Auto component industry clocks $69.7-bn topline in FY23, EVs contribute 2.7%

Vinnie Mehta, Director General, ACMA and Sunjay Kapur, President, ACMA and Chairman, Sona Comstar at ACMA's conference for Annual Performance FY23.

The turnover of the automotive components industry witnessed a 32.8-percent growth at Rs 5.60 lakh crore ($69.7 billion) for the period April 2022 to March 2023 as against Rs 4.20 lakh crore ($56.9 billion) earned in the corresponding period of FY22. The auto parts industry also surpassed its highest-ever turnover of $57.1 billion (as per prevalent exchange rates) in FY19. This was revealed by the Automotive Component Manufacturers Association of India (ACMA) in its Industry Performance Review report for fiscal year 2022-23.

During FY2023, auto component sales to Original Equipment Manufacturers (OEMs) in the domestic market stood at Rs 4.76 lakh crore ($59.3 billion), growing by 39.5 percent compared to the previous year. Consumption of increased value-added components and a shift in market preference towards larger and more powerful vehicles contributed to the increased turnover of the auto-component sector.

As per Sunjay Kapur, President, ACMA, & Chairman, Sona Comstar, the growth in vehicle sales and significantly higher value addition led to the “noteworthy performance” of the component sector in FY23. He also revealed that there has been steady growth in exports despite recessionary trends in Europe and the US, which are key export destinations for the auto components industry. He also revealed that a strong rebound in vehicle sales in the domestic market also led to a sharper rise in imports that has translated into a lower trade deficit this year.

Robust exports

Furthermore, automotive parts exports grew by 5.2 per cent to Rs 1.61 lakh crore ($20.1 billion) in 2022-23 as against Rs 1.41 lakh crore ($19.0 billion) in 2021-22. North America accounted for 32 percent of exports, which is a growth of 8 percent. Meanwhile, Europe and Asia accounted for 31 per cent and 26 percent, which is a growth of 3 and 4 percent, respectively. The key export items included drive transmission and steering, engine components, body/chassis, suspension, braking, etc, as per ACMA’s findings.

“I feel what is playing out very well in our favour is the China+1 strategy. You can see that with increased exports (in 2022-23). Secondly, as we invest more in technology and continue to export, our endeavour is to create India as the manufacturing hub for the world. We are going in that direction,” added Kapur. He also stated that many established component manufacturers can leverage their skillsets to integrate software and hardware.

ACMA represents over 850 manufacturers, which constitute more than 90 percent of the auto component industry's turnover in the organised sector.

 EVs share gaining traction

Furthermore, EVs (excluding battery parts) accounted for 2.7 percent of the turnover, up from 1 percent in FY22. The auto component industry foresees the contribution to go up further in the coming fiscal.

“The demand for EVs is going to increase and therefore, when you look at subsidies in FAME2, etc, the two-wheeler space is going to continue to electrify with or without subsidies. We have the PLI scheme as well, which has been introduced by the government and is very encouraging in terms of investment in future technologies," Kapur said.

"It's a good roadmap laid out for the industry, for component makers as well as OEMs. And I feel that electrification will continue. And like we said, going from one percent to 3 percent, is growing at a good rate,” he added.

Surging imports 

ACMA said that traction in the domestic market also reflected in imports of components, which grew by 10.9 percent to Rs 1.63 lakh crore ($20.3 billion) from Rs. 1.36 lakh crore ($18.3 billion) in 2021-22, leading to a trade deficit of $200 million. The aftermarket, estimated at Rs 85,333 crore, also witnessed a steady growth of 15 per cent.

Asia accounted for 66 percent of imports followed by Europe and North America at 26 and 6 percent, respectively, it said. While imports from Asia grew 12 percent, those from Europe were up by 6 percent and from North America by 23 percent.

Increased movement of vehicles post-pandemic and a surge in demand for used vehicles led to buoyancy in the aftermarket across all segments.

Vinnie Mehta, Director General, ACMA, said the industry is looking to enhance exports while reducing imports, especially from China, which accounts for around 30 per cent of the total imports.

He noted that from a peak trade deficit of $2.5 billion a couple of years back, the industry has moved to a better position with a trade deficit of $200 million. "We are continuously working along with other industry bodies like SIAM to enhance exports and reduce imports," Mehta said.

The outlook

Sharing the outlook for the coming years, he said, “The good thing is that all PV OEMs such as Maruti, Tata Motors and Hyundai are talking about increasing their capacities very significantly. Additionally, two-wheeler OEMs like Bajaj Auto and Hero MotoCorp have announced tie-ups. All this augurs well for the auto component industry because once the OEMs start investing, there is a trickle-down effect. And then, therefore, the component industry has to invest in more capacities to cater to that demand.”

Meanwhile, the domestic auto component industry expects to log in double-digit sales growth in the current fiscal.

Elaborating on the mood of the industry and outlook for the near future, Kapur said even though the automotive value chain faced significant disruptions in the wake of the pandemic, vehicle sales, especially in the PV, CV, and tractor segments, have now reached pre-pandemic levels. Even the two-wheeler industry has recovered well, he said.

“With significant mitigation in the supply-side issues of availability of semiconductors, raw-material costs, and logistics, the vehicle industry is expected to continue to perform well in FY24, which augurs well for the auto components sector. That apart, exports and growth in the domestic aftermarket continue to be robust,” noted Kapur.