The Automotive Component Manufacturers Association of
India (ACMA) is the nodal agency for the Indian Auto Component Industry. Its
active involvement in trade promotion, technology up gradation, quality
enhancement and collection and dissemination of information has made it a vital
catalyst for this industry’s development. Its other activities include
participation in international trade fairs, sending trade delegations overseas
and bringing out publications on various subjects related to the automotive
ACMA is represented on a number of panels, committees
and councils of the Government of India through which it helps in the formulation
of policies pertaining to the Indian automotive industry. For exchange of
information and especially for co-operation in trade matters, ACMA has signed
Memoranda of Understanding with its counterparts in Australia, Brazil, Canada,
Egypt, France, Germany, Iran, Italy, Japan, Malaysia, Pakistan, South Africa,
South Korea, Spain, Sweden, Thailand, Tunisia, Turkey, UK, USA and Uzbekistan.
ACMA represents over 600 companies, whose production forms a majority of the
total auto component output in the organised sector.
It is a known fact that the
Indian auto component industry has evolved since the turn of the millennium.
Keeping that factor in mind, how prominent is ACMA amongst its counterparts
I think ACMA is very well known internationally. We have
close to about 30-odd MOUs signed with our counterparts across the globe. As
the Indian auto component industry grows in stature, the importance of the
Indian market becomes increasingly significant by each passing day. Our
counterparts are now engaging with us proactively. I think we had a very
fruitful relationship with most of our partners like VDA, OESA etc. Our relationship has been very cordial with
There has been a lot of
buzz that in the auto ancillary industry, fresh investments are projected to
decline to a four-year low of less than US$1 billion in 2012-13. Could you
confirm this development? If yes, please can you cite reasons?
I think the automotive industry in India is definitely
going through a bad patch. The commercial vehicles, especially the medium and
heavy segments, have been struggling for sometime now. The construction
equipment industry has also been struggling. The tractor industry is also under
stress. The passenger vehicles sales have been almost flat. The two-wheeler and
motorcycle segments have also not seen any robust sales growth. I think with
these developments, the Indian component industry definitely comes under
pressure. Having said so, I am still of the view that the medium to long term
growth story of the Indian economy is intact.
Hopefully, the RBI will cut down the interest rates that will bring in
some cheer in the market. This is because one of the biggest problems that the
automotive industry is grappling with is the higher rates of interest. I hope
that should be addressed a little bit.
Moreover, with the 2014 elections coming in, this year should see a lot
of developmental project announcements by the government. So things should look
up in the medium term.
What about investments?
Have the companies reduced that too?
The auto component industry has invested around US$
6-7 billion in the past four years at the rate of US$ 1.7 billion in 2009-2010,
US$2-2.5 billion in 2010-11, US$1.6-1.9 billion in 2011-12 and an estimated
under US$1 billion in 2012-2013.
Very recently, Prime
Minister Manmohan Singh has announced the National Electric Mobility Mission
Plan 2020. So do we expect the Indian auto component industry redrawing its
strategies to develop parts for zero-emission and hybrid vehicles?
It’s like this. The emission norms and hybridisation
of vehicles are all done by vehicle manufacturers. We meet their component
requirements. We are aware that the government has announced a policy on
electric mobility and are also happy that such a move has been taken. Such a
policy has already been implemented world over, including China. With the state
of affairs like pollution, incentivising emission less vehicles will be very
beneficial in the long run. Having said that, we need more concrete plans like
localistion of these ‘XEVs’ as the government calls it. The component industry has to fall in line
and the opportunity has to be communicated to us by the vehicle manufacturers.
So at this juncture, I guess it’s is important for the industry to have a clear
roadmap. Let us see how things shape up
in the long run.
It’s all over the media
that the Auto Expo’s venue has been shifted to India Expo Mart, Greater Noida.
So what has ACMA decided about it? Are
you open to jointly host the exhibition with SIAM and CII? Or are you going for
your own course of action? And are you actively looking at hosting the show
Well, a lot of such plans are still on the drawing
board. SIAM has gone ahead with its plans to shift the venue from Pragati
Maidan in 2014. ACMA has always
maintained that we will jointly host the show with SIAM. Let’s see how things
pan out. It’s also a question of the availability of a presentable venue. So we
are working towards it. So no decision has been taken from our end. At the end
of the day, the Auto Expo is a wonderful brand that has been built over so many
years. And I believe that both the vehiclemaking and its allied industries
should jointly leverage and strengthen it. So with CII, we will develop a
strategy that ensures we don’t let the show down. But I can confirm that the
India Expo Mart will not have enough space accommodating both vehicles and the
components together. We are constrained and forced to look at an alternative
ACMA, in association with
Messe Frankfurt, has decided to host Automechanika at Pragati Maidan. How is it
benefiting the Indian industry per se? Could you shed some light on that?
The aftermarket segment in India has become
significantly important. The size of this segment is itself US$ 36 billion.
Therefore, it justifies a show which is dedicated for the automotive
aftermarket segment. Globally, Automechanica is known for its aftermarket
shows. So keeping both the factors in mind, we decided to host this global show
in India. Until now, we didn’t have any show of such an international standing.
To begin with, we are starting small because it is happening for the first
time. It is happening at Hall no 8, 9, 10 and 11 and we are completely sold out
in space. There will be all activities
like conferences, seminars, exhibits and a lot of international players are
showing interest because of the vibrant domestic automotive aftermarket. We
have participants from the UK, Germany, Turkey, Taiwan, China, etc running
their pavilions. That is itself very encouraging for us. Apart from giving a
platform for the Indian firms, the show will also be having a forum for
exchange of technologies between companies. This is because not everybody can
have a footprint in the country. So there are various avenues and opportunities
that will be explored by international firms at the fair.
Could you also speak a
little bit about the Technology Development Fund which the ACMA was proposing?
Has it borne any fruition?
We have been talking about it for the last three
years. At the 12th five-year plan of the government of India, they have sort of
accepted our recommendation principally that there is a need for a technology
development and upgradation fund. What we are looking for is a 5pc interest
subvention from the market rates. This is because the cost of capital in this
country is very huge. So a lot of companies need to access funds in the market
for investing essentially in the R&D activities. But that is prohibitively
expensive. However, we are very happy that the government has announced in the
last budget that a tax break will be offered on the amount that will be spent
by a company in its R&D operations. But we think that the automotive
industry needs to move up the value chain and has to enhance its role in
product development. So we are pushing for the technology development and
upgradation fund which incidentally has been echoed very well with our
Ministries of Heavy Industries and Micro, Small and Medium Enterprises (MSME).
Last year, your association
had orgainsed a plenary session on the burgeoning Indian automotive
aftermarket. Why has this vertical picked up so drastically? Is it because the
consumers are now getting more brand-conscious?
As the vehicle parc in this industry increases, there
is a need for maintenance and servicing of vehicles. There is also a need for
the replacement of worn-out parts. As the vehicle parc is getting larger by the
day, the incidence of parts replacement is rising sharply. Therefore, the
aftermarket segment is getting very vibrant. And I guess the consumer is well
aware about aftermarket parts and needs more choice.
Does you association
support Free Trade Agreement with Europe?
Very broadly speaking, ACMA has always stood for Free
Trade Agreements (FTAs) with various nations. At the end of the day, the trade
should be free-flowing and the industries of the respective countries should be
benefitted out of it. What we have observed in the FTAs is that the benefit has
accrued only to the signatory countries and not India. So our concern is that if our tariffs get
lowered, the other country gets more benefit than us. This is because their
tariffs were already lower than us before the proposed deal. So going forward,
the government will increasingly be looking at FTAs with counties like Brazil
& South America where tariff rates are higher than ours. That will ensure
that our exports will increase in those countries. What should also be kept in
mind is that these agreements should not lead to any inverted tariff structure
like what happened in Early Harvest Schemes (EHS), which was a precursor to the
FTA with Thailand. We ran into a problem wherein the government keeps the price
of raw material like aluminum and alloys intact. However a finished product was
shipped in from Thailand at nil duty. In such a scenario, the domestic industry
is at the receiving end as the basic inputs to churn out a component becomes
As a lot of industry
players have earlier announced their plans to derisk their business by
diversifying into non-automotive domains like aerospace, aviation, defence,
etc. So has there been any progress on that front?
Diversification into adjacent
domains that you have mentioned have been mulled by various firms since 2008-09
when the industry was first hit by the economic downturn. ACMA, had infact, set
up an aerospace and railways committee at that time. But what happened was the
magnitude of recession in 2008-09 was less than what it is now. Nearly four
years back, the government came in very proactively with across-the-board
excise duty cuts for local manufacturers. This plan really worked out for the
Indian industry per se. Moreover, the industry was able to come out with
recession very quickly. Therefore, the focus required for diversification was
lost very quickly because the automobile industry came back with an
unprecedented growth of around 40pc. But I guess, over a period of time the
industry will look for non-automotive domains because of the cyclicality of its
traditional business. Once again, ACMA is focussing on non-traditional segments
not only to secure its business from risks, but also to garner higher margins.
Having said all that, it’s not so easy to enter certain sectors as there are
certain barriers to its entry. Moreover, a lot of well-established players have
already made significant sums on hi-end technologies. The bottomline is that
the gestation period for diversification into aerospace and other areas is very
large. So what ACMA is doing right now is studying in detail to ascertain the
business opportunities in such space.
What is the turnover that
the Indian auto component industry is expected to clock during this
fiscal? And how much will the exports
account for out of the total amount?
In 2012-13 the domestic auto component industry is
expected to witness a growth of 8-10pc, while exports are likely to increase by
15-20pc. During the last financial year, the industry had revenue of US$ 43.5
billion, while exports stood at US$ 7 billion. Imports by the component
industry were at US$ 10.25 billion, while investment of US$ 1.6-1.9 billion was
made in the last fiscal. The first quarter of this fiscal went off very well,
but there was a deceleration in the second and third quarters. While SIAM is
talking about the overall industry growth in single digits, we would grow
pretty much in tandem with them. Exports at this juncture, are definitely a
concern for us as certain European countries like Germany are seeing an
economic crisis of sorts. A country like Germany accounts for 36pc of our
shipment. So even though the exports
will see a massive slash in this fiscal, a revival can be projected in the long
Lastly, what is your vision
for the industry that you are working for? Do you have any targets in mind?
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