ACMA President, Auto News, ET Auto
After two consecutive years of decline, the $46-billion automotive component industry in India is estimated to grow by 10-15% in FY22 on the back of improved exports according to the Automotive Component Manufacturers Association (ACMA).
Auto component companies have also resumed their capital expenditure (capex) plans with expectations of growth in new technology vehicles sales and a recovery in domestic sales, Sunjay Kapur, the president of ACMA told ET.
“We’re expecting growth in the components industry because we don’t cater only to the domestic industry but export too. We’re seeing good opportunities, especially in North America, Europe, even China, for that matter,” Kapur told ET via video conferencing.
Export orders were going up especially due to companies wanting to expand and diversify their sourcing base beyond China, he said.
The automotive components industry declined from its peak of $57 billion in net turnover in FY19 to $45.9 billion in FY21. About a third of the net revenue comes from exports.
The industry is facing challenges on multiple fronts, right from a shortage of semiconductor chips, which is impacting vehicle production volumes to a shortage of containers, which is impacting global trade. High raw material prices have forced automakers to increase their prices. Coupled with high fuel prices, it has become a perfect recipe to deter new vehicle buyers.
However, component makers were bullish due to good macro-economic indicators and export demand, according to the ACMA president. “There are headwinds. However, the good thing is that demand exists. Passenger car demand is there. Commercial vehicles demand is coming back, which is a good thing,” he said.
The capex cycles of auto component makers were also back up, Kapur said, as companies invest in new technologies, especially on the electric vehicles front. “There is a lot of investment taking place in capacity expansion and in R&D, which is very encouraging.”
While the sales volumes of electric vehicles (EV) pale in comparison to that of combustion engine vehicles, component makers were betting on the industry to grow rapidly in the future, Kapur said. This is in stark comparison to just a year ago when EV makers were still struggling to source components as suppliers shied away from making them due to low volumes.
The production-linked incentives (PLI) scheme announced by the government is also helping shift the momentum in favour of EVs, Kapur said, as it incentivises investments in making new technology vehicles like EVs.