NEW DELHI: India’s auto industry is likely to generate a turnover of nearly US$ 110 billion (Rs 5 lakh crore) in the next decade . Of this, the domestic turnover can grow to Rs 4 lakh crore (USD 80 billion) and exports scale up to another Rs 1.4 lakh crore (USD 29 billion), according to the forecast by Automotive Component Manufacturers Association (ACMA).
The association reckons that the domestic auto parts industry is tipped to be the engine of India’s economic and manufacturing sector growth, potentially contributing 3.6 per cent of GDP by 2020, up from the current 2.1 per cent. To achieve this potential the auto component industry would require investments of over Rs 1.6 lakh crore (USD 35 billion) during the period. It will also create employment opportunity for over 1 million skilled people. It is to be mentioned that the country's auto components industry shot up by 20 per cent to $22 billion in the financial year ended March 31.
"The Indian auto component industry can potentially grow to over US$ 110 billion by 2020, driven in tandem with the surge in vehicle production in the country," the study, called "Vision 2020 for the Auto Component Industry", said. It further noted, “Passenger vehicles - projected to be 5 million units by 2015 and over 9 million by 2020 driven by domestic demand and as a global hub for exports of small cars. Commercial vehicles – volumes of over 1.4 million by 2015 and over 2.2 million by 2020 and Small Commercial Vehicles (SCV), a relatively new segment, expected to grow 28% annually over the next few years. Two and three wheelers – expected to double to 22 million units by 2015 and reach 30 million by 2020 driven by low penetration levels, expanding rural sales and growth in exports.”
The report also highlighted, “Tractors – projected to be over 0.7 million by 2015 and over 1 million by 2020 with steady growth expected in domestic and export volumes. Construction equipment – likely to grow 2.5 times to 0.1million units by 2015 and almost double to 0.18 million by 2020 driven by the infrastructure sector.
The ACMA-Ernst & Young Vision 2020 report calls for a significant role to be played by the Government to support the industry. Some of the salient recommendations for the government include: Facilitate access to cost-effective capital for the industry. The government should provide incentives to retail and private investors, domestic financial institutions, and strategic investors that invest in the domestic auto components sector. The recommendation stated that the government should consider setting up a Technology Development & Upgradation Fund for the auto components industry to enable significant infusion and absorption of technology to build domestic capability and to support faster product development plans of the OEMs. Another recommendation was to incentivize & institutionalize a R&D environment. Create an environment for R&D through stable and long-term incentives to individual companies and fostering linkages between industry and academia for pre-competitive research. The government also proposed to set up auto supplier parks that provide high quality infrastructure. Such supplier parks can be set up in the regional auto hubs (NCR, Pune, Chennai, etc) with basic facilities for component suppliers like continuous power supply, park-to-port rail tracks, tooling centres technical training centres for workmen skill upgradation, and banks for providing easy access to capital. Another consideration was to accelerate infrastructure project execution. Indian government is undertaking various initiatives with huge budgetary outlays for improving power, logistics and port facilities. The infrastructure initiatives need to be managed efficiently for faster execution. Reforms in land acquisition were also proposed so that new plants can be set up without delays. Many component manufacturers will need to set up new plants to meet rising demand levels. This will require faster land acquisition. The State governments need to play a proactive role in this.
Another primary recommendation was to create long-term, stable trade policies that enable auto sector growth. Besides continuing existing FTA negotiations, the Indian government should also consider having FTAs with major auto producing countries such as Brazil, South Africa and Iran. This will help Indian companies to supply their products at competitive prices in these large markets, and also Correct the inverted duty structure. The existing inverted duty structure makes value addition less competitive in those components that require raw material imports. The government needs to rectify this anomaly such that Indian component manufacturers remain competitive in domestic and export markets, as per the recommendation, adding, “Revise labour policies such that they allow manufacturers to maintain a flexible workforce. The existing labour laws also drive manufacturers to set up multiple sub-optimal plants. Improving labour policies would have a significant impact on improving productivity levels and the overall competitiveness of the Indian auto component industry. What was also on the govt’s agenda was to increase the availability of skilled manpower. Increasing interaction levels between education and vocational institutes and the industry would help in minimizing the gap between skills requirement vs. availability.
Commenting on the out come of the Vision 2020 study, ACMA president, Jayant Davar said: “India is well on its way to be among the top 5 vehicle producing countries in the world by 2020. The high projections of vehicle production in the country will provide traction to the auto component industry, which is expected to grow almost five-fold to over USD 110 billion from its current level of USD 26 billion. Increasing cost pressures is driving OEMs towards low cost country (LCC) sourcing. In order for the Indian component manufacturers to stay competitive, among other things, they will have to move up the value chain. Many different regions around the world are fast becoming centres for LCC sourcing; India will have to be wary of these.”
Elaborating on the need for immediate action by the industry to harness the opportunity and stay ahead of competition, Davar mentioned, “The Indian component industry must raise capital – strengthen balance sheets; scale capacities – manage costs and flexibility of new assets; build R&D competence - product development, design and frugal engineering capabilities; and build robust organizations - to manage significantly increased complexities and risks associated with growth.”
He further added, “On its part the Indian government needs to provide long-term stable policies to create a conducive ecosystem in which the large numbers of small and medium companies that make up this industry are able to scale up at the rapid pace. Additionally the government needs to continue its efforts to improve the infrastructure especially that of roads, ports and clean & stable power. Internationally, there is strong competition from other countries in both the exports and local market. The growing trend of FTAs with other auto producing nations will further add to the competitive intensity in the industry, we must cautiously tread this path and explore agreements that are advantageous to the local industry.”
Sharing his thoughts on the need for action by the industry body as delineated in the Vision 2020 document, to facilitate the development of a healthy environment for the auto component industry in India, ACMA Executive Director Vinnie Mehta said, “The association must focus on ‘Creating a Joint industry- Government Vision 2020 Taskforce’ to monitor the progress of various initiatives with the Government and provide periodic updates to its members on progress and emerging trends in the automotive industry. There is a need to promote the Indian auto component industry domestically as well as internationally to make it more attractive to investors for raising the much-needed capital. ACMA should consider broadening the scope of its existing cluster-based initiatives to include wider array of operational issues faced by component manufacturers including those for improving throughput, productivity, marketing (especially in export markets), and logistics operations and last but not the least, working closely with training and education institutes to help align the curricula with industry requirements.”
Uno Minda, a leading Tier 1 supplier of proprietary automotive solutions to original equipment manufacturers, has launched its new premium range of alloy wheels in the Indian aftermarket in collaborat...
Greaves Retail, India's leading fuel-agnostic mobility solutions provider and a unit of Greaves Cotton Limited, has announced the launch of its complete range of e-rickshaw batteries under the brand '...
Kia India is now offering an electric sunroof in its Sonet Smartstream G1.2 HTK+ variant. The model will be available at Rs 9.76 lakh. Sonet has already more than 3.3 lakh customers in last three year...