The auto ancillaries industry in India, currently valued at USD 56.5 billion, accounting for 7.1% of India’s Gross Domestic Product and employing approximately 5 million people, is all set to grow at an unprecedented rate, according to Grant Thornton Bharat’s Auto Bytes. The growth will be driven by factors such as 100% foreign direct investment (FDI) under the automatic route for the auto components sector, a projected increase in the electric vehicles (EV) market, and India’s competitive advantage as a low-cost manufacturing base and the second largest producer of steel. Additionally, emerging technologies such as Robotic Process Automation (RPA) will be pivotal in ensuring an efficient and optimal process flow, further reducing operational costs and turnaround time for the manufacturers.
Saket Mehra, Partner and Auto Sector Leader at Grant Thornton Bharat, said, “With a strong focus on the ‘Make in India’ initiative, India’s manufacturers are gradually localising the supply chain, leading to higher vertical integration and production of value-added products. India has emerged as a favourable cost-effective alternative for diversification, yielding direct benefits of the China plus one strategy.”
For the first time, in FY22, the auto components industry emerged from a trade deficit and reported a trade surplus of USD 700 million. This is significant because India’s auto components sector has always imported more than it has exported. While India’s auto components import grew by approximately 33% in FY22, exports grew at a much faster rate of approximately 43%. Exports of auto components are expected to grow at a CAGR of 43% to reach USD 80 billion by 2026, as forecasted by IBEF. Drive transmission and steering components were the most exported in FY22 and registered a Y-o-Y growth of 40% in exported quantities
According to industry estimates, the total sales of the auto components industry in FY22 was at around USD 56.5 billion. The organised sector, which caters to original component manufacturers (OEMs) and consists of high-precision instruments, contributed to around 81% of sales, while the unorganised sector which includes low-value products and caters mostly to the aftermarket category, making up the reminder 19% of sales.