Having posted 8.8 percent YoY growth in 2015-16, apex industry body ACMA is optimistic Indian parts makers will clock improved revenues, both in domestic business and exports.
17 Jun 2016 | 9287 Views | By Shobha Mathur
The Automotive Component Manufacturers Association of India (ACMA) expects the Indian component industry to clock 8-12 percent growth during 2016-17.
This would be a spin-off on the back of the expected recovery in the automotive sector supported by a good monsoon around August-September this year, which is when the ...
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The Automotive Component Manufacturers Association of India (ACMA) expects the Indian component industry to clock 8-12 percent growth during 2016-17.
This would be a spin-off on the back of the expected recovery in the automotive sector supported by a good monsoon around August-September this year, which is when the rural markets are also likely to turn around and in turn give a fillip to sales of commuter motorcycles and light commercial vehicles.
ACMA president Arvind Balaji (pictured above) has pitched the current fiscal as a turnaround year for the auto component sector with bright prospects of sustained growth in the automobile sector, given the improved sales since the past 2 months. Slow global markets, which had curtailed exports, would be balanced by higher sales in the domestic market. In addition, upcoming regulations on safety, emissions and electrification are expected to trigger off a fresh round of investments in the sector on research and development to meet these requirements. “The end of the year will signal a better direction for the auto component industry,” added Balaji.
The expected announcement of the enforcement of the Goods & Services Tax (GST) from April 2017 is also expected to smoothen the flow of goods and in the long run make life easier for the auto industry which has been under stress for the past couple of years due to a slowdown. The beneficiaries of GST include logistics service providers, which are critical to the supply chain of vehicle manufacturers.
Component Industry's Performance in FY 2015-16
An industry performance review of 2015-16 reveals that the auto parts sector has posted a turnover of Rs 2.55 lakh crore, growing 8.8 percent over the previous fiscal and posting a CAGR of 6 percent across the last 6 years. This covers the entire gamut of the industry including both members and non-members.
“While overall exports from India witnessed de-growth of 9.58 percent, the auto parts sector exports grew by 3.5 percent. With signs of recovery in the auto market in the country and prospects of a better monsoon, the component sector is expected to experience growth in early double digits this year,” confirmed Balaji.
Exports of auto components grew to Rs 70,900 crore from Rs 68,500 crore in FY2016 with a CAGR of 18 percent over the last 6 years. Europe accounted for 36 percent of exports followed by Asia and North America each at 25 percent. Exports to Central America and North America increased by 30 percent and 3 percent respectively over the previous fiscal.
The key export products included engine parts, transmission parts, brake systems and components, body parts, exhaust systems and turbochargers. Balaji maintains that more big-ticket products need to be added to the export list and the inverted duty structure in trade changed.
In comparison, imports rose by a lower 9.3 percent to Rs 90,600 crore in FY2016, from Rs 82,900 crore in 2014-15. Asia and Europe contributed to 58.6 percent and 30.9 percent of the imports.
Though imports continue to be higher than exports, they have seen a marginal decline in terms of growth compared to export growth indicating the growing maturity, expertise and ability of Indian auto parts makers to hold their own against global competition.
“The performance of the auto component industry in 2015-16 has been satisfactory. This is despite a less-than-expected performance in the passenger vehicle, two-wheeler and tractor segments. With the Make in India initiative and thrust on increased localisation by OEMs, the component industry is actively focusing on delivering enhanced quality products as well as on R&D and innovation,” added Vinnie Mehta, director general of ACMA (pictured above).
With the increasing vehicle parc in the country, the aftermarket grew by 12 percent in FY’16 to Rs 44,660 crore from Rs 39,875 crore in the previous fiscal.
An estimated capital investment of Rs 2,700 crore-Rs 4,000 crore was seen in the sector compared to Rs 2,000 crore-Rs 2,800 crore in 2014-15. This is attributed to improved business prospects due to improving market sentiments.