Indian automotive component sector has been observing a sturdy growth over the past few years. The industry already generates about 2.3% of India’s GDP and is responsible of 4% of India’s total exports. The industry has also shown robust double-digit growth over the last couple of years and chances are that by the year 2026 exports from this industry alone will be in the region of $80 to $100 billion.
Indian auto components are exported to more than 160 countries including spark ignitions, gearboxes, hydraulic power steering systems, parts of diesel engines, and crank shift for engines, etc. Presently, India has emerged as one of the most sought-after countries for sourcing auto parts, owing to several contingent factors. While being close to key automotive markets such as Japan and Korea have worked in India’s favor, other factors like credibility in the OEM sector in Europe and its cost-competitiveness has also contributed towards making the country a global hub for automotive parts.
Way to Consistent Market Growth
Indian auto parts have always found lucrative markets in Latin America, Europe, and Africa in the past. In FY 2018 Europe was the largest Indian auto components importer contributing 34%, closely followed by North America at 28% and Asia at 25%.
Latin America, almost 15000 km away from Indian sub-continent has always been a key market for India, but with the continent losing its economic sheen it now makes for only 6% of India’s auto component exports.
Indian auto industry is known for its engineering prowess in both OEM and after-market products. This has allowed Indian auto-component manufacturers and exporters to hold forte in the international markets with a competitive price range. But the lack of consistent growth and the prevalence of risk factors in the major automobile component importing economies have become a cause of concern for the thriving Indian auto industry. In recent years, exports to Africa and the Latin America have been witnessing slow and gradual downtrend owing to macro-economic factors.
A transition towards a flourishing future
Being threatened by the unstable and risky markets of Latin America and Africa, India has been seriously contemplating on the measures to undertake a paradigm shift in its exports of automotive components to more sustainable and developed economies. The USA standing as the topmost importer of Indian automotive parts in the first quarter of FY 2019, with an almost 24% growth in auto part exports to the country, at an aggregated $ 290 million signals a positive momentum towards this shift.
Turkey following closely at imports worth $100 million with Bangladesh at $80 million, and Germany at $61 million respectively. It indicates the gradual shift of Indian auto components towards more secure economies. Expanding their horizons to the markets of Romania, Japan, Vietnam, and Colombia, though low-key at present, Indian auto part exporters, it appears, have taken on the challenge to explore global markets steadfastly.
A few Initiatives: Backbone of Indian auto-component exports
Some sound initiatives undertaken by the government in collaboration with the auto component manufacturers have already begun to strike chords with some global tier-I suppliers. The new initiatives seek to bring revolutionary changes in the design, technology, research, and testing in the auto parts sector through technology transfer and joint ventures.
We believe it will not be long before the Indian auto component sector climbs up the value chain and becomes the preferred sourcing destination for auto-majors across the globe. The route has already been charted!