Indian Auto Component Industry Analysis

Critical component shortage, increase of material costs, and more severe second Covid-19 wave

2021/06/04

Summary

  At present, the automotive component industry in India contributes to over 2.3% of the national GDP, 25% of the national manufacturing GDP and employs over five million people. In FY 2019-20, the Indian automotive component industry registered a turnover of USD 49.3 billion. The turnover saw a reduction of 11.7 % compared to the USD 57 billion in FY 2018-19, caused by a slowdown in demand and the impact of Covid-19. However, the compound annual growth rate (CAGR) of the industry stood at 8% over a period of six years.

  In fiscal year 2020-21, like other industries, the Indian component industry also felt the impact of Covid-19. Other factors such as price increases of raw materials, supply chain imbalances, shortage of critical components such as semiconductors and a financial crisis also impacted the industry negatively. The lockdown and weak demand affected the operations of suppliers, but thanks to a recovery in the market in the second half of the year, and government stimulus, the industry started witnessing green shoots in demand.

  However, at the start of fiscal year 2021-22 (April 2021 to March 2022), a more severe second wave of Covid-19 hit India. It has impacted the vehicle sales in the country, particularly two-wheelers. The local government also applied a lockdown to curb the spread of Covid-19. It resulted in further sliding of the automotive component market in India.

  Several major announcements by the Indian government and recovery in vehicle sales are expected to boost the component industry in the near future. The industry is also moving towards electrification and started working on the development of electric vehicles parts. In spite of the pandemic, suppliers continued to make investments to expand production and R&D centers.

  The automotive component industry in India is set to become the 3rd largest in the world by 2025. The Indian government expects that the rapidly growing automotive component market in India will reach USD 300 billion by 2026, accounting for as much as 5% to 7% of GDP by 2026.

 

Related reports:
India: Automotive sales impacted by Covid-19 (Mar. 2021)
CASE Development in India (Part 2): Mobility (Feb. 2021)
CASE Development in India (Part 1): Electrification (Feb. 2021)

 

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