India Business Guide
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Set to become the third largest auto component industry by 2025, according to a report by the Confederation of Indian Industry, India’s automotive component industry provides an outlet for global manufacturers to engage one of the fastest growing markets in the world.
2015 marked a turnaround in India’s auto component industry as revenues crossed $35 billion—an 11% increase according to the Automotive Component Manufacturers Association of India. This impressive growth can be attributed to strong consumer demand and favorable government policies. The first Automotive Mission Plan for the decade ending in 2016 implemented deregulation of foreign direct investment. The 2015 budget established some further concessions on excise duties which help auto parts makers.
Where is India’s Detroit?
India’s auto component industry is focused in three major regions. Chennai in the south and Pune in the west are optimal because of their proximity to ports and availability of skilled workers. The Delhi National Capital Region gained popularity from the success of Japan’s Maruti Suzuki.
Out of 800 domestic component suppliers in India, let’s take a look at the big four. Headquartered in Pune, Bharat Forge features power train and chassis components for passenger vehicles, commercial vehicles, and SUVs. Motherson Sumi Systems, based in Noida, supplies wiring harnesses, mirrors for passenger cars, and plastic components. In Chennai, Sundram Fasteners manufactures radiator caps, pumps, and fasteners. Also in Chennai, Sundaram Clayton specializes in aluminum die castings for passenger cars, heavy commercial vehicles, and two wheelers. Many American and European auto component manufacturers have trusted Indian suppliers for their recognized attention to quality. These suppliers include the TVS Group in Chennai and the Rane Group in Chennai, both recipients of the Deming Award for Quality, which many consider to be a Nobel Prize for Manufacturing. Much of the domestic investment is made by Indian auto component manufacturers with their funding directed towards capacity expansion, establishing partnerships in India and overseas, acquiring companies for greenfield ventures, and research and development.
Global parts makers are also expanding current Indian operations. Covering 95% of the market, Illinois-based Tenneco established Tenneco Automotive India, now a leading supplier of components for passenger cars to OEMs. Operating in Chennai and Pune, Michigan-based Visteon, is the second largest provider of automotive thermal management systems. Focusing on the manufacture of light diesel engines and systems for power generation, Indiana-based Cummins is investing $500 million. U.K.-based Delphi, with more than $200 million invested in its India operations, currently operates three plants located in Nagar, Uttarakhand and Mannur and Oragadam near Chennai. It plans to double the Oragadam plant’s capacity for low-pressure carburizing, a heat treatment coating method. Delphi originated as the parts division of General Motors.
India Auto Component Consumption by OEM Segments Show:
- 46% are for passenger vehicles
- 21% are for two-wheelers, largely motorcycles used for commuting
- 9% are for light commercial vehicles
- 7% are for tractors
- 5% are for three-wheelers
- 5% are for heavy commercial vehicles
- 5% are for medium commercial vehicles
- 3% are for backhoe loaders
- 3% are others
- 1% are for small commercial vehicles
China is the top foreign supplier to India’s industry at 21% of imports and a value of $2.6 billion annually. Germany, Japan, and South Korea each contribute over 10% through high technology components. Popular imports include batteries, wheels, and engine valves.
At 20%, the U.S. is the largest component exports destination for products from India. In addition, Germany, U.K., Turkey, Italy, and Brazil add up to 50% of the Indian automotive component exports. Principal exported automotive parts include piston rings, fuel pump nozzles, radiators, gears, brake assemblies & bearings, spark plugs and body parts. Exports may grow to $30 billion by 2020.
India’s exports of auto components have increased by 11.4% this year.
For exports from India, a breakdown of products shows:
- 31% are engine parts
- 19% are drive, transmission, and steering parts
- 12% are suspension and brake parts
- 12% are body and chassis components
- 10% are miscellaneous equipment
- 9% are electric parts
- 7% are others
Secular growth in domestic consumption and international trade, along with more business-friendly government policy and investments into new technology bode well for India to continue to develop as a hub of automotive component manufacturing.