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Indian Auto Components Market

Automotive Component Manufacturers Association of India (ACMA) claims that the auto-components industry in India is set to register a turnover of $100 billion by the year 2020 supported by strengthening exports valuing between $80- $100 billion by the year 2026, while it's current value US$ 11.2 billion. The industry is to grow as the automobile industry grows making it an attractive industry for investor.
BY Shrishti Rai
Feature Writer, BusinessEx
Oct 04,2017

The Market Scenario

The challenge ahead of the auto-component Industry has always been the need to enhance efficiency and productivity in the manufacturing process. Also to survive in the era of ever increasing globalization it is very important to innovate in order to survive the competition and fulfill the demands of customers. Other challenges that are prominent in the Indian markets are the price sensitivity and rising awareness about the environment safeguarding amongst the customers. Now to keep a check on the price levels, optimization needs of manufacturers comes into play along with the need for sustainable development. Although in the recent past the quality of the India product has elevated and imports have declined, while exports rose. Still there is a lot of scope of improvement for the Indian auto parts manufacturers, the future strategies are to be focused on improved environmental safety needs, rising fuel prices and cost-effectiveness to survive the intensifying market competition. Innovation has to focus on increasing competence and life of the products, while shrinking emissions.

The auto parts industry is a prime enabler to the automobile industry, which clearly suggests that the growth in the later will drive the growth in former. The auto industry contributes 7.1 per cent to the country's Gross Domestic Product (GDP) and grew at a compound annual growth rate of 9.6 per cent which was largely driven by the two-wheeler segment. Another segment that can bring about disruption in the auto component industry is Electric Vehicles segment that is currently moving slowly in India as the industry accounts less than 1% of the total vehicles sold in India. Only about 0.4 million electric two-wheelers and electric cars just about a few thousands run on Indian roads currently. But given the rising environmental concerns and the push from the government, the market is expected to stride real soon.

In the past decade, the automotive components industry tripled in size to $39 billion in 2015-16 and grew at a CAGR of 7 per cent and is predicted to grow at 8-10 per cent in FY 2017-18. Faster growth was seen in the size of exports that reached US$ 10.8 billion, based on increased domestic manufacturing by original equipment manufacturers (OEM), higher component content per vehicle, and rising exports from India, as per ICRA Limited. The segment is supposed to record a turnover of $100 billion by 2020. The enablers to this were strong growth in the domestic market, exports and mounting globalisation of numerous Indian suppliers.

The sub sectors within the industry are engine and engine parts, transmission and steering parts, suspension and breaking parts, electrical parts, vehicle equipments and others. The most changed parts in a vehicle are oil filters, wind shield wiper blades, Tire Pressure Monitoring System, Door handles, locks, spark plugs, fuses compared to other various other parts incorporated in the manufacturing, therefore these have a shorter purchase cycle.

Deals in the industry

Looking at the opportunities in the sector, many investments have happened from both national and international investors. Everstone Capital, a private equity firm, based out of Singapore purchased 51 per cent in an Indian auto components maker called SJS Enterprises for an anticipated amount of US$ 51.35 million. Also, Amtek Auto acquired German company Scholz Edelstahl via its wholly owned subsidiary Amtek Precision Engineering based out of Singapore.

On the other hand digital disruption is transforming the automotive industry like every other. Automobile manufacturing is no longer only about the product. It is largely a digital service routine that leverages digital technology across all dimensions. For instance, Ecommerce hub for spare parts and components, Hyderabad Angels and Singapore-based MS Partners invested an undisclosed amount in a pre-series investment round in this startup. Gaadifix is an app for repairs, maintenance servicing of vehicles, which is also a market place for branded spare parts based out of Delhi.

Role of SMEs in the market

The auto component segment is largely dominated by SMEs in India, which makes about 70% of the whole industry. Indian SMEs are incrementally are becoming more profitable and productive while moving towards technological innovations. Additionally, process changes include raw material substitution, among others, to achieve both cost drop or quality betterment. Overall, enhancing firm level competitiveness was the major objective of SME innovations in India and to compete with the global players. These are a few SME players in this industry are Pradip Plactic moulders, Samvardhana Motherson, Lucas Indian- The aftermath solutions provider, NRB, TAFE, The sona group, Suprajit, PCL India etc.

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