Opportunities for India’s Auto Component Industry
Rapid Globalization of world is opening new opportunities for Automotive industries, while making a shift towards Electric and hybrid vehicle which are efficient and Environmental friendly.
With proliferation of EV Segment in automotive industry, the opportunities for automotive manufacturers are on High again. As per ACMA reports, Components export from india is expected to reach US$ 80 billion by 2026. Indian automotive component trade is likely to expand by 4-5% by 2026.
Indian automotive component industry is expected to become third in world by 2025. Government has taken initiative with Automotive mission plan which will help automotive industry to grow and will benefit Indian economy. Auto-industry’s contribution to GDP will rise over 12% and End of life policy will be implemented for old vehicles.
Automotive industry is classified broadly into two categories i.e organised and unorganised sector.
Organised sectors caters need of OEM’s while unorganised sector comprises of low value product and takes care of need of aftermarket category. Various sub-sectors of automobile component industry in india are chassis and body , Drive-transmission and Steering parts, Suspension and braking and electrical parts.
The FDI inflow into Indian automotive industry during period April 2000 -March 2021 was at US$ 25 billion as per DPIIT
Gearboxes and Drive axles are the two key products that are globally exported. India’s share in export of these components was less than 1.5% for CY2019. India highly depends on china for its automotive components imports. Companies are navigating the ways to minimalize their dependence on china and to boost production and upgrade their infrastructure to cater the needs of Indian market. Indian automotive industry faces many hurdles in area of Emisson, Safety and Electronics. With increased usage of automotive electronics, which are technologically advance and most of it is therefore imported, and therefore possibility here for local players is eliminated.
To bridge this technological gap, Several foreign firms has have forged ties with local players for sharing their platforms and technological upgradation. Some of the Automotive components are placed under highest GST slab. GST on ICE engine are currently at Slab of 28%, while 60% of components are under slab of 18%. Lack of uniform GST for components creates barriers for enhancing domestic production. Limited indigenisation in EV domain, forces to import complex power electronics and batteries. Domestic manufacturing of Power electronics component and batteries will greatly reduce our reliance over their imports. Govt must promote indigenisation in same domain by inviting foreign players and their collaboration with local players to support and both financially and technologically. Domestic production of Power electronic devices, batteries and communication systems will greatly contribute to India’s GDP and Growth of Indian Automotive Sectors. EV specific manufacturing involves high level of expertise in Electronic domain. Indian automotive industry derives 29% revenue from global market. These markets are soon to be undergoing transition from gasoline to Electric domain, Hence to retain and Expand its Global market share , Industry needs to be future ready and technologically advance for opportunities presented by electrification.