Auto component exports may rise 20% in 2022-23 despite challenges in Europe, US

India’s auto component industry expects close to 20 per cent growth in exports in the current financial year despite weakening economic activities in the US and Europe, which accounts for more than 60 per cent of the shipments from India.

Despite the economic challenges in the US and European countries, the demands for Indian auto components remain strong. This is because companies in the US and European countries are adopting strategies to de-risk part of their sourcing from China.

“A lot of companies want to de-risk. They want to have alternate sources of components. Therefore, India is benefiting from that,” said Vinnie Mehta, Director General, Automotive Component Manufacturers Association of India (ACMA).

Also Read: Auto components sales up 35% in H1 FY23; export growth slows

Auto component exports from India jumped by 43 per cent to $19 billion during the financial year 2021-22. In the first half of the current financial year, exports increased by 8.6 per cent to $10.1 billion.

North America accounts for nearly one-third of total exports of auto components from India, while Europe accounts for 30 per cent of the shipments.

According to the IMF, half of the European Union and one-third of the world would face a recession in 2023. Even countries that are not in recession, it would feel like a recession for hundreds of millions of people, IMF Managing Director Kristalina Georgieva said a few days back.

Is the Indian auto component industry concerned about the economic challenges in its key export markets, Mehta said, “We are not overly concerned.”

He said the ‘China-plus-one’ strategy is gaining currency among the major companies across the world and it would benefit India, especially the auto component industry. China-plus-one refers to a business strategy in which companies avoid investing only in China and diversify their businesses to alternative destinations. India is seen as an attractive alternative destination.

The current size of India’s auto component industry is just around 10 per cent of that of China. The size of India’s auto component industry is close to $56 billion, while China’s auto component industry size is around $550 billion. China’s annual exports of auto components stand at around $200 billion while India’s exports are close to $20 billion. This offers a huge opportunity for Indian auto component manufacturers.

According to Vipin Sondhi, Chairman, CII National Committee on Future Mobility and Battery Storage, a slew of measures taken by the government like production linked incentive (PLI) schemes, localisation norms and 100 per cent FDI under the automatic route would give a boost to auto component industry in the country.

The government has approved the PLI scheme for automobile and auto component industry with a budgetary outlay of Rs 25,938 crore. Through this scheme, the government offers financial incentives to selected firms to boost domestic manufacturing of Advanced Automotive Technology (AAT) products and attract investments in the automotive manufacturing value chain. This is expected to attract investments of Rs 74,850 crore in the next five years.