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Make in India | Sectors - Automobile Components

 

Summary
  • The Automotive industry in India is leading in many segments- primarily in Passenger Cars, Utility Vehicles, Vans and two Wheelers.1
  • The rapidly growing auto market in India is expected to reach USD 300 Bn by 2026.
  • The Compound Annual Growth Rate (CAGR) of the industry stood at 13% over the period FY 2013-14 to FY 2018-19.2
  • With increasing vehicle parc in India, the aftermarket in 2018-19 raised by 9.6% to USD 10.1 Bn from USD 9.2 Bn in 2017-18.3
  • The automotive aftermarket segment in India is expected to reach USD 32 Bn by 2026.
  • The Automobile component industry in India is composed of organized and unorganized sector. The organized sector refers to original equipment manufacturers (OEMs) and is engaged in the manufacture of high-value precision instruments. Whereas, the unorganized sectors comprise of low-valued products catering to after-market services.
  • Various sub-sectors of the Automobile component industry in India are engine parts, drive transmission & steering parts, body and chassis, suspension and braking parts, equipment, electrical parts and others such as fan belts, die-casting and sheet metal parts.
Reasons To Invest
  • A stable government framework with increased purchasing power, large domestic market and an ever-increasing development in infrastructure have made India a favourable destination for investment.
  • India is emerging as a global hub for sourcing auto components. The key automotive markets like the ASEAN, Japan, Korea, Europe and huge domestic market are geographically closer to India.
  • India offers low cost by 10-25% relative to that offered by Europe and Latin America. Hence, India is cost-competitive as compared to other manufacturing countries.
  • There are minimal restrictions on export-import which make it a favourable trade policy. Furthermore, specific incentives are available for export-oriented units and export processing zones.
  • India’s growing integration in Global Value Chains further offers impetus to the Automobile component industry.
  • Presence of enabling infrastructures like automotive training institutes and auto design centres, special auto parks and virtual SEZs for auto components.
  • An increasing working population and an expanding middle-class are likely to remain key demand drivers.
  • India is considered competitive in the manufacturing of forgings, stampings, castings, machining, wiring harness and electronic fuel injectors.
  • A large pool of skilled workforce and a strong educational system are the supporting factors for investment. Improvised R&D operations and laboratories that have been set up to conduct activities such as analysis, simulation and engineering animations are helping in additional investment prospects.
  • The growth of global Original Equipment Manufacturers (OEMs) sourcing from India and the increased indigenisation of global OEMs is turning the country into a preferred designing and manufacturing base.
  • M/S Stanley Black and Decker is a USA based company with over USD 15 bn revenue. They manufacture a wide range of mechanical tools. This company has 2 manufacturing plants in India and looking forward to expanding operations in India in the coming 6 years.15
  • 38 original Equipment Manufacturers (OEMs) of e-2W, e-3W & e- 4W registered under phase-II of FAME-India Scheme.
  • Out of the global Auto Component trade of USD 1.3 tn, India’s share is USD 15 bn. The Government aims to double its exports of Auto Components to USD 30 bn by 2026.
  • GOI is providing financial support up to 8-13 per cent for auto component manufacturers and up to 13-18 per cent for EV manufacturers. This will also facilitate the creation of about 7.5 lakh new advanced-level employment opportunities in the country.
Recent Announcements

09th August 2021: Under Ministry of Heavy Industries, 1,590 Electric Vehicles in more than 160 Central and State Government Departments in 49 cities deployed/under deployment by EESL/CESL.

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29th June 2021: Minister of Heavy Industries and Public Enterprises inaugurated NATRAX- the High-Speed Track(HST) in Indore which is the longest such track in Asia. NATRAX is a one-stop solution for all sorts of high-speed performance tests for the widest categories of vehicles from 2 wheelers to heavy tractor-trailers.

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22nd January 2021: Electrical Equipment (Quality Control) Order, 2020 to certifying and enforcing authority to work on the quality maintenance of Electrical Equipments. 

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11th November 2020: Hon’ble minister Shri Prakash Javadekar has set up a 22-member inter-ministerial committee in strengthening the Capital Goods(CG) Sector through interventions that help the CG Sector in contributing more actively in the national goal of achieving a USD 5 tn economy and a USD 1 tn manufacturing sector.

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Statistics
  • The contribution of the Automobile component industry in India’s GDP will account for as much as 5% to 7% by 2026.
  • The Automobile component in India contributes 2.3% to India’s GDP.2 About 1.5 mn people are directly and 1.5 mn are indirectly are employed in this industry.
  • Automotive Mission Plan (2016-26) projects to provide direct incremental employment to 3.2 mn by 2026. Realization of goals in the Automotive Mission Plan (2016-26) requires an additional investment of USD 25-30 Bn.
  • The Automobile component industry in India will be among the top three of the world in engineering, manufacturing and export of vehicles and components.
  • The size of Indian Original Equipments Manufacturers is USD 80.8 bn with exports of USD 11.7 bn. Size of auto component industry is USD 57 bn with exports of USD 15 bn.
Growth Drivers
  • The Public Procurement Order 2017 (revision) was issued on 20th Oct 2020 with an aim to promote manufacturing of Automobile and Automobile Components.16 
  • BHEL has successfully manufactured and tested India's highest rating 500 MVA 400/220/33 kV Auto Transformer, at the National High Power Test Laboratory (NHPTL) at Bina in Madhya Pradesh- a new benchmark in the global transformer industry.17  

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