The year 2013-14 was undoubtedly one of the most challenging ones for the automobile industry. Both, vehicle and auto component sales saw a decline during the fiscal year that ended in March, 2014. During a press conference about the auto component industry's performance review for the fiscal 2013-14, Automotive Component Manufacturing Association of India (ACMA) said that the industry recorded a decline of 2 per cent, with overall turnover standing at Rs. 2,11,765 crores (USD 35.13 billion) against last year's 2,16,000 crores. The compound annual growth rate (CAGR) for the industry has been 14 per cent for the last six years. However, the auto component industry expects a growth of 4-6 per cent in the 2014-15 fiscal, if the vehicle sales continue to grow like they have in the last couple of months. Also, some positive initiatives taken by the Modi-led government during the union budget will also help the industry record growth, says ACMA.
Commenting on the performance of the auto component industry, ACMA president, Harish Lakshman said, "The last fiscal has been one of the most challenging for the automotive industry in India; flagging vehicle sales, high capital costs, high interest rates, currency fluctuations and slowing down of the investment in manufacturing, have adversely impacted the growth of the auto component industry. However, with the automotive sector being a key driver of the economy and growth returning to vehicle consumption in the last couple of months, we expect the component industry to grow in the range of 4-6 per cent in the current fiscal 2014-15"
Elaborating how a robust component base in the country can be achieved, he said, "There is a greater need for collaboration between the component manufacturers, OEMs, machine tool supplies and the raw material industry."
"While we are confident of the the medium to long term prospects of the auto component sector, to tide over the industry's cyclicity and minimise rsik, the component industry needs to consciously consider diversifying into adjacent markets including defence, aerospace, railways etc.", he further added.
Expressing his views on the 2014 Union Budget and its impact on the component industry, Mr Ramesh Suri, Vice President, ACMA, said, "The government has taken a pragmatic approach of encouraging the MSMEs and investing in social and infrastructure sectors. We expect the new government to provide an environment conducive for growth and reviving the investment climate particularly in the automotive sector. Further, with a new Foreign Trade Policy on the Anvil, the urge the government to announce long-term and stable trade policies and accord export incentives that are critical for sustaining the industry in these times of global challenges."
Key findings of the ACMA Industry Performance Review 2013-14:
Exports: Exports grew by 16.7 per cent to Rs 61,487 crores (USD 10.2 billion) from Rs 52,690 crores (USD 9.7 billion) in 2012-13. Europe is the leading marketplace with 38 per cent contribution, while the US topped the list of top export destinations.
Key Export Items: Engine parts, transmission parts, brake system & components, body parts, exhaust systems, turbochargers.
Imports: Imports of auto components grew by 3.6 per cent to Rs 77,160 crores (USD 12.8), which is about 3 billion dollars higher than exports. So, this is an area of concern; our exports are lower than imports, while an ideal situation dictates the exact opposite. Asia and Europe contributed to 57 per cent and 34 per cent of imports, respectively.
Aftermarket: The aftermarket in 2013-14 grew by 12 per cent to Rs 35,603 crores from Rs 31,788 crores in 2012-13, thanks to increasing vehicle parc in the country.
Capital investment: The industry inspected a continuous year-on-year decline in terms of investment. While in 2010-11 almost USD 2 billion were invested, in 2011-12, it was in the range of USD 1.6-1.9 billion. It further dropped to USD 1.26-1.75 billion in 2013-13, whereas in 2013-14, an investment of around USD 0.5-0.7 billion was witnessed in the sector. The reason behind this was moderation in vehicle sales and depressed market sentiments.
Challenges for the auto component industry
- High cost of capital impacting growth
- Capacity Utilisation
- Infrastructure Challenge & Cost: Roads, Ports, Power
- Imports: Higher than exports
- Fighting the problem of counterfeit parts
- Availability of skilled manpower
- Building R&D competence and Ecosystem
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