Auto-Components Industry


 

OVERVIEW

The auto-components industry in India has shown robust growth during the past few years, mainly due to a flourishing end-user market, improved consumer sentiment and better purchasing power, supportive government incentives and return of adequate liquidity in the financial system. India’s geographical proximity to key global automotive markets such as the Association of Southeast Asian Nations (ASEAN), Japan, Korea and Europe gives it a distinct advantage over its competitors in this sector.

The Indian auto-components industry can be broadly classified into the organized and unorganized sectors. The organized sector caters to the Original Equipment Manufacturers (OEMs) and consists of high-value precision instruments while the unorganized sector comprises of low-valued products and caters mostly to the aftermarket category. This industry, on a whole, accounts for almost 7 per cent of India’s GDP and employs as many as 3 million people, both directly and indirectly.

The turnover of the industry registered a Compound Annual Growth Rate (CAGR) of 7% during 2011-17. The Aftermarket sector is growing at a CAGR of 6.6% annually. During the same time period, exports increased from US$8.8 billion to US$10.9 billion.

The auto component industry registered a turnover of US$43.5 billion in the Financial Year (FY) 2016-17 registering a growth rate of 11.7%. A cost-effective manufacturing base keeps costs lower by 10-25 % as compared to operations in Europe and Latin America.

The total value of India’s automotive aftermarket stood at US$ 8.4 billion in FY 2016-17. This has been driven by strong growth in the domestic market and increasing globalization (including exports) of several Indian suppliers.

Exports were at US$10.9 billion as compared US$10.8 billion in the year 2015-16, up by 0.8 per cent whereas imports in the year 2016-17 have decreased from US$13.8 billion to US$13.5 billion, down by 2.3%.

As per Automotive Mission Plan 2016-26 (AMP) the Indian auto component industry may attain an impressive US$200 billion in revenue by 2026, with exports reaching US$80 billion. Also, the contribution of auto-component industry in India’s GDP will account to as much as 5% to 7% by 2026.

FDI inflows into the Indian automobile industry during the period April 2000 – December 2017 were recorded at US$ 18.41 billion, as per data by the Department of Industrial Policy and Promotion (DIPP).

100% FDI is allowed under the automatic route in the auto components sector, subject to all the applicable regulations and laws, by the Government of India.

The Indian automotive aftermarket is expected to grow at a CAGR of 10.5 per cent and reach US$ 13 billion by the year 2019-20, according to the Automotive Component Manufacturers Association of India (ACMA). India is expected to become the 4th largest automobiles producer globally by 2020 after China, US & Japan.

This is because Indian auto-component makers are well positioned to benefit from the globalization of the sector. These estimates are in sync with the targets of the Automotive Mission Plan (AMP) 2016-26. The Indian auto-components industry is set to become the third largest in the world by 2025. This phenomenal growth is facilitated by a favorable trade policy, flexible FDI rules and also the presence of enabling infrastructure like automotive training institutes and auto design centres, special auto parks and virtual SEZs for auto components. Growth of the domestic auto components industry is expected to reach 13-15 per cent in FY18 on the back of high growth expectation in domestic passenger vehicles, commercial vehicles, tractors, and two-wheelers segments.


 

SELECT GOVERNMENT INCENTIVES

Government has drafted Automotive Mission Plan (AMP) 2016-26 which will help the automobile industry to grow and will benefit Indian economy.

Some other government policies include –

  • Manufacturing and imports in the auto-components sector are exempt from licensing and approvals
  • Under the National Automotive Testing and R&D Infrastructure Project (NATRiP), a total of US$388.5 million has been allotted to enable the industry to adopt and implement global performance standards. Also, the focus is on providing low-cost manufacturing and product development solutions.
  • The Department of Heavy Industries & Public Enterprises has set up a US$200 million fund to modernise the auto components industry by providing an interest subsidy on loans and investment in new plants and equipment. It also provides export benefits to intermediate suppliers of auto components against the Duty Free Replenishment Certificate (DFRC).

 

SELECT EXPORT MARKET REGULATIONS

Before one decides to export a vehicle or vehicle parts to the United States, one should ensure that it conforms to the Environmental Protection Agency (EPA) and Department of Transportation (DOT) regulations.

For further details, visit - https://help.cbp.gov/app/answers/detail/a_id/218/~/requirements-for-importing-a-vehicle-%2F-vehicle-parts

This link provides an overview of the automotive sector, the key regulations you will need to comply with as an exporter or importer, and selected sources of further help and support.

https://www.gov.uk/guidance/automotive-import-and-export-regulations