Record $70 bn revenue for auto parts makers


India’s automotive components sector saw a record turnover of $69.7 billion in 2022-23, driven by a significant rise in demand for high value-added components for the domestic market, data released on Monday by apex auto components industry body Automotive Component Manufacturers Association of India (ACMA) showed. The growth was despite a moderation in exports to North America and Europe, as fears of inflation weighed on demand in those regions.

In FY23, automotive parts suppliers saw a 32.8% increase in sales to original equipment manufacturers (OEMs) to nearly $70 billion, reflecting a shift in preference for larger, high-powered vehicles across segments—sport utility vehicles (SUVs) in the passenger vehicles space, medium and heavy commercial vehicle, and high-capacity, premium motorcycles and scooters, said ACMA.

Growing domestic auto sales, however, led to higher component imports, reversing the $700-million trade surplus seen by the Indian auto parts sector in FY22 clocking a $200 million deficit in FY23, primarily due to higher imports from China, the single largest sourcing destination outside India for domestic OEMs.

Component imports grew 10.9% in FY23 to Rs1.63 trillion ($20.3 billion) from Rs1.36 trillion ($18.3 billion) a year ago. Asia accounted for 66% of the imports followed by Europe at 26% and North America at 6%, according to data shared by ACMA. Imports from the Asian region grew 12%, Europe by 6% and from North America by 23%, the industry body said.

Exports, on the other hand, rose 5.2% to Rs1.61 trillion ($20.1 billion) in 2022-23 in contrast to Rs1.41 trillion ($19.0 billion) in FY22. North America accounted for 32% of the exports, up 8%. Europe accounted for 31% and Asia for 26%, growing 3% and 4%, respectively.

ACMA data showed a nearly three-fold increase in contribution of electric vehicle parts, barring EV batteries, to overall auto components supplies to 2.7%, compared to 1% in FY22. India’s EV component sales are dominated by electric two- and three-wheelers, with electric passenger vehicles (four-wheelers) representing just 1.0-1.5% of total EV sales. The auto components segment has been growing at a compound annual growth rate (CAGR) of 4.1% over the last five years.

ACMA represents over 800 auto component manufacturers across tier-1, 2, and 3 levels and uses a mathematical model to arrive at its turnover volumes, which is then verified with industry stakeholders, including agencies. It sources trade data from the government.

“The domestic industry has definitely seen growth, which is really a bounce back from where we were. The export opportunity has risen, too. We are at $20 billion in terms of exports and $70 billion in revenue. I think the China +1 strategy is playing out from a value addition perspective. What we’re doing in terms of investments in technology is paying off for us now. Many OEMs are looking towards new technologies, and we’re able to follow suit, and providing them the technology solutions that they require. That’s really where a lot of the value addition comes in. With the increase of EVs, there is more movement towards supplying them because that’s the global trend. I see it continuing, and we’re going to invest more in products for EVs,” Sunjay Kapur, ACMA president, said.

Kapur expects India’s reliance on China for imports of various components including engine parts, vehicle chassis, suspension and braking systems and electronics which has remained at a stable 20%-30% of all its total imports for the last five years to gradually come down. “We expect this reliance to come down even as we increase domestic volumes. We’ve been able to narrow down our trade gap significantly”, he said.

ACMA expects the auto components industry to show a strong double-digit growth in FY23 as well, as domestic manufacturers invest significantly to expand capacity for passenger vehicles in the country. Passenger vehicles constitute 45% of all auto component sales in India in value terms, followed by 25% contribution from the CV sector, and nearly 20% from two-wheelers.

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Updated: 08 Aug 2023, 12:10 AM IST

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