supplies to OEMs in 2017-18, followed by two wheelers and light commercial vehicles.
Turnover.PNGProduct wise in after mkt.PNGValue of auto exports.PNGDomestic mkt by segment.PNGAftermkt turnover.PNGLoann.PNGTurnover share in industry.PNGVolume by geo.PNGAuto comp supply y volume.PNG

Market Outlook

  • The auto-components industry in India is expected to witness a turnover of US$ 100 billion by 2020.
  • Automobile component exports are expected to touch US$ 80 billion by 2026.
  • The Indian auto component industry aims to achieve US$ 200 billion in revenue by 2026.

Competitive Factors

  • There is large pool of skilled and semi-skilled workforce in India.
  • India is the third largest steel producer in the world, hence a cost advantage.
  • The cost-effective manufacturing base keeps costs lower by 10 to 25 per cent in India as compared to operations in Europe and Latin America.
  • Relative to competitors, India is geographically closer to key automotive markets like Middle East and Europe
  • India is emerging as global hub for auto component manufacturing.

Key Market Players

The below table shows the key players in auto components market in India by segments:

Key players by segmnt.PNG

Strategic Conclusion

The Indian auto-components industry has witnessed robust growth over the last few years. The strong growth is backed by government’s support, increasing middle class population, increased purchasing power, development in infrastructure and increased vehicle production. Globalization is opening up newer opportunities for the automobiles industry especially while it makes a shift towards electric cars. The Indian auto-components industry is expected to become the third largest in the world by 2025.

Further Reading

Appendix

  • ACMA : Automotive Component Manufacturers Association of India
  • CAGR : Compound Annual Growth Rate
  • FDI : Foreign Direct Investment
  • FY : Indian Financial Year (April to March)
  • GDP : Gross Domestic Product
  • GOI : Government of India
  • OEM : Original Equipment Manufacturers
  • NATRiP : National Automotive Tetsing and R&D Infrastructure Project
  • SEZ : Special Economic Zone
  • US$ : US Dollar


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