Research Study: Industry feature: Auto components sector

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Automobile and auto-component manufacturing play a significant role in India’s economy because of their contribution to overall GDP, employment and export revenues. The sector contributes a little over 7% to the GDP of the country, provides direct and indirect employment to at least 19 million people and constitutes around 5% of the total export revenue from goods. The country ranks 6th globally in the production of vehicles.


India’s domestic production of vehicles grew 5.41% to 25.31 million in 2016-17 from the previous year. These vehicles include passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycle. Export of passenger vehicles and commercial vehicles grew 16.20% and 4.99% respectively, during 2016-17.


India’s auto-components sector comprise six product segments viz. engine parts, drive transmission and steering parts, body and chassis, suspension and braking parts, equipments, electrical parts and others. In 2015-16, India exported Rs 709 billion worth of auto-components, while it imported Rs 906 billion worth of auto-components.


Domestic sale of vehicles is estimated to be 3.85 million units during 2016-17 and this is almost 6% higher than last year. Of this, two wheelers constitute 69%, passenger vehicles 19%, three wheelers 10% and commercial vehicles 3%.


The turnover of auto-component industry is estimated to be Rs 2,556 billion in 2015-16. Of this, 31% constitute engine parts and 19% constitute drive transmission and steering parts, while other components make up the balance revenue.


Government of India allows 100% foreign direct investment (FDI) under automatic route in this industry. The industry (automobile and auto-components) received around USD 16.51 billion of FDI cumulatively between April 2000 and December 2016.

  • Government of India introduced the Automotive Mission Plan 2016-26 (AMP 2026) which aims to expand the automotive industry by four-fold by 2026.
  • Recently, Government of India amended the Motor Vehicles Act, 1988 to streamline processing of motor licenses, create Motor Vehicle Accident Fund, improve regulation of testing and certification for automobiles and so on.
  • In 2015, Government of India introduced Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) to promote production and sales of electric vehicles in the country.

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