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Automotive Product Finder Magazine | Low vehicle sales may lead to lay-off in auto component sector
Low vehicle sales may lead to lay-off in auto component sector
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Indian auto component industry, which grew by 14.5 per cent in 2018-19 to Rs 3.95 lakh crore ($ 57 billion), witnessed slump in the second half of 2018-19 due to slow vehicle sales.
Continued slowdown in the automotive industry is impacting the performance of auto component suppliers. “The automotive industry is facing an unprecedented slowdown. The vehicle sales in all segments have continued to plummet for the last several months. Considering the auto component industry grows on the back of the vehicle industry, a current 15 to 20 per cent cut in vehicle production has led to a crisis like situation in the auto component sector. If the trend continues, an estimated ten-lakh people could be laid-off,” said Ram Venkataramani, President of Automotive Component Manufacturers Association of India (ACMA).
The automotive component industry contributes 2.3 per cent to India’s GDP, 25 per cent to its manufacturing GDP and provides employment to 50 lakh people. According to ACMA, the Indian auto component industry recorded turnover of Rs 3.95 lakh crore ($ 57 billion) for the period April 2018 to March 2019, registering a growth of 14.5 per cent over the previous year. Though 2018-19 started on a high note, second half witnessed a muted growth.
“The first-half of the fiscal 2018-19 witnessed a robust double digit growth, however the second-half saw a significant slump in vehicles sales. The component industry, in tandem, posted a some-what subdued performance with growth of 14.5 per cent over the previous fiscal, registering a turnover of Rs 395,902 crore ($ 57 billion). Auto component exports grew by 17.1 per cent in FY 2018-19 to Rs 106,048 crore ($ 15.16 billion),” commented Vinnie Mehta, Director General, ACMA.
The subdued demand, recent investments made for transition from BS IV to BS VI, lack of a clarity on policy for electrification of vehicles, especially for two and three wheelers, has left the industry unsure of its future and has caused it to stop all future investments.
Ram stated, “The industry needs urgent government intervention. There is an immediate need to stimulate vehicle demand and also sustain it post BS VI implementation, as vehicles will become significantly expensive thereafter. We strongly recommend that the government instates 18 per cent GST rate across the entire auto and auto component sector.”
On the need for a stable policy for electric mobility, Ram added, “As we prepare for introduction of electric mobility in the country, the FAME 2 scheme and the associated Phased Manufacturing Program (PMP) are indeed welcome steps in this direction and will ensure a successful ‘Make in India’ program. Any further changes in targets for roll out of electric vehicles would increase India’s import bill and damage the current robust auto components manufacturing ecosystem. This will also result in significant job losses. Therefore, a stable, technology agnostic, e-mobility policy is the need of the hour to ensure a smooth transition and creation of a strong local supply base.”
Performance in a nutshell
Exports of auto components grew by 17.1 per cent to Rs 106.048 crore ($ 15.16 billion) from Rs 90,571 crore ($ 13.4 billion) in 2017-18. Europe accounted for 33 per cent of exports followed by North America and Asia, with 29 per cent and 26 per cent respectively. The key export items included drive transmission & steering, engine components, body/chassis, suspension & braking etc.
Imports of auto components increased by 14.4 per cent to Rs 123,688 crore ($ 17.6 billion) in 2018-19 from Rs 106,672 crore ($ 15.9 billion) in 2017-18. Asia accounted for 61 per cent of imports followed by Europe and North America, with 29 per cent and 8 per cent respectively.
With increasing vehicle base in the country, the aftermarket in 2018-19 grew by 9.6 per cent to Rs 67,491 crore ($ 10.1 billion) from Rs 61,601 ($ 9.2 billion) in the previous fiscal.
Auto Component Sector
Automotive Component Manufacturers Association Of India
Indian Auto Component Industry
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