India is now one of Asia’s largest
automotive hubs and is expected to occupy a significant place in the global auto supply chains. In tandem with the automotive industry, the
auto component industry has shown impressive growth over the past decade, in terms of production and exports.
Today, there are over 20,000
auto parts manufacturing companies in the nation, with the top 10 occupying only 6 percent of the total market share. Moreover, as India steps up to improve its infrastructure with an increased focus on manufacturing, the auto components segment has also witnessed a drastic evolution in important technological advancements.
Different schemes like PLI have given the auto component industry a much-needed boost. Thanks to the booming ecosystem, the auto components market recorded its highest trade surplus of USD 700 million in the financial year 2021-22. According to Invest India, the Indian auto component industry, which at present states accounts for 2.3 percent of the nation’s GDP is set to become the 3 rd largest globally by 2025.
The market is experiencing rapid growth and increased demand, both in the domestic and international markets. In this article, let’s look into the key factors that are boosting the auto components ecosystem of India.
The geographical Benefit
The geographical location of any business actively shapes its growth prospects and determines its future potential. When considering India's market for automotive components, it is placed in close proximity to other important auto markets like Japan and Korea. As the demand increases in this region, the Indian auto component market profits. In fact, as the global auto industry gained momentum, India’s automotive exports grew by more than USD 8 billion. Historically, the Indian market has also benefitted from leading players from these regions including Suzuki Motors, and ISUZU motors for setting up new units in the country.
Moving ahead, India’s location has also allowed it to become a global manufacturing hub for auto components, specifically for the parts used in small cars. According to the AMP 2016 -26, 31 percent of small cars sold globally have been manufactured in India.
India has also evolved to be a leader in the manufacturing of small-capacity diesel and petrol engines and transmission-related auto components.
Fast-Growing Economy
Starting from Russia- Ukraine war to the slowing global economy and the probability of recession in the USA, the world is now amidst major chaos. In fact, all the major economies around the globe like – China, the UK, US, are massively struggling with their declining economy.
However, India has been a major exception with the country reporting a growth of 13.5 percent over the last quarter. It is also expected that the country will emerge as the strongest major economy with a 7 percent growth rate in FY23 amid the fears of the world slipping into recession.
As India’s economy grows, the automotive components in India are seeing an increase in demand from consumers in the domestic market. Moreover, with the rising disposable income of Indians, the popularity of electric and hybrid vehicles is also increasing within
India’s domestic market.
Rising Domestic Automotive Industry
The automotive industry of India has been a major success story and in the past four decades, it has emerged as a shining light to catalyze India’s Gross Domestic Product and the whole economy.
Occupying a major place in the nation's economy, the auto industry of India contributes to about 49 percent of India’s manufacturing GDP and 7.5 percent to the overall GDP. The Indian automobile market has also overtaken Germany to emerge as the world’s fourth largest in 2018. The industry is further estimated to create 65 million jobs by 2026.
The increasing demand from the domestic market is helping to drive the production of automobiles which is leading to increased demand for automotive components. Production within India is also increasing thanks to investments by major players in infrastructure and manufacturing facilities.
Future Market Perspective
India’s auto components market is one to watch. If current trends and patterns evolve, it has the potential to outpace the major competitors and come one step closer to dominating the global market.
The government of India has already granted several manufacturing incentives to assist businesses in adapting to the sector’s changing dynamics. India is also aggressively investing in electric vehicle infrastructure. These investments matched with the growing trend towards sustainable transportation will push the auto component market of India to new heights.
