Growth Opportunities in the Global Auto Component Market

Indian Auto-part Sector Overview

In recent years, the Indian auto-component sector has grown healthily. With a CAGR of 6 percent over FY16, the automotive components industry expanded from FY20 to US$ 49.3 billion in FY20. It is predicted that by FY26 industry will reach US$200 billion. The automotive components sector is forecast to grow by two digits in FY22 due to excellent development outlooks across all vehicle industries.

The automotive component business represents 2.3% of the Indian Gross Domestic Product (GDP) and directly and indirectly employs as many as 1,5 million people. India has been turned into an advantageous investment target by a stable government framework, expanding purchasing power, a vast domestic market, and constantly growing infrastructure development.

Size of the market

The sector can be widely divided between organized and unorganized industries. The organized sector includes original manufacturers of equipment (OEMs) and consists of high-value precisions and unorganized items, mainly in the after market class.

The Automotive Component industry's sales amounted to 49.3 billion dollars in fiscal 20, up from 39.05 billion dollars in fiscal 16 years, and are predicted to reach 200 billion dollars in fiscal 26 years.

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Export of auto components expanded at a CAGR of 7.6 percent to reach Rs. 102,623 crore (US$ 14.5 billion) during the same time. As to Vehicle Component Manufacturers Association (ACMA), automobile components export from India is estimated to exceed US$ 80 billion by 2026. By 2026, the Indian automotive components sector is estimated to generate revenues of $200 billion.

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Investments

In April2000-December20020, the FDI inflow to the Indian car industry amounted to US$25.39 billion as reported by the Department of Industry Promotion and Internal Trade (DPIIT).

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Some of the recent investments in the Indian automotive components industry were:

· A PLI program for the production of state-of-the-art cell chemist batteries, estimated at Rs 18,100 crore (247.3 million US dollars) was approved by the government of India in May 2021.

· In March 2021, as part of a comprehensive car industry initiative, the government announced that it would be offering electric vehicle (EV) firms fresh incentives. In the following five years, the project is expected to attract an investment of US$ 14 billion.

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· Vedanta Resources introduced its most new product in February 2021 — aluminum cylinders head alloy, an important raw material for the production of cylinders and automobile components.

· In October 2020, the Japan Bank for International Cooperation (JBIC) agreed to assist the State Bank of India (SBI) with US$ 1 billion in finance for manufacturing and sales of Japanese car manufacturers and distributors, as well as for auto loans to acquire Japanese cars in India.

· In October 2020, 14 memoranda of understanding (MoU) worth Rs. 10,055 crore (USD 1,4 billion) were signed by the government of Tamil Nadu, generating 69,712 jobs in the state.

Government Support and Initiatives

The government of India has made considerable progress in assuring sector growth under the 2006-2016 Automobile Mission Plan (AMP). The Indian Automobile industry expects to achieve sales of 300 billion dollars by 2026 and will grow by 15% on its current sales of 74 billion dollars at CAGR.

In November 2020, the Union Cabinet approved a PLI system with an approved financial cost of Rs. 57,042 crores (US$ 8,1 billion) for car and car components over five years.

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The government's Automobile Mission Plan (AMP) 2016-26 has been developed to help the automotive industry thrive and boost the Indian economy:

· Car industries will contribute more than 12 percent of GDP in the country.

· The number of direct and indirect jobs will increase by around 65 million.

· The Life Policy for Old Vehicles will be enacted.

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Bottom Line

The world of rapid globalization offers the transportation industry new opportunities, especially as it shifts to more efficient, safe, and reliable modes of transport, electric, electronic and hybrid cars. Over the next 10 years, this will give auto-component manufacturers new verticals and opportunities, who need to systematically adjust changes through R&D.

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By 2025 the Indian automotive sector will be the third biggest in the world. Indian self-components are ideally placed to take advantage of globalization, as export potential might be expanded up to US$ 30 billion by 2021E.

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