Auto component sector to drive in low gear

August 31, 2011 12:17 pm

The auto component industry in India expects to clock only 12-15 per cent growth this year – a big dip from the 34 per cent growth it saw in FY 2010-2011. According to the Automotive Component Manufacturers Association of India (ACMA), the slowdown in the vehicle sales could impact the growth rate of the component industry this fiscal. In 2010-11, the turnover of the auto component industry stood at Rs. 182,127 crore. This data represents the entire supplies from the auto component industry to the on-road and off-road vehicle manufacturers and the aftermarket in India and overseas from ACMA member and non-member companies, including component suppliers captive to the OEMs and the unorganized & smaller players.
Commenting on the industry performance, ACMA President, Srivats Ram said, “The auto components sector, in sync with the vehicle industry, grew to a healthy USD 39.9 billion in 2010-11. The exports especially with signs of recovery in North America, Western Europe and Asian markets grew by 54 per cent over the last year to touch USD 5.2 billion. Imports crossed USD 8.5 billion, growing 30 per cent over the last fiscal. The first quarter of 2011-12 witnessed some slowdown in vehicle consumption in India and this seems to suggest that the growth in the auto component industry in the current fiscal will be in the range of 12-15 per cent.”
Addressing the challenge of access to capital in the auto component industry he elaborated, “The growth in the auto component industry will require cost-effective funding across the various tiers in the industry to ensure that adequate capital addition takes place to fund the future growth. It is important to recognize that the relative scale and size of companies in the industry will grow over a period, and the need to provide funding based on the potential that industry players offer. As the scale and sophistication of the automotive industry evolves, the nature of technology required will also change and require capital to ensure both global competitiveness and technology leadership.”
Delineating his thoughts on the current policy environment and the need for supporting Auto component manufacturing in the country, ACMA Vice President, Arvind Kapur said, “It is important that investments are made in core manufacturing processes to ensure that there is adequate in-country value-add to secure our position as a global hub for automotive manufacturing. Herein, policies should encourage core manufacturing over purely assembly oriented investments in automotive technology.”
“On foreign trade, India should consider establishing Foreign Trade Agreements (FTAs) with countries like Brazil, South Africa etc. who already have a ready market for our products. We also need to ensure that FTAs do not result in inverted duty structures and that they are not a disincentive to source or manufacture in India. Further on the exports front, it is important that the government continues its scheme of export incentives, as many of our export contracts are long term in nature. ”, added Arvind.
Sharing his thoughts on the need for a conducive ecosystem for the auto component industry in India, ACMA Executive Director Vinnie Mehta said, “In order to keep the growth momentum, as also to stay competitive, the industry, on one hand, needs to optimise capacities, raise capital, absorb technologies, build R&D competence, concentrate on innovation, focus on internal governance and develop strong organization; on the other, Government needs to focus attention to address the challenges of access to capital, availability of skilled manpower, rapidly increasing inflation, access to technology and lack of proper infrastructure, including power.”