Auto Component Industry Case Study

Threats and opportunities before the Indian auto-components industry

The infectious positivity causes contagious growth –i.e., the success of one industry in a sector stimulates the growth of allied industries in an economy. Nowadays, the auto-components industry in India is very much influenced by the unprecedented boom in the automobile sector. While The auto industry contributes 7.1 per cent to the country's Gross Domestic Product (GDP) and grew at a compound annual growth rate of 9.6 per cent. Domestic automobile component industry is expected to grow by 9-11% during FY18

As per Automotive Component Manufacturers Association of India (ACMA), the auto-components industry in India is going to fetch a turnover of $100 billion by the year

Although their present share is very small, even less than 1 percent, the rising environmental concerns and Government’s commitment towards a green drive in future, the growth of electric vehicles is quite certain in the future. Unlike conventional fuel-based automobiles, electric vehicles are not the driver of auto-component industry.

Amongst all commodities, rubber prices were very volatile with prices peaking at Rs 160 per kg level in Q4 FY17, though the same were down to around Rs 130 per kg level during Q1 FY18.

Tyre manufacturers have witnessed sharp correction in profitability during Q1 FY18, as they liquidated most of the high cost inventory. Other commodities like steel and lead have also remained at elevated level, continuing to pressurise profitability. Consequently, other segments like batteries (high dependence on lead) as well as sheet metal and automotive bearing players have also witnessed Y-o-Y decline in profitability. that input costs have spiralled over the last 12-18 months. That said, raw material costs for component firms have risen sharply on the back of rising commodity prices during the last 12