Export of Automobile Component from India -

Export of Automobile Component from India

Export of Automobile Component from India

The Automotive industry in India is progressing in many segments, majorly in Passenger Cars, Utility Vehicles, Vans and two Wheelers. The Indian auto-components industry has experienced a cumulative growth over the last few years. 

The Automobile component industry in India is composed of organized and unorganized sector. The organized sector refers to original equipment manufacturers (OEMs) and is engaged in the manufacture of high-value precision instruments. Whereas, the unorganized sectors comprise of low-valued products catering to after-market services.

Various sub-sectors of the Automobile component industry in India are engine parts, drive transmission & steering parts, body and chassis, suspension and braking parts, equipment, electrical parts and others such as fan belts, die-casting and sheet metal parts. 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.

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Statistics

  • The auto-components industry expanded 10.6 per cent to reach US$ 56.52 billion in FY19.
  • Auto-components industry account for 2.3 per cent of India’s Gross Domestic Product (GDP) and employs as many as 1.5 million people directly and indirectly each.
  • Automobile component industry’s revenue stood at US$ 56.52 billion in FY19, up from US$ 35 billion in FY14. 
  • 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 aims to achieve US$ 200 billion in revenue by 2026. 
  • Turnover of the industry stood at Rs 1.79 lakh crore (US$ 25.61 billion) in FY20 (till September 2019) and export of auto components grew 2.7 per cent to reach Rs 51,397 crore (US$ 7.35 billion) during the same time. 
  • The Automobile component industry in India is set to become the 3rd largest in the world by 2025.
  • The contribution of Automobile component industry in India’s GDP will account to as much as 5% to 7% by 2026.
  • The Automobile component in India contributes 2.3% to India’s GDP.4 About 1.5 mn people are directly and 1.5 mn are indirectly are employed in this industry.
  • Automotive Mission Plan (2016-26) projects to provide direct incremental employment to 3.2 mn by 2026. Realization of goals in the Automotive Mission Plan (2016-26) requires an additional investment of USD 25-30 Bn.
  • The Automobile component industry in India will be among the top three of the world in engineering, manufacturing and export of vehicles and components.
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Government Support

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 per cent from its current revenue of US$ 74 billion.

As per the Union Budget 2019-20, Government moved GST council to lower the GST rate on EVs from 12 per cent to 5 per cent. Also, to make EVs affordable to consumers, Government will provide additional income tax deduction of Rs 1.5 lakh (US$ 2,115) on the interest paid on loans taken to purchase EVs.

Government has come out with Automotive Mission Plan (AMP) 2016-26 which will help the automotive industry to grow and will benefit Indian economy in the following ways: –

  • Contribution of auto industry in the country’s GDP will rise to over 12 per cent.
  • Around 65 million incremental number of direct and indirect jobs will be created.
  • End of life Policy will be implemented for old vehicles.

Past Investments

The Foreign Direct Investment (FDI) inflow into Indian automotive* industry during the period April 2000–March 2020 stood at US$ 24.21 billion as per the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

Some of the recent investments made in the Indian auto components sector are as follows:

  • In February 2020, National Engineering Industries Ltd (NEIL) announced investment of Rs 100 crore (US$ 14.31 million) 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.
  • In October 2019, Minda Industries acquired Germany-based automotive lamps firm Delvis Gmbh along with two of its subsidiaries for Rs 164 crore (US$ 23.47 million).
  • In August 2019, Eaton partnered with Pune-headquartered technology firm KPIT.
  • In April 2019, Durr, a German automotive painting and sealing company, entered a partnership with Patvin to provide automated painting solutions for two or three wheelers and agricultural machinery for the Indian markets.
  • As of January 2019, Lite Auto Components Pvt Ltd, a part of Hindustan Magnesium Products Pvt Ltd, planned to invest Rs 500 crore (US$ 69.30 million) to set up Magnesium-based manufacturing plant in Andhra Pradesh.

Reasons to Invest

A stable government framework with increased purchasing power, large domestic market and an ever-increasing development in infrastructure has made India a favorable destination for investment.

  • India is emerging as a global hub for sourcing auto components. The key automotive markets like the ASEAN, Japan, Korea, Europe and huge domestic market are geographically closer to India.
  • India offers low cost by 10-25% relative to that offered by Europe and Latin America. Hence, India is cost competitive as compared to other manufacturing countries.
  • There are minimal restrictions on export-import which make it a favourable trade policy. Furthermore, specific incentives are available for export-oriented units and export processing zones.
  • India’s growing integration in Global Value Chains further offers impetus to the Automobile component industry.
  • Favourable government policy with 100% FDI allowed through automatic route.
  • Presence of enabling infrastructures like automotive training institutes and auto design centres, special auto parks and virtual SEZs for auto components.
  • An increasing working population and an expanding middle-class are likely to remain key demand drivers.
  • India is considered competitive in manufacturing of forgings, stampings, castings, machining, wiring harness and electronic fuel injectors.
  • A large pool of skilled workforce and a strong educational system are the supporting factors for investment. Improvised R&D operations and laboratories that have been set up to conduct activities such as analysis, simulation and engineering animations are helping in additional investment prospects.
  • The growth of global Original Equipment Manufacturers (OEMs) sourcing from India and the increased indigenisation of global OEMs is turning the country into a preferred designing and manufacturing base.

Achievements

Following are Government’s achievements in the past four years:

  • 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 (US$ 1.39 billion) 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 powertrain.

Future Aspirations 

The rapidly globalizing world is opening doors of opportunities for the transportation industry, especially while it progresses towards sectors like electric, electronic and hybrid cars, which are considered 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 will have to invest more time in systematic R&D and market study.

As per ACMA forecasts, automobile component export from India is expected to reach US$ 80 billion by 2026.

The Indian auto-components industry is positioned rightly to become the third largest in the world by 2025. Indian auto-component makers are all set to benefit from the globalization of the sector as export potential could be increased by up to US$ 30 billion by 2021E.

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