Indian economic growth has been on a rising spree in today’s time. This growth in the economy is due to multiple contributing factors from different fields of work and industries.One such industry that has been contributing immensely to the growth of the Indian economy, in the present decade is the Indian auto components industry.
In 2014-15, this industry registered a turnover of Rs 2.34 lakh crore.
Over the last six years, the compound annual growth rate (CAGR) of the Indian auto components industry has been 11%.
The components that are manufactured at Indian shop floors are exported to around 160 countries
The compound annual growth rate, in the last six years in this specific area, has been around 29 percent.
As per reports:
The contribution of the automobile industry has been 25.6 percent.
It has been manufacturing GDP and contributing 3.8 percent to national GDP.
It has also been a major source of employment in our nation.
As per the evaluation of Automotive Component Manufacturers Association of India (ACMA)
A turnover of USD 100 billion is expected to be registered, by the Indian auto-components industry by 2020.
The current USD is 11.2 billion, whereas there are possibilities that this sector will be backed by potential exports that would range between USD 80- 100 billion by 2026.
Automotive Mission Plan from 2006–2016 by the government of India brought in growth for the sector.
The major focus of this plan had been on the exports of small cars, multi-utility vehicles, two and three-wheelers vehicles and auto components.
In spite, of these powerful plans, the auto components manufacturing unit is unable to develop a bright future and is indeed facing multiple challenges.
The Challenges and Solutions
Some of the major challenges faced by the auto components manufacturing industry in India are as follow:
- Major sink in the sales of two, three and four-wheelers
- Infrastructure deficit
- Lack of talented manpower
- The difficulty in scaling-up the industry.
- Limited access to internationally recognized technology.
- Cost competitiveness
- Accessing of cost-effective capital
However, as per the trade policy, the challenges mostly faced by the Indian manufacturers are gradually reducing of investment in OEM auto sector. Also, there has been ignited rise in the imports specifically from Asian countries.
As per the reports, the Indian automobile industry is currently suffering due to multiple factors.
Following are the six M’s by which the factors that are responsible for their performance. They are:
- Men (labor)
- Money (capital)
- Material (inputs),
- Matter (energy, water)
- Mandarin (policies) and
- Market (domestic and global).
As per the automakers, India scores decently in just two of these 6 Ms. They are Men and Market.
In terms of Men i.e. labor, the issues are the insufficiency of skilled workers and rise in militancy, which has been life-threatening for the workers, in the past few years. In one of the cases, in Greater Noida, it led to the death of a chief executive of an auto component maker also other instances like the strike at Maruti’s Manesar plant.
The issues with regard to the market are the slowdown in North American markets and European markets. Also the decrease in demand, in a short span due to decisively rapid switch in the preference of customers for the diesel engine, equivalently due to rise in fuel rates.
Also, the increase in interest rates has further added complications in the industry as it has made it difficult for international investors for considering India as an investment landing place. Thereby it has caused many financial issues in the industry.
As a result of these issues, many automobile manufacturers have put their investment plans on a hold. Some of them are even deciding to go slow on them.
Some auto majors continue to differ with their investment plans. This might majorly affect the auto components industry.
The President of ACMA, Mr. Arvind Balaji, said that The Make in India campaign has brought enthusiasm in the domestic and the international auto manufacturing industry. He further added that this drive encompasses multiple initiatives in order to promote investments also growth in the manufacturing value-chain India entirely. He also said that this has undoubtedly brought in the focus that has been much required and the impetus for the reforms related to the auto manufacturing sector.
The Indian auto components industry has well-developed manufacturing ecosystem that produces a variety of products, like the engine parts, drive transmission, steering parts, body and chassis, suspension, braking parts, equipment and electrical parts in order to serve this dynamic industry.
Owing to efficient and frugal engineering, the impressive performance of this industry has been possible. This economical engineering has been the key strength for the growth factor.
The industry has developed strong manufacturing capabilities, over the past few years that enabled in keeping low costs and meeting strict global quality norms.
The various Government of India initiatives related to infrastructure development has led to a steady growth in the auto components industry.
The export growth has been driven mainly by engine parts, transmission parts, brake system, and components, body parts, exhaust systems, and turbochargers, as per the studies.
India has started to emerge as an international hub for small engines as these are increasingly manufactured in India for exports.
A systematic shift has been acknowledged, with a target on engineering, design and technology and innovation management being the most important element.
Other factors that will drive the future development in this sector are shortening of product life cycles, developing new products and increasing localization.
The regulatory environment has been made strict with regards to maintaining safety, emissions and vehicle-recalls,
Investment in requisite technologies will have to be made by this industry, in order to meet prescribed standards and to produce quality products.
The weakest link in the automotive value chain, that formulate in bulks, are the tier-2 and tier-3 wheelers.
It is thus necessary to focus attention towards enhancing the skills of such organizations in terms of quality, production, manpower management, skill up-gradation, etc.
Auto component makers are beginning to propagate for a future when they will have to comply with more strict regulations on the measures of safety, emissions and fuel efficiency.
Most of the component makers are in search for forging technical alliances and the joint ventures by seeking buyouts. They are also deciding to strengthen their research and development capabilities as they want to adapt to the changes that they will have to come across and deal with, over the years.
Mr. Arvind Balaji, The President of the Automotive Component Manufacturers Association of India (ACMA), said that every challenge is an opportunity. He also added that the challenge is on time frame and achieving right cost structure.
Overall, in this technology-driven world, a revolution in the automotive industry is inevitable, be it in terms safety, emission or the powertrain. Innovation will thus be the guiding force for bringing phenomenal changes in the automotive industry in India.