"The first quarter of 2011-12 witnessed some slowdown in vehicle consumption in India and this seems to suggest that the growth in the auto component industry in the current fiscal will be in the range of 12-15%," he added.

Access to capital in the auto component industry.

"The growth in the auto component industry will require cost-effective funding across the various tiers in the industry to ensure that adequate capital addition takes place to fund the future growth. It is important to recognize that the relative scale and size of companies in the industry will grow over a period, and the need to provide funding based on the potential that industry players offer. As the scale and sophistication of the automotive industry evolves, the nature of technology required will also change and require capital to ensure both global competitiveness and technology leadership," he elaborated.

Policy initiatives to encourage core-manufacturing

"It is important that investments are made in core manufacturing processes to ensure that there is adequate in-country value-add to secure our position as a global hub for automotive manufacturing. Herein, policies should encourage core manufacturing over purely assembly oriented investments in automotive technology," said ACMA Vice President, Arvind Kapur.

"On foreign trade, India should consider establishing Foreign Trade Agreements (FTAs) with countries like Brazil, South Africa etc. who already have a ready market for our products. We also need to ensure that FTAs do not result in inverted duty structures and that they are not a disincentive to source or manufacture in India. Further on the exports front, it is important that the government continues its scheme of export incentives, as many of our export contracts are long term in nature," added Arvind.

Need for a conducive ecosystem for the auto component industry.

"In order to keep the growth momentum, as also to stay competitive, the industry, on one hand, needs to optimise capacities, raise capital, absorb technologies, build R&D competence, concentrate on innovation, focus on internal governance and develop strong organization; on the other, Government needs to focus attention to address the challenges of access to capital, availability of skilled manpower, rapidly increasing inflation, access to technology and lack of proper infrastructure, including power," said ACMA Executive Director Vinnie Mehta.

ACMA Industry Performance Review 2010-11:

Exports: The Exports of auto components grew to USD 5.2 billion from USD 3.4 billion in 2009-10.  Europe accounted for 36% of exports followed by Asia and North America at 28% and 23% respectively. Although the proportion of exports to Europe declined from 40% last year to 36%, however in absolute terms the exports grew by 46%. Exports to North America and Asia grew by 65% and 48% respectively. With exports to North America, Europe Asia and other parts of the world are improving, a full recovery of exports are expected to gain strength in 2011-12.

Imports: With growth in the domestic market, imports of auto components also grew by 30% to USD 8.5 billion from USD 6.5 billion in 2009-10; almost 85% of the imports were accounted for by the OEMs, the rest 15% by the aftermarket. Asia and Europe contributed to over 56% and over 35% of the imports respectively. Within Asia, China, South Korea and Thailand contributed to the maximum imports to India while from Europe the key contributors were Germany, Italy and Czech Republic. The quantum of imports has also increased due to several FTAs and other trade agreements signed by the Government.

Capacity Addition: The auto component industry added capacity in the range of USD 2 -2.25 billion in 2010-11 in several green-field as well as expansion projects.  The cumulative investment (gross-block) in the auto component sector in India over the last five years stood at over USD 6.5 billion. The industry is expected to add at least another similar number in capacity addition 2011-12.

*The data in ACMA's Industry Performance Review for fiscal 2010-11 represents the entire supplies from the auto component industry to the on-road and off-road vehicle manufacturers and the aftermarket in India and overseas from ACMA member and non-member companies, including component suppliers captive to the OEMs and the unorganized & smaller players.