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Indian
Auto Components
Sector Aiming
for $40-bn Turnover
by '14
-
Exim Bank Study
The Indian auto-components
industry has emerged
as one of the fastest
growing and globally
competitive manufacturing
sectors, says a
study by the Export
Import Bank of India.
Quoting the figures
given by the Auto
Components Manufacturers'
Association (ACMA),
the Exim Bank study
says the Indian
auto components
industry has generated
sales of about US$
15 billion in 2006-07,
including US$ 2.9
billion worth of
exports. It is estimated
that India has the
potential to become
one of the top five
auto component economies
of the world by
2025.
Exports by the Indian
auto component industry
have been vibrant
with a CAGR of 40
percent during the
five-year period
2002-07. In absolute
terms, exports have
increased from US$
760 million in 2002-03
to US$ 2930 million
in 2006-07. According
to industry estimates,
export during the
period 2006-2015
is expected to grow
at a CAGR of more
than 24 percent.
While exports have
been booming, there
has been a sharp
rise in imports
of auto components
as well, especially
in the last three
years. From an import
of US$ 740 million
in 2002-03, they
have gone up to
US$ 3350 million
in 2006-07. This
is a healthy trend,
indicative of rising
domestic demand.
Investments in the
auto components
industry have more
than doubled from
US$ 2.6 billion
in 2002-03 to US$5.4
billion in 2006-07.
The India Advantage
India's component
industry today has
the capability to
manufacture the
entire range of
auto-components,
such as engine parts,
transmission parts,
suspension and braking
parts, electrical
parts, and body
and chassis parts.
Engine parts are
the largest sub-segment
of the industry
in terms of production,
with a share of
31 percent in total
exports, followed
by drive transmission
and steering parts,
and suspension braking
parts.
Steered by India's
sophisticated engineering
skills, established
production lines,
a thriving domestic
automobile industry
and competitive
costs, global auto
majors are rapidly
ramping up the value
of "components
that are sourced
from India. The
share of exports
in total production
has risen from 10
percent in 1997
to 19.5 percent
in 2007. More than
a third of Indian
auto component exports
are directed towards
Europe, with North
America featuring
a close second.
The composition
of exports in terms
of the proportion
of original equipment
manufacturer (OEM)
and aftermarket
sales has undergone
a sweeping change
since the past decade.
The ratio of OEM
to aftermarket sales
has changed from
35:65 in the 1990s
to 75:25 in 2006.
Considering the
potential of India,
several OEMs in
India including
General Motors,
Ford Motors, Cummins
International, Volkswagen,
BMW, MAN (trucks)
and JCB (earthmoving
equipment), amongst
others, have set
up shops in India.
India's competitive
advantage comes
from its full service
supply capability
as well, which makes
India a favourable
destination. Besides,
the quality consciousness
of the industry
matches the global
standards. This
is corroborated
by the fact that
nine Indian companies
in the automotive
industry have received
the coveted Deming
Prize, which is
the largest number
outside Japan. The
auto component suppliers
are also embracing
modern shop floor
practices like 5-S,
7-W, Kaizen, Total
Quality Management,
Total Productivity
Management, 6-Sigma
and Lean Manufacturing,
as they graduate
to match with world-class
industry. A large
number of firms
in this industry
are also recipients
of quality certificates
like ISO-9000, TS-16949,
QS-9000, ISO-14001
and OHSAS-18001.
The Road Ahead
Better times are
ahead for the Indian
auto component industry
with the turnover
expected to reach
about US$ 40 billion
by 2014 -The commercial
vehicles market
in India, which
has been growing
at 18 percent for
the last five years,
is the ninth largest
market in the world.
The passenger vehicles
are the fifth largest
and are growing
at 27 percent for
the last five years.
The Union Budget
2008-09 has made
several proposals
to boost the domestic
demand for automobiles
and thereby strengthen
the auto-components
industry.
Select proposals
in the Union Budget
2008-09
• Reduction
in excise duty from
16% to 12% for transportation
vehicles, chassis,
small cars, 2/3
wheelers;
• Reduction
in excise duty for
hybrid cars from
24% to 14%;
• Removal
of excise duty (from
8% to nil) for electric
cars, and specified
parts of electric
cars (from 16% to
nil) on end use
basis;
• Reduction
in excise duty on
tyres from 16% to
14%;
• Customs
duty reduced from
10% to 5% on specified
raw materials for
tyre industry;
• 125% weighted
deduction for outsourced
R&D.
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