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 10% annually during the period 2012-13 to 2017-18. During the same period, exports increased from US$ 9.7 billion to US$ 13.5 billion.

The auto component industry registered a turnover of US$51.2 billion in the Financial Year (FY) 2017-18 registering a growth rate of 18.3% . A cost-effective manufacturing base keeps costs lower by 10-25% as compared to operations in Europe and Latin America. Production in India has been estimated at Rs. 3,099 hundred crore, with engine components accounting for 26 % of output, followed by suspension & breaking (14 %).

The industry consists of a large number of players concentrated in the unorganized sector— more than 14 times than the organized sector. However, the organized sector accounts for 85 % of total industry turnover.

The organized sector mainly caters to the OEMs, consisting of high-value precision instruments, while the unorganized sector comprises low-valued products and caters mostly to the aftermarket category. Since FY 2013, the auto component aftermarket has registered a 14 % CAGR, increasing in value from Rs. 317 hundred crore to Rs. 616 hundred crore from 2012-13 to 2017-18.

India’s exports of auto-components has been increasing consistently from US$ 9.7 billion in 2012-13 to US$ 13.5 billion in 2017-18, registering a CAGR of approximately 11.4 %. India’s imports has also increased from a value of US$ 1.85 billion in 2007-08 to US$ 4.12 billion in 2016-17, registering a CAGR of 7 %. Leading constituent products in India’s exports include Transmission and Steering (34%), engine components (20%) and Body/Chassis (16%). Over this period, India has transformed its own industry status, reducing trade deficit to a marginal considerably.

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.

Cumulative Foreign Direct Investment (FDI) inflows into the Indian automobile industry during the period April 2000 to June 2018 was recorded at US$ 19.29 billion accounting for 4.95 % of total FDI flows into the country, as per data published by Department of Industrial Policy and Promotion (DIPP), Government of India. A number of global suppliers have established both manufacturing and R&D facilities in India, including Bosch Chassis Systems, Tenneco & Faurecia etc. 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 auto components industry is expected toregister a turnover of US$ 100 billion by 2020 . India is expected to become the 4th largest automobiles producer globally by 2020 after China, US & Japan. The auto components industry is also expected to become the 3rd largest in the world by 2025. A large part of this growth will emanate from the exports sector.

Auto component exports are projected to rise at 10-12% CAGR between fiscals 2018 and 2023, which is higher than the past five years CAGR of 8%, on account of improvement in the global scenario. Moreover, India is moving towards higher global standards in terms of quality and safety measures. This helps the players to expand in newer geographies and gives a higher edge as compared to other low-cost countries.

The auto components industry is expected to follow OEMs in adoption of electric vehicle technologies. The global move towards electric vehicles will generate new opportunities and create new challenges and risks for automotive suppliers. According to estimates, mass conversion to electric vehicles may generate a US$ 300 billion domestic market for EV batteries in India by 2030.


 

SELECT GOVERNMENT INCENTIVES

  • Automotive Mission Plan 2016-26 was unveiled in September 2015 with a target of fourfold growth in the sector by the end of 2026, generating 65 million jobs and contributing 12% of India’s GDP.
  • National Automotive Testing and R&D Infrastructure Project (NATRiP) was set up with a fund of US$ 388.5 million with the objective of creating state-of-the-art testing, validation and R&D infrastructure in India, enabling the industry to adopt and implement global performance standards.
  • The FAME-India, a part of the National Electric Mobility Mission Plan (NEMMP) launched in 2015 is aimed at incentivising all vehicle segments, including hybrid and electric technologies. This scheme was extended for the third time from April 1, 2018, extending its validity till September 30, 2018.
  • In Budget 2018-19, there was an increase in customs duty from 10 % to 15 % on radial tyre imports for trucks and buses and 5 % - 7.5 % increase in customs duty on fully built vehicles, completely built units, completely knocked down units and auto components across vehicle and component categories. Total customs duty on various engine and electrical parts was increased from 7.7 % to 16.5 %, and total customs duty on components such as suspension parts, steering, wheel rims, etc. was increased from 10.3 % to 16.5 %. Subsidy for over 1000 e-vehicles and charging infrastructure for public transport in 11 cities was also announced.
  • In May 2018, anti-dumping duty of US$ 22.89 per unit on all imports of aluminium radiators originating or exported from China.

 

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) 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