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Manufacturing: Auto ancillary industry expands CAGR of 12.06% in 2023-27

Fiinews by Fiinews
May 16, 2023
in Manufacturing, Markets
Reading Time: 3 mins read
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Govt policies to boost growth in auto market

The auto ancillary market is anticipated to reach Rs.7,294.99 billion by FY 2027, expanding at a compound annual growth rate (CAGR) of ~12.06% during the FY 2023 – FY 2027 period.

It is segmented into organized and unorganized sectors, says a ResearchAndMarkets industry projection report “Auto Ancillary Market in India 2022-2027”.

The organized sector serves original equipment manufacturers (OEMs) and deals in high-value instruments. The unorganized sector provides the aftermarket with low-value tools and parts, the report said on 12 May 2023.

By 2025, the entire Indian auto components market, which presently contributes 2.3% of India’s GDP, is expected to overtake its rivals to take the third-place spot internationally.

The auto sector has been facing a slump since FY 2019, mostly due to weak consumer sentiments and tightening of liquidity in non-banking financial companies and other lending institutions.

Furthermore, it was affected by strict lockdown measures in the wake of the COVID-19 pandemic. However, with the enactment of new regulatory measures and adoption of advanced technologies, the sector is expected to gain momentum from 2021 onwards.

Engine components, body/chassis, BiW and suspension braking components made up nearly 50% of the total auto ancillary sales in FY 2022. Despite supply-side problems, the auto component market performed impressively during FY 2022 as vehicle sales and exports gradually gained momentum month after month.

Auto ancillary producers faced the challenge of subdued demand and manufacturing restrictions induced by COVID-19-related safety measures. The Society of Indian Automobile Manufacturers (SIAM) reported a 14.07% reduction in automobile production in FY 2021.

Following the decline in sales, automobile manufacturers curtailed orders to auto ancillary suppliers and producers.

Export of auto ancillary products also dropped in FY 2021 due to international production cuts. However, the market started expanding at a robust pace after the third quarter of FY 2021 with the gradual growth of the automobile industry. Govt policies to boost growth in auto market

The government has formulated various policies to boost the growth of the market. Auto Policy 2002, Automotive Mission Plan 2016-2026, National Automotive Testing and R&D Infrastructure Project (NATRIP), and National Electric Mobility Mission Plan 2020 (NEMMP), are a few significant programs launched by the government.

Other initiatives include providing R&D incentives for industry- and private-sponsored research, granting export subsidy under the Merchandise Exports from India Scheme (MEIS), and offering incentives to players operating in Special Economic Zones.

The enforcement of BS-VI standards of safety and emission is anticipated to help the export market expand during the forecast period for the benefit of auto component players in India

Foreign players prefer India because it is a cost-effective location for manufacturing, which bodes well for the auto ancillary market.

Even though annual production of the overall automotive industry has improved, consumption in recent quarters (2019 onwards) experienced a decline mainly due to a liquidity crisis for Non-Banking Financial Companies (NBFCs).

Moreover, the lack of research and development infrastructure and quality standards is a threat to the market.

Competitive landscape:

Amtek Auto Limited

Bharat Forge Limited

Bosch Limited

Exide Industries Limited

Gabriel India Limited

Mahindra CIE Automotive Limited

Sundram Fasteners Limited

TVS Motor Limited

Nifco India Private Limited

A Raymond Fasteners India Private Limited. fiinews.com

Tags: ResearchAndMarkets
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Fiinews.com features through news articles on business opportunities in the Indian market for the benefits of foreigners. It is also a platform for international businesses to showcase through elaborate articles on their products & services to the Indian consumers and corporations exploiting industrialisation of the country.

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