Auto Components

Auto Components

The auto component industry remains one the fastest growing segments in India’s manufacturing sector. The industry has come a long way today from being a small supplier of components to the Indian market to becoming a major player in the domestic and international markets. The auto component segment is a major supporter to several industries within the Indian economy including automobiles, machine tools, steel, aluminium, rubber, plastics, electronics, forging and machining.

During FY09, the total turnover of the industry was estimated to be Rs 87,700 crore, representing a growth rate of 6% as compared to the previous year. In FY09, total exports of auto components grew by an estimated 8% to Rs 17,450 crore as compared to the previous year. The share of exports as a percentage of total turnover was estimated to be 19.9% in FY09 as compared to 19.6% in FY08. Europe, North America and Asia remained the top three export destinations for India’s auto components, together accounting for 81% of the total share in FY08. Among them, Europe had the largest share of 44% in FY08, followed by North America (22%) and Asia (15%). Imports of auto components have remained strong, growing by an estimated 30% (y-o-y) in FY09 to Rs 31,230 crore.

As far as investments are concerned, the Government of India continues to encourage foreign investments in the sector. Some policy initiatives include automatic approval for foreign equity investment up to 100% for manufacture of automobiles and components, delicensing the industry and allowing free imports of auto components. As a result investments in the sector have grown at a CAGR of 19.9% in the last six years to Rs 35,360 crore in FY09. However, despite making such strong progress in the domestic and international front, the auto components industry still remains fragmented, with only 41 companies out of the total 584 companies having an annual turnover in excess of Rs 4.6 lakh crore. The industry is mainly dominated by Small and Medium Enterprises (SMEs) that are grouped together in clusters spread throughout the country. Some notable clusters are located in Indore and Pune in Central India, Jamshedpur & Kolkata in East India, Manesar in the Gurgaon district in North India and Chennai in the South. 

Going forward, in line with the on going process of making India a global auto component hub, the Government of India aims to increase both the turnover and exports to Rs 6.7 lakh crore and Rs 1.6 lakh crore respectively by 2016. As far as the SMEs are concerned, the large influx of foreign companies, foreign technology and capital in the last six to seven years has enabled SMEs to gain access to better technology that has improved productivity. As the Government continues to promote foreign investment into the sector and provide assistance to the SMEs through policy initiatives, the auto component clusters are expected to maintain strong growth in next three to five years. Besides, as demand for auto components continues to rise in India, the Auto Component Manufacturers Association (ACMA) believes that investments for capacity enhancement and in green field manufacturing would go long way towards meeting demand.

Relevant Reports

The Automotive Industry in India

Automotive Components

Diagnostic Study- Auto Component Cluster in Chennai

Defining the role of the Government in the Transnationalization Efforts of the Indian SMEs in the Auto Components Sector