The turnover of the auto component industry, which includes supplies to the vehicle manufacturers, aftermarket sales and exports, but sans the imports stood at `103,400 crores ($22 billion) for the period April 2009 to March 2010, registering a growth of 20 percent over the previous year.
This, however, does not include components manufactured by vehicle manufacturers for their captive consumption; components manufactured by non-ACMA member companies, a majority of whose supplies are non-automotive in nature, and the unorganised sector.
Auto component consumption in 2008-09 was severely impacted by the slowdown in the Indian economy. The industry, however, recovered smoothly and witnessed upsurge in consumption, especially in the second half of 2009-10. With business sentiment gaining momentum and consumption of finished vehicles growing steadily, auto component industry in fiscal 2010-11 is expected to cross $26 billion, registering an over 18 percent growth.
Commenting on the industry performance, ACMA president, Jayant Davar said: “The adverse impact of the global economic slowdown is well behind us; the auto industry witnessed unprecedented growth in 2009-10. The auto components sector, in tandem with the finished auto goods industry, grew to a healthy over $22 billion.
The exports owing to slow recovery in the US and Western Europe remained flat at $3.8 billion. Imports crossed $8 billion, growing 20 percent over the last fiscal. The first quarter of 2010-11 continued to witness significant growth of over 30 percent and this quantum seems to suggest that the growth in the auto component industry in the fiscal 2010-11 will surpass 18 percent.”
Addressing the issue of capacity addition in the auto component industry he elaborated: “The industry is in the mode of capacity expansion, but with poor infrastructure, insufficient power, lack of skilled manpower and low return on investments, scaling up has been somewhat behind. It is also essential that the OEMs take the component manufacturers into confidence, guide them and invest in the industry such that the supply chain is able to service the auto industry to its fullest potential. Some hand holding in areas such as tooling, equipment etc. might be required by vehicle manufacturers to ensure unabated supplies for meeting the demand.”
Delineating his thoughts on the current policy environment and the need for supporting Auto component manufacturing in the country, ACMA vice president, Srivats Ram, said: “We foresee a need for accelerated investments in the auto component sector, which will require higher scale technologies to be absorbed by component manufacturers. We believe that a Technology Development & Upgradation Fund is the need of the hour. This has been taken up with the government.
“On foreign trade, India should consider establishing Foreign Trade Agreements (FTAs) with countries like Brazil, South Africa and Iran who already have a ready market for our products. We also need to ensure that FTAs do not result in inverted duty structures and that they are not a disincentive to source or manufacture in India. Further on the exports front, it is important that the government continues its scheme of export incentives, as many of our export contracts are long term in nature.”
Sharing his thoughts on the need for a conducive ecosystem for the auto component industry in India, Vinnie Mehta, ACMA's executive director said: "There is a need for India to build product development capabilities by nurturing relationships between industry, academia and testing agencies. Further, we also need to address the issue of skilling and manpower in the auto component manufacturing industry. The recently announced Auto Skill Development Council (ASDC) is definitely a welcome step and would enable skilling of people based on curriculum and training methods prescribed by the industry. However, there could also be a shortage of manpower, per se, skilled or unskilled, due to the concentration of the auto industry in a few urban centres, which also needs to be addressed.”
Some of the other observations of the ACMA Industry Performance Review 2009-10:
Exports: The exports of auto components remained flat at $3.8 billion. Europe accounted for over 40 percent of exports, followed by Asia and North America at 24 percent and 22 percent, respectively. The latter half of the 2009-10 witnessed the European economy and the Euro hitting troubled waters. While exports to North America, Asia and other parts of the world are improving, a full recovery of exports is expected in due course.
Imports: With growth in the domestic market, imports of auto components also grew by 20 percent to $8.16 billion; almost 85 percent of the imports were accounted for by the OEMs, the rest 15 percent by the aftermarket. The quantum of imports has also increased due to several FTAs and other trade agreements signed by the government.
Capacity addition: The auto component industry added $1.7 billion in capacity in 2009-10 in several greenfield as well as expansion projects. The cumulative investment in the auto component sector in India stood at $9 billion. The industry is expected to add at least another $2 billion in 2010-11.
Indian Auto Components Industry: Summary of findings (figures in $ billion)
Source: ACMA.
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