• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
BW Businessworld

Indian Auto Component Industry Could record $50 Billion in revenues by FY'18: ACMA

In an interview with BW Businessworld, Vinnie Mehta, Director General, ACMA reveals that the Indian auto component industry is projected to clock $50 Billion in revenues by the financial year 2018-19

Photo Credit :


Automotive Component Manufacturers Association of India (ACMA), the apex body representing the interest of the Indian Auto Component Industry, has the vision to develop a globally competitive Indian auto component Industry and strengthen its role in national economic development as also promote business through international alliances. In an exclusive interview with BW Businessworld, Vinnie Mehta, Director General, ACMA reveals that the Indian auto component industry is projected to clock $50 in revenues by the financial year 2018-19.

How has the industry performed during the last financial year and how do you foresee its performance during this FY?
The auto component industry works in tandem with the vehicle industry. The vehicle industry had a mixed performance last year.  The PV industry, especially UV segments, had an upward growth in volumes. Even though the figures for the auto component industry are awaited, we believe that we would comfortably have grown by 10 per cent during FY 2016-17. Last financial year (FY 2015-16), the industry clocked around $39 billion and during FY 2016-17 we are expecting to post around $43-45 billion. Out of the total turnover posted during FY'16, exports contributed around US$ 11 billion and is expected to be higher during this fiscal (FY'17). Considering that we are expecting normal monsoons during this year, the entire economy will do well. So the bottom line is we are expecting a healthy growth during the next financial year (FY 18) too. That is despite the fact that the industry is undergoing a lot of changes due to a whole lot of regulatory matters.

So will it be fair to assume that the Indian auto component industry will be worth $50 billion during FY 2017-18? And will GST be a key enabler? 
Yes, that could very much be a possibility.  If the macroeconomic indicators are positive, then we could easily attain the figure by FY 18. Moreover, the mother of all reforms is the GST which is very much long awaited. We do hope that the GST will be an enabler for our industry. We have of course requested the govt for a benign rate since we are an intermediary industry.  We have requested the govt to put us at an 18 per cent rate. But what we find is that not all auto components are at that rate.  About 30 per cent of the components are slotted at 18 per cent (GST) rate, the remaining 70 per cent are slotted at 28 per cent (GST) rate.  Our plea to the govt is that the entire industry should be bracketed under 18 per cent (GST) rate because we have a large aftermarket to service in almost all categories of products. The aftermarket is dominated by smaller players and is adversely affected by counterfeit products and spurious parts.  We are afraid that a higher GST rate will compel a lot of players to gravitate towards non-compliance and survive by means of under-invoicing.

As the Defense and Aerospace industries are opening up, will there be more investments flowing in towards making components for these industries?
Yes, these are definitely high-margin markets and would be interesting to explore.  Many companies have diversified themselves in order to de-risk their existing business. In fact, ACMA runs a Committee on Aerospace & Defence Industry. But again, one has to understand the dynamics of these industries vis-à-vis automotive industries. Though they look similar when it comes to components, they are as separate as chalk and cheese. Serving defence or aviation is a slow process and one needs to graduate and acquire high levels of skills and precision. Their quality benchmarks are very stringent and there is no scope for defective parts.

As there is a major thrust by the govt on environment-friendly vehicles, will the component industry be realigning its product lines?

There are two ways to look at it.  One is the aspiration of the govt to curb pollution and making the environment conducive for living which is very much appreciable. One also has to see whether pure electric mobility is the only solution or there are viable solutions that exist in the market.  Our industry, which has deployed around $13-14 billion in capital expenditure over the years, employs 3 million people. There is a lot of stake in IC-engine-powertrains today as 40-50 per cent of ACMA members falls into this category. The domestic component industry doesn't have the kind of technologies (for Zero-emission Vehicles). We at ACMA believe that the logical progression will be to move from IC-engines to hybrids to finally pure electrics. That gives an opportunity for the local industry to develop and acquire technologies for electric mobility.  So the (technological) progression should not be disruptive but evolutionary.

As the automotive industry is leapfrogging from BS-IV to BS-VI emission norms by 2020, are your members geared up accordingly to serve them?
Everybody has to prepare them to meet the deadline.  If they don't do it from a component's perspective, then the OEMs will have to import (BS-IV) technologies. So if they need to survive, they have to brace up for the change in a short span of time.  Secondly, it is a very big challenge because we are not only skipping a generation of technology (BS-V) but also squeezing the timelines rather radically. We have just about three more years left for BS-VI implementation. I think the industry has to take it upon a war footing as there is no room for complacency.

What are the potentialities in the automotive aftermarket in India?
The Indian automotive aftermarket, comprising spare parts sales and support systems, is set to grow at a consistent 10.5 per cent over the next two years. The automotive aftermarket, which stood at Rs 56,098 crore ($8.4 billion) in 2016-17, is expected to reach Rs. 75,705 crore ($13 billion) by 2019-20. By 2026, the auto component industry per se could be worth $200 billion and our exports will scale up to $70-80 billion and the aftermarket vertical will be pegged at $32 billion. We definitely have a definite roadmap on the milestones to achieve when it comes to all segments of the industry, including the aftermarket.

Tags assigned to this article:
auto auto component acma Vinnie Mehta