INTRODUCTION

 

The Indian automobile industry has witnessed high growth over the last few years.The reasons for the same are: vast end-user market, better consumer sentiment and rise of liquidity in the financial system.

 

The auto-components industry accounts for 7% of GDP and employs around 19 Mn people. Adequate government framework, increased disposable income, huge market, and better infrastructure have made India a favorable destination for investment.

 

•       Turnover of the Indian auto component sector stood at USD39 billion in FY2015–16; the industry is expected to reach USD115 billion by2020

•       India is expected to become the 4th largest automobile producer across the world by 2020 after China, US and Japan.

•       In July 2015, India become the 3^rd largest producer of steel in the world. Steel being a key raw material which is used in automobiles has been extremely advantageous.

 

 

MARKET SIZE 

 

The Indian auto-components industry is classified into the organized and unorganized sectors. The organized sector caters to the Original Equipment Manufacturers (OEMs) and consists of high-value precision instruments while the unorganized sector comprises low-valued products and caters mostly to the aftermarket category. 

 

The Indian automobile industry is expected to grow by 8-10% in FY 2017-18, based on higher localization by OEM, higher component content per vehicle, and rising exports from India, as per ICRA Limited. 

 

The industry is expected to register a turnover of US$ 100 billion by 2020 backed by strong exports ranging between US$ 80- US$ 100 billion by 2026, from the current US$ 11.2 billion according to Automotive Component Manufacturers Association of India (ACMA)

 

 

 

 

INVESTMENTS 

 

The cumulative FDI inflows into the Indian automobile industry during the period Apr 2000 – Mar 2016 were recorded at US$ 15.07 billion, as per data by the Department of Industrial Policy and Promotion (DIPP). Some of the major investments made into the Indian auto components sector are as follows: 

 

•       JK Tyre and Industries Ltd, India's leading tyre manufacturer, has acquired Cavendish Industries Ltd (CIL) for Rs 2,200 crore (US$ 329.2 million), which will enable JK’s entry into the fast-growing two-wheeler and three-wheeler tyre market. 

•       Japanese auto major Honda is planning to step up supply and target exporting of auto components worth Rs 1,500 crore (US$ 224.45 million) from India to it various international operations. 

•       Auto components maker Bharat Forge Ltd (BFL), the flagship company of the US$ 3 billion Kalyani Group, has formalised agreement with Rolls-Royce Plc which will supply BFL with critical and high integrity forged and machined components 

•       Canada’s Magna International Incorporated has started production at two facilities in Gujarat’s Sanand, which will supply auto parts to Ford Motor Co in India 

•       Everstone Capital, a Singapore-based private equity (PE) firm, has purchased 51 per cent in Indian auto components maker SJS Enterprises for an estimated Rs 350 crore (US$ 51.35 million). 

•       ArcelorMittal signed a joint venture agreement with Steel Authority of India Ltd (SAIL) to establish an automotive steel manufacturing facility in India. 

•       German auto components maker Bosch Ltd opened its new factory at Bidadi, near Bengaluru, which is its fifth manufacturing plant in Karnataka. The company has also signed a memorandum of understanding (MoU) with Indian Institute of Science (IISc), Bengaluru with a view to strengthen Bosch’s research and development in areas including mobility and healthcare thereby driving innovation for India-centric requirements. 

•       French tyre manufacturer Michelin announced plans to produce 16,000 tonnes of truck and bus tyres from its Indian facility this year, a 45 per cent rise from last year. 

•       Amtek Auto Ltd acquired Germany-based Scholz Edelstahl GmbH through its 100 per cent Singapore-based subsidiary Amtek Precision Engineering Pte Ltd. 

•       MRF Ltd plans to invest Rs 4,500 crore (US$ 660.231 million) in its two factories in Tamil Nadu as part of its expansion plan. 

 

•       German luxury car maker Bayerische Motoren Werke AG’s ( BMW ’s) announced it will start sourcing parts from at least seven India-based auto parts makers in response to promote ‘Make in India’. 

 

•       Hero MotoCorp is investing Rs 5,000 crore (US$ 733.59 million) in five manufacturing facilities across India, Colombia and Bangladesh, to increase its annual production capacity to 12 million units by 2020.