Parts & Components

Localisation is key to a resilient Indian automotive industry

March 16, 2021March 16, 2021 Motorindia Comments(173)

Gearing up for the new edition of the trade fair in New Delhi, organisers of ACMA Automechanika – Messe Frankfurt India and The Automotive Component Manufacturers Association (ACMA) share their insights on the need for deep localisation of automotive component manufacturing and the role of the recently announced Union Budget in promoting this objective

The approach of the automotive industry in 2020 was largely subdued and nimble-footed as the issuance of trade restrictions brought a drastic slowdown in all major sectors. Amid the doldrums of the pandemic, harnessing a digital business model and focus on financial health greatly enabled automobile companies to continually persevere and push forward. Despite endless hurdles faced last year, some green shoots appeared toward the second quarter as demands briefly resurfaced during the festive seasons. Domestic retail vehicle sales across categories grew for the first time since the onset of the pandemic, as double-digit growth was achieved in the sale of passenger vehicles (PV) and two-wheelers, posing to be a good omen for the year 2021.

While industry experts continue to be cautiously optimistic, recent projections from ICRA show that the domestic automotive component industry’s revenue may grow by 16-18 per cent in the subsequent financial year. There have also been speculations that demands may revert to the 2019 levels in case automobile sales and production retain normalcy this year. With potential development and distribution of the vaccine, in consort with a rising preference towards personal mobility, consumer sentiment may tip in favour of the industry.

Commenting on the industry and its leading exhibition in the automotive aftermarket, Raj Manek, Executive Director and Board Member, Messe Frankfurt Asia Holdings Ltd., said, “It is very vital to provide a push to local manufacturers to bolster the domestic supply chain and strengthen the automotive industry from its very core.” With the world’s leading electric car company setting up its base in India, it will be just a matter of time before the first fleet of electric cars arrive in India. “Thus, a more resolute approach towards e-mobility by OEMs will largely benefit in the long term,” he added.

As one of the leading automotive exhibitions of India, ACMA Automechanika, slated to be held from April 22-25, 2021 at Pragati Maidan, New Delhi, has been the ultimate “pit stop” to discover new technologies and engage with leading automotive aftermarket service providers and components manufacturers from the industry. “Going forward, the focus of our automotive trade fairs will not just be aimed at creating a safe and healthy atmosphere for channel players to promote their businesses but also to enable them to develop collectively as one integrated industry,” Manek said.

Vinnie Mehta, Director General, Automotive Component Manufacturers Association (ACMA), also shared his views on the upcoming edition of ACMA Automechanika, “The excitement is mounting as the biennial ACMA Automechanika New Delhi, the flagship aftermarket expo, draws closer. To be organised jointly by ACMA and Messe Frankfurt, the event is being held at an opportune time as the automotive market gains momentum post the pandemic hiatus. The expo, probably the first of its kind in the ‘real world’ since the lockdown, will be a hybrid one. Bridging the best of a physical and online exhibition, the one-stop sourcing platform will provide a preview of the latest aftermarket innovations and a sneak-peek into the shape of things to come.”

“With the automotive industry expected to recover fast and grow in double digits in most segments, the expo will be a booster shot to bring the industry back on track. It will also help consolidate India’s position as a major manufacturing hub for automotive components. Apart from a strong presence of domestic and international aftermarket product exhibitors, the popular business event will not only attract the domestic buyers but also the international OEMs and aftermarket distributors,” Mehta elaborated.

The recently announced budget puts a crucial focus on road building, voluntary scrappage policy, research and development and PLI, among others, auguring well for the automotive sector. The emphasis on self-reliance, accompanied by an increase in custom duty on certain automotive components will encourage local manufacturers to produce components within India. With an investment of Rs 1.97 trillion towards the production-linked incentive scheme (PLI), the government will provide a strong impetus to localised manufacturing over the next five years, and the doubled budget outlay for the MSME segment will deliver stronger support to the automotive component segment which is primarily dominated by MSMEs.

The ‘voluntary scrapping policy’ announced by the government to boost the production of energy-efficient vehicles in India will not only lead to a reduction in vehicular pollution but also generate new demands for the commercial and passenger vehicle segment, thus creating opportunities for OEMs and tyre manufacturers. With the automotive industry on the path of recovery, the government’s goal of achieving self-reliance will certainly be a vision to look up to, as deep localization would not only make the automotive industry globally competitive, but also more resilient in the face of any future crisis.