ACMA, the apex body representing India’s Auto Component manufacturing industry, has announced the findings of its Industry Performance Review for fiscal 2010-11. The turnover of the auto component industry stood at Rs. 182,127 crore (US$ 39.9 billion) for the period April 2010 to March 2011, registering a growth of 34pc (in rupee terms) over the previous year. This data represents the entire supplies from the auto component industry to the on-road and off-road vehicle manufacturers and the aftermarket in India and overseas from ACMA member and non-member companies, including component supplier’s captive to the OEMs and the unorganised & smaller players. Auto component consumption in 2010-11, in tandem with the significant growth in the vehicle sales in the domestic market grew at a robust pace. However, in the current fiscal, with business sentiment in the vehicle industry moderating, the auto component industry is expected to grow in the range of 12-15pc.
Commenting on the industry performance, ACMA President, Srivats Ram said: “The auto components sector, in sync with the vehicle industry, grew to a healthy US$ 39.9 billion in 2010-11. The exports especially with signs of recovery in North America, Western Europe and Asian markets grew by 54pc over the last year to touch US$ 5.2 billion. Imports crossed US$ 8.5 billion, growing 30pc over the last fiscal. The first quarter of 2011-12 witnessed some slowdown in vehicle consumption in India and this seems to suggest that the growth in the auto component industry in the current fiscal will be in the range of 12-15pc.”
Addressing the challenge of access to capital in the auto component industry he elaborated, “The growth in the auto component industry will require cost-effective funding across the various tiers in the industry to ensure that adequate capital addition takes place to fund the future growth. It is important to recognise that the relative scale and size of companies in the industry will grow over a period, and the need to provide funding based on the potential that industry player’s offer. As the scale and sophistication of the automotive industry evolves, the nature of technology required will also change and require capital to ensure both global competitiveness and technology leadership.”
Delineating his thoughts on the current policy environment and the need for supporting Auto component manufacturing in the country, ACMA Vice-President, Arvind Kapur said: “It is important that investments are made in core manufacturing processes to ensure that there is adequate in-country value-add to secure our position as a global hub for automotive manufacturing. Herein, policies should encourage core manufacturing over purely assembly oriented investments in automotive technology.”
“On foreign trade, India should consider establishing Foreign Trade Agreements (FTAs) with countries like Brazil, South Africa etc. 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,” added Arvind.
Sharing his thoughts on the need for a conducive ecosystem for the auto component industry in India, ACMA Executive Director Vinnie Mehta said, “In order to keep the growth momentum, as also to stay competitive, the industry, on one hand, needs to optimise capacities, raise capital, absorb technologies, build R&D competence, concentrate on innovation, focus on internal governance and develop strong organisation; on the other, Government needs to focus attention to address the challenges of access to capital, availability of skilled manpower, rapidly increasing inflation, access to technology and lack of proper infrastructure, including power.”
Some of the other observations of the ACMA Industry Performance Review 2010-11:
• The Exports of auto components grew to US$ 5.2 billion from US$ 3.4 billion in 2009-10. Europe accounted for 36 pc of exports followed by Asia and North America at 28pc and 23pc respectively. Although the proportion of exports to Europe declined from 40 pc last year to 36 pc, however in absolute terms the exports grew by 46 pc. Exports to North America and Asia grew by 65pc and 48 pc respectively. With exports to North America, Europe Asia and other parts of the world are improving, a full recovery of exports are expected to gain strength in 2011-12.
• With growth in the domestic market, imports of auto components also grew by 30 pc to US$ 8.5 billion from US$ 6.5 billion in 2009-10; almost 85pc of the imports were accounted for by the OEMs, the rest 15pc by the aftermarket. Asia and Europe contributed to over 56pc and over 35pc of the imports respectively. Within Asia, China, South Korea and Thailand contributed to the maximum imports to India while from Europe the key contributors were Germany, Italy and Czech Republic. The quantum of imports has also increased due to several FTAs and other trade agreements signed by the Government.
• The auto component industry added capacity in the range of US$ 2 -2.25 billion in 2010-11 in several green-field as well as expansion projects. The cumulative investment (gross-block) in the auto component sector in India over the last five years stood at over US$ 6.5 billion. The industry is expected to add at least another similar number in capacity addition 2011-12.
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