Other BriefingsRecord Turnover for India’s Auto Component Industry: Details Here
India’s auto component industry achieved a turnover of INR 6.14 trillion (US$73.1 billion) between April 2023 to March 2024. According to a recent industry report, this represents a 9.8 percent increase from the previous year.
In July 2024, the Automotive Component Manufacturers Association of India (ACMA) released a report on the auto component industry performance review for the fiscal year 2023-24. The association believes that consistent vehicle production, a robust aftermarket, and rising exports propelled the auto component sector to this new high, surpassing the previous year’s INR 55.9 billion (US$665,846,765).
While the domestic Original Equipment Manufacturing (OEM) component supply grew by 8.9 percent to INR 5.18 trillion (US$61.7 billion), the EV manufacturing sector contributed 6 percent to total production.
India’s auto components exports rose by 5.5 percent to US$21.2 billion in FY 2023-24, while imports increased by 3 percent to US$20.9 billion, resulting in a US$300 million trade surplus.
India’s aftermarket segment, valued at INR 938.86 billion (US$11.1 billion), saw a 10 percent increase. The aftermarket refers to the market providing spare parts, accessories, and components for maintaining or improving a finished product such as the automobile. The aftermarket offering includes automobile replacement parts and accessories.
Trade surplus amid industry challenges showcases capacity localization
The steady automobile industry growth in India reportedly helped the sector return to pre-pandemic performance levels in FY2023-24. Despite geopolitical challenges and rising logistics costs, India’s auto component exports grew even as overall Indian merchandise exports declined last fiscal.
India’s merchandise exports stood at US$437.06 billion in FY 24, down from US$451.07 billion in the previous fiscal. Whereas, goods imports fell to US$677.24 billion from US$715.97 billion during the same period. Lower growth in imports led to a trade surplus, which experts say reflects the country’s focus on localization.
However, the first quarter of FY 2024-25 saw slower vehicle sales, especially in passenger vehicle (PV) and commercial vehicle segments. It is believed that this dip was caused due to climatic conditions and elections taking place in the country.
Looking ahead, with favorable economic indicators, supportive government policies, and projected 7 percent GDP growth, India expects its auto components industry to perform well in FY25.
Key insights from the ACMA report for 2023-24
- Sales to OEMs: Domestic sales of auto components to OEMs reached INR 5.18 trillion (US$61.7 billion), growing 8.9 percent from the previous year, driven by increased value-added components, localization efforts, and market preference for larger, more powerful vehicles.
- Exports: India’s auto component exports grew by 5.5 percent to US$21.2 billion in 2023-24, up from US$20.1 billion in 2022-23.
a) North America, accounting for 32 percent of exports, saw a 4.5 percent increase. Europe and Asia accounted for 33 percent and 24 percent of exports, respectively, with exports to Europe growing 12 percent while remaining flat to Asia.
b) Key export items included drive transmission & steering, engine components, body & chassis, and suspension & braking systems. - Imports: Imports of auto components in India increased by 3 percent to US$20.9 billion in 2023-24, up from US$20.3 billion in 2022-23. Asia accounted for 66 percent of imports, followed by Europe at 26 percent and North America at 8 percent. Imports from Asia grew by 3 percent. Key import items include engine components, body & chassis, suspension & braking, and drive transmission & steering.
India’s localization roadmap for auto components
India’s automobile sector has identified 28 essential components for indigenization as part of its ‘localization roadmap’ to bolster the ‘Make in India’ initiative. The director-general of the Society of Indian Automobile Manufacturers (SIAM) has stated that these components are crucial for sustaining the sector’s growth rate and that ongoing localization efforts have already resulted in foreign exchange savings exceeding INR70 billion (US$833 million).
India’s OEMs have urged their component suppliers to explore local production of these parts, including high-end electrical and electronic components, to reduce reliance on imports and enhance export potential. It is believed Production Linked Incentive (PLI) schemes for the automotive sector are accelerating the localization of advanced auto components, creating a supportive ecosystem for companies to invest in and manufacture in India.
Reducing import dependence of critical auto components
The identified components list includes automatic transmissions, power control units, various sensors, actuators, miniature motors, combined charging systems, and 6- and 10-layer printed circuit boards (PCBs).
Meanwhile, SIAM has claimed that as of 2023, the auto component industry achieved a 5.8 percent reduction in imports over two years, surpassing the initial target of 3-5 percent.
In 2024, various Indian auto component manufacturers have entered joint ventures with foreign companies in a bid to produce critical components domestically. Current localization efforts include manufacturing parts for sunroofs, airbags, seatbelts, electronic stability control units, power steering motor control units, two-wheeler EV motors, urea tank systems, and aluminum alloy wheels.
The automotive industry heavily relies on imported components, particularly for advanced technologies and specialized features, making it vulnerable to global supply chain disruptions and currency fluctuations.
According to a report published in January 2024, while localization of inputs for small cars by companies like Maruti-Suzuki and Tata Motors exceeds 85 percent, there is rising demand for mid and high-segment cars in India, which necessitates local production of critical components.
In FY 2021-22, the value of imported automotive components was estimated at US$20 billion, with 60 percent from OEMs and 40 percent from auto part suppliers. Key imports include engines, drivetrains, electrical systems, and electronics, with China being the largest source, followed by Japan, Germany, South Korea, and Thailand.
India’s automobile sector has become the world’s third largest, with passenger vehicle sales surpassing the 4-million-unit mark in 2023. The sector now has a turnover exceeding US$180 billion, accounting for about 40 percent of India’s manufacturing GDP.
(US$1 = INR 83.95)
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