Auto Component Industry To Invest $7 Billion Over Next 5 Years To Expand Capacity, Upgrade Tech

The auto component industry is looking to invest around $6.5 to 7 billion over the next five years on capacity expansion and technology upgradation, with the demand expected to remain robust over the period.

The industry, which recorded a 12.6% year-on-year revenue growth in the first half (April-September) of the current fiscal at Rs 2.98 lakh crore, expects double digit sales growth to continue in the rest of the current fiscal and in the upcoming financial year as well.

"The components industry continues to make investments for purposes of higher value-addition, technology upgradation, and localisation to stay relevant to both domestic and international customers," Automotive Component Manufacturers Association of India President Shradha Suri Marwah told reporters here.

The industry is looking to invest $6.5-7 billion capex over the next five years as compared to $3.5-4 billion spent in the last five years, she added.

"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 noted.

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.

Elaborating further on the performance of the industry, ACMA Director General Vinnie Mehta said that with vehicle sales and exports displaying steady performance, the auto component industry demonstrated a growth of 12.6% scaling a turnover of Rs 2.98 lakh crore ($36.1 billion) in the first half of FY 2023-24.

Auto component supplies to all segments of the industry -- to OEMs, exports as also the aftermarket -- remained steadfast, he added.

He noted that during the period under review, auto component exports grew by 2.7% to $10.4 billion (Rs 85.87 lakh crore) while imports grew by 3.6% to $10.6 billion (Rs 87.42 lakh crore).

Mehta noted that Asia accounted for 63% of imports, with China remaining the largest importing country, followed by Europe and North America, with 27% and 9%, respectively.

He noted that the industry is making conscious efforts to reduce imports and there is enhanced focus on localisation with the active support of the government.

For exports, North America and Europe remained the biggest markets accounting for 33% each in the April-September period this year.

Besides, the component sales to OEMs in the domestic market grew by 13.9% year on year to Rs 2.54 lakh crore in the first half of the current fiscal, he added.

Consumption of increased value-added components and the shift in market preference towards larger and more powerful vehicles continued to contribute to the increased turnover of the auto-components sector, Mehta said.

The aftermarket, estimated at Rs 45,158 crore, also witnessed a growth of 7.5% year on year, he stated.

Mehta said the EV segment continues to grow and there has been an increase in revenue from sales of EV components for the industry in the first half of the fiscal as compared to the same period last fiscal.

ACMA represents over 875 manufacturers which contribute more than 90% of the auto component industry's turnover in the organised sector.