Auto-Components Industry


 

OVERVIEW

The Indian auto-components industry can be broadly classified into 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. The ‘Driving Transmission and Steering’ product category accounted for the largest part of the aftermarket at 21 percent, followed by ‘Engine Components’ and ‘Electricals’ at 18 percent each and ‘Suspension and Braking’ at 15 percent. The industry as a whole, accounts for nearly 2.3 percent of India’s GDP and employs as many as 3 million people, both directly and indirectly.

Over the past decade, the auto components industry revenues have risen from US$ 26.5 billion in 2007-08 to US$ 51.2 billion in 2017-18, registering a CAGR of 6.8 percent during this period. The production of Storage batteries increased from 1,18,713 in 2016-17 to 1,29,561 in 2017-18 (till December 2018), registering a y-o-y growth rate of 9.14 percent. The production of tyres also registered a y-o-y growth of 5.5 percent, from 170,732.50 tyres in 2016-17 to 180260.7 in 2017-18 (till December 2018).

Exports of automobile components from India in 2018-19 stood at US$ 1796.5 million. The exports of steering wheels, steering columns and steering boxes (HS Code: 870894) increased at a CAGR of 48.7 percent between 2015-16 and 2018-19. The exports of other parts and accessories of bodies (including cabs) (HS Code: 870829) also increased by nearly two folds from US$ 62.9 million in 2015-16 to US$ 122.17 million in 2018-19. While exports of gear boxes (HS Code: 870840) and radiators (HS Code: 870891) registered minimal decline of (-)0.3 percent and (-)0.6 percent as compared to 2015-16, the exports witnessed bumpers and parts there of (HS Code: 870810) recorded steep decline in CAGR of (-)18 percent between 2015-16 and 2018-19.

Category-wise Global Exports of Auto-Components
Amount in US$ millions
HS Code Commodity 2015-16 2016-17 2017-18 2018-19
870810 Bumpers and parts thereof 179.21 155.71 162.21 97.42
870829 Other parts and accessories of bodies(including cabs) 62.90 75.76 115.88 122.17
870830 Brakes and servo-brakes; parts thereof 308.77 342.17 419.70 418.71
870840 Gear boxes 341.78 269.10 331.03 337.89
870850 Drive axles with differential w/n provided with other transmitters 193.52 204.17 342.67 313.11
870870 Road wheels and parts and accessories thereof 93.04 107.45 133.81 141.65
870880 Suspension shock absorbers 82.85 89.74 129.38 120.04
870891 Radiators 40.21 37.74 49.23 39.44
870893 Clutches and parts thereof 42.34 42.46 57.70 61.60
870894 Steering wheels, steering columns and steering boxes 43.94 92.20 176.71 144.49
Total 1388.56 1416.527 1918.324 1796.53
Source: SIAM

Europe accounted for the largest share in Indian auto component exports at 34 percent during 2017-18, followed by North America and Asia with 28 percent and 25 percent respectively.

FDI of 100 percent is allowed under the automatic route in the auto components sector, subject to all the applicable regulations and laws, by the Government of India. FDI inflow in automotive sector from April 2000 to March 2019 stood at US$ 21.4 billion.

As per Automobile Component Manufacturers Association(ACMA) forecasts, automobile component exports from India are expected to reach US$ 80 billion by 2026. The Indian auto component industry aims to achieve US$ 200 billion in revenues by 2026. The domestic market is expected to account for 71 percent of total sales by 2021 with a total market size of US$ 115 billion. Both domestic & export markets are nearly similar in terms of potential share by different product types. For example, Engine & Exhaust components, along with Body & Structural parts, are expected to make up 50 percent potential domestic sales as well as exports in 2020, according to IBEF.

The introduction of BS VI norms is expected to result in a price increase across all automobile segments and pre-buying of cheaper BS IV vehicles in 2019-20 is likely to drive volumes up. Bharat Stage Emission Standards (BSES) are emission standards mandated by the Government to regulate the output of air pollutants from internal combustion engines and spark-ignition engines equipment, including motor vehicles. A strong domestic demand and a pickup in exports is expected to aid overall auto components growth in 2019-20.

The industry aspires to triple vehicle sales by 2026, from 26 million to 65 million to 76 million vehicles, across segments1. These could be definitive tailwinds for the Indian automotive components industry, which has ambitions of its own—to double the contribution to manufacturing GDP with a 4-fold growth in size and a 6-fold growth in exports by 2026. Outlook for the industry is positive in the medium term.


 

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 percent 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 incentivizing all vehicle segments, including hybrid and electric technologies. This scheme is extended from April 1, 2019, extending its validity till for 3 years. The main objective of the scheme is to encourage Faster adoption of Electric and hybrid vehicle by way of offering upfront Incentive on purchase of Electric vehicles and also by way of establishing a necessary charging Infrastructure for electric vehicles. The scheme will help in addressing the issue of environmental pollution and fuel security.
  • In May 2018, anti-dumping duty of US$ 22.89 per unit on all imports of aluminum radiators originating or exported from China.
  • In January 2019, The Government of India lowered the custom duty on import of parts and components of electric vehicles to 10- 15 percent.
  • In Union Budget 2019-20, the Government of India reaffirms their commitment towards Electric Vehicles (EV) and their mission for 30 per cent electric mobility by 2030 in order to overcome India’s reliance on imported fossil fuels and gas, and greatly boost sustainable energy in India. The Department of Revenue also eased the import duty on lithium-ion cells.

 

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