Auto component in India may touch $100 bn mark in decade

Rajkot, Sept 28: Indian auto component industry, which is currently valued at USD 30 billion, is expected to grow at USD 100 billion in the current decade on a robust domestic demand even as rising inflation and interest rates continue to be major challenges.

"The Indian auto component industry may cross USD 100 billion mark by 2020 by growing at a 15 per cent CAGR (Compound Annual Growth Rate)," Azaz Motiwala, a principal consultant with the city-based Ikon Marketing Consultants told PTI quoting from a national survey conducted by the firm.

Motiwala said the industry for the first time, during FY11 recorded a Year on Year (YOY) growth at the highest 36 per cent compared to the last year on major contribution from exports at USD 5 billion and fresh investment from US at approximately USD 2 billion.

However, during the FY12 the growth is estimated to remain at almost half to the previous year at around 15-18 per cent, he said, adding the prime factors that could hamper the industry growth are: lingering post-crisis difficulties in high-income countries, political turmoil in the Middle-East and North Africa and slow industrial production and trade from Japan due to earthquake and tsunami.

According to him, the domestic demand is going to be adversely affected due to rising inflation and interest rates.

When asked about the overall outlook of the industry, Motiwala observed the adverse macro economic factors such as GOI's policy of promoting Free Trade Areas (FTAs) that lead to increase in the threat of imports and technology absorption, besides proposed withdrawal of Duty Entitlement Pass Book (DEPB) scheme, which might prove detrimental for exports, will also contribute to hamper the overall industry growth.

The government has extended the DEPB scheme till September 30, even as an alternative scheme is in the works.

Though two and three-wheelers, along with passenger cars, account for two-thirds of the components manufactured, commercial vehicle components have shown the fastest growth rate over the last five years, Motiwala said.

Among the product range, the engine parts lead the industry with almost 31 percent market share followed by drive transmission and steering parts at 19 per cent, he said, adding that the other products like body and chassis parts, suspension and breaking parts, equipments and electrical parts also contribute significantly in overall industry turnover.

The survey further stated that the domestic market is estimated to grow at over 8 per cent per annum in the current decade, while exports are projected to rise at over 30 per cent per annum.

India's share in the world auto components too is likely to grow to over 3 per cent by 2015-16 while it was mere 0.4 per cent in 2003-04, Motiwala added.

While Gujarat is in the fast lane of becoming a automobile hub with existing plant of Tata Neno and likely entry of automobile majors like Maruti, Ford and Peugeot; it will give a boost to the industry, he said.

PTI