Efforts to boost localisation adding on to revenue of component firms


India’s love for larger, feature-rich vehicles, coupled with efforts being undertaken by stakeholders to deepen localisation, is turning into a boon for local autos parts makers with component sales in the country surging to a whopping $ 36.1 billion in the first six months of the current financial year.

An increase in value of sales of components sold to automakers, aided by the shift in consumer preference to larger, more powerful vehicles across segments helped drive up revenues by 6.5% till September FY24, shows data available with industry body Automotive Component Manufacturers Association (ACMA). Auto component makers had reported turnover of $ 33.9 billion in the corresponding period of the last financial year.

The share of utility vehicles in total sales of passenger vehicles in the Indian market grew to 57% in the first half of the current fiscal, from 49% in H1 FY23. In the commercial vehicle segment, the contribution of medium and heavy duty trucks and buses (MHCVs) inched up to 35% from 34% in the period under consideration. Ditto, two-wheelers where sales of motorcycles with engine capacity of 200-250 cc rose by 70%.

To be sure, given higher sales volumes, the regulatory shift to higher emission and safety standards and the demand for feature-rich vehicles import of auto components into the country increased by 3.6% to $ 10.6 billion. However, despite global uncertainties auto parts makers were able to scale up exports by 2.7% to $ 10.4 billion, which helped reduced the trade deficit to $ 200 million.

Shradha Suri Marwah, President, ACMA, said, “We had set out a roadmap to deepen localisation levels in the country a couple of years back. And have since been investing heavily in bettering our capabilities. We expect imports to come down as progressively value-addition goes up.”

The auto component industry, in fact, is looking at investing around $ 6.5-7 billion over the next five years on capacity expansion and technology upgradation, with the demand expected to remain robust over the period. Auto component makers have invested $ 3.5-4 billion in the past five years.”Going forward, considering the festive season has gone well with significant sales across most segments of the vehicle industry, I am optimistic that the current fiscal year will witness another good performance from the auto components sector,” Marwah added.With vehicle sales across all segments reaching pre-pandemic levels and with mitigation of supply-side issues witnessed during the pandemic such as availability of semiconductors, high input raw-material costs and non-availability of containers, the auto components sector witnessed a steady growth in both domestic and the international markets in the first-half of FY2023-24, she said.

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