Vision 2020 study expects five-fold growth in the auto component industry within the next decade  The Indian auto component industry is up for a smooth ride. Amidst burgeoning demand for vehicles in the country, which has prompted several biggies to expand their existing capacity and look to set up new production units in India, the domestic auto component industry is poised to get a huge facelift. According to ‘Vision 2020’ document jointly brought out by Automotive Component Manufacturers Association (ACMA) and Ernst & Young, the sector is expected to go beyond US$110 billion by 2020, thereby taking up its contribution to the country’s GDP to 3.6% from the current 2.1%. The document released by B S Meena, secretary of the Ministry of Heavy Industry and Public Enterprises, also stated that to achieve this target, the sector needs to invest over US$35 billion during the said period. The document also forecasted a growth in vehicle production across all the segments by 2020.
According to Jayant Davar, president of ACMA, “The auto component industry is anticipated to grow almost five-fold to more than US$110 billion by 2020 from the current US$26 billion. It is important for Indian auto component manufacturers to move up the value chain in order to remain competitive. India will have to be wary about the fact that several regions in the world are fast becoming centres for low-cost country (LCC) sourcing.” Mr Davar added that auto component players need to strengthen their balance sheets and build R&D competence to remain competitive in the global market.
Companies investing big bucks
Some of the leading auto component manufacturers that are aiming to invest heavily during the said period are Jamna Auto, Lumax Industries, Mahindra Systech and Subros, among others. According to Mahindra Systech officials, the company plans to invest somewhere between US$3.5 and US$4 billion over the next 1 year in a bid to increase its capacity in manufacturing castings and forgings. Similarly, Lumax Industries is setting up two new plants in Sanand and Bengaluru with an investment of US$2 billion.
Need for conducive ecosystem
A conducive ecosystem needs to be created in order to further boost the industry. At the same time, the country needs to be careful in establishing and exploring Free Trade Agreements (FTAs), which can benefit the domestic auto component industry. Notably, during the industry performance review of the sector for 2009-10, Srivats Ram, vicepresident of ACMA, had said, “The country should eye at FTAs with countries such as Brazil, South Africa and Iran, which have a lucrative market for Indian auto components. It is also important to ensure that FTAs do not lead to inverted duty structure and are not disincentive to fabricate or source products in the country.”
Meanwhile, ACMA is also of the view that the government has a huge role to play in the growth of the auto component industry and suggested several recommendations to maintain a steady growth. Of the many recommendations that were suggested, one was to provide incentives to private investors and financial institutions that invest in the domestic auto component sector. It is also believed that the sector needs to come up with more investment opportunities to raise the much-needed capital.
Arup Choudhury
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