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The automotive component industry is an important sector of the Indian economy and a major foreign exchange earner for the country. There are around 400 major players in the auto component sector. Most of them are distributed in the north, south, and, western parts of India around major automotive vehicle manufacturers (AVMs).
These AVMs contributed largely towards the development of component suppliers through technical and or financial collaborations. In the South the AVMS and the component manufacturers are mostly in Tamil Nadu, Karnataka and Andhra Pradesh. These States have well-defined, futuristic policy frame work for the orderly development of the automotive and auto component industries. They continue to offer policy, infrastructure, and fiscal support to the automotive industry.
South India is the nerve centre of Indian automotive industry, of the vehicles and of the components. The South is the home of some of the leading traditional auto component manufacturers like the TVS Group, the Amalgamations Group, Rane Group, Bosch, Continental and others. It is also home of
the new industries like Suprajit, Sansera, Pricol, Toyota Kirloskar, Cadence India, BorgWarner, Visteon, Valeo, Delphi and several others.
The auto component makers provide wide range of parts including castings, forgings, finished, semi-finished components, assemblies, and subassemblies for all types of vehicles produced in India. As the aerospace industry is taking roots in Karnataka and Tamil Nadu many of the auto component manufacturers are exploring opportunities to be the preferred vendors of the aerospace companies. Some of them like Sansera has made successful advance in this.
Presently, the Indian automotive component industry is highly fragmented. This industry can be divided into the organised and the unorganised categories of manufacturers. The organised component manufacturers supply components to at least one of the Original Equipment Manufacturer (OEM). They also have access to technology due to their tieups with some of the foreign collaborators or through associate AVM.
The OEM market is predominantly catered by the organised sector. The 402 organised producers contribute around 80% to
this market. Presently, these manufacturers have grown in size and numbers beyond the control of OEMs. They control about 65% of the aftermarket.
The 402 medium and large key players in the organised auto components sector operate along with 6000 ancillary units. They employ directly about 2.5 lakh people. In the unorganised sector there are approximately 5000 small and tiny units. No figures are available for employment in the unorganised sector.
The geographical spread of medium and large companies as per records of Automotive Component Manufacturers Association of India (ACMA) is: Northern region 161, Western region 123, Southern region 91 and the Eastern Region 27.
The automotive component industry caters to 3 broad categories of the market: The OEMs or vehicle manufacturers, the replacement market and export market that comprises primarily the international tier 1 companies. The two-wheeler segment is the largest domestic customer segment for the Indian auto components industry.
Tamil Nadu aims to manufacture 5.8 million automotives a year by 2020. Chennai, one of India’s largest auto hub accounts for 20% of India’s total installed capacity. The current annual output in the automotive sector in Tamil Nadu is estimated to be $3-3.5 billion with an estimated share of 25% in the Indian automotive industry and its contribution to the State’s Gross Domestic Product is 7-8%.
There are over 80 automobile components manufacturers in Tamil Nadu, accounting for a turnover of over USD 1.3 billion as in 2013-14. The industry is highly concentrated in manufacturing of body and structural parts. Over 15% growth of investments (both domestic and foreign) in the sector was from 2004 to 2013. The State accounts for over 7% of total auto components output. Tamil Nadu is the largest tyre manufacturers in India. The State contributes to 40% to India’s total tyre manufacturing output.
OEM’s and auto components industry have a well established and efficient supply chain ecosystem in the Chennai automotive cluster spread across Ennore, Sriperumbudur, Orgadam, Mariamalai Nagar, and Cheyyar.
The Key OEM customers of auto component industry in Tamil Nadu are Ashok Leyland, Hyundai, Ford, Daimler, BMW, Volvo, Nissan, Renault, Mitsubishi, Caterpiller, Mahindra & Mahindra, and Yamaha. The State has an installed production capacity of 1,380,000 units of cars and about 361,000 commercial vehicles annually.
Recently, Mahindra & Mahindra has also signed a MoU with the state government to invest Rs 2,000 crore, which will be enhanced to Rs 4,000 crore by 2020. The investment is to set up test track and an automotive plant near Cheyyar. Tractors and Farm Equipment Limited (TAFE) will also invest Rs 200 crore to set up a facility which will manufacture agriculture equipment products. The company is looking at setting up the facility in and around Chennai and it will cater both domestic and export markets. The factory will create around 1,200 jobs and will make variety of products including rotavator, harvester and others.
Among the leading component manufacturers are the TVS group companies, Rane, Comstar, Autolec, Delphi, Valeo, Motherson, Bosch, Visteon, JBM, SGI. The tyre manufacturers are MRF, Apollo and Michelin. The State government plans to transform the state into one of the top 3 manufacturing hubs for automotive and auto ancillary in Asia.
Pondicherry, an Union Territory in Tamil Nadu has a lot of potential to grow as an industrial hub but it lacks due to improper government support. Even though Pondicherry has established players like Manatec, Rane, Pondy
Die Cast and few other component manufactures have established their factories in the coastal town.
Karnataka is the 4th largest state in automotive production with output of US$2.8 billion, contributing 8.5% to national sector output. The State is home to auto majors like Tata Motors, TVS Motors, Toyota, Volvo, Honda, Scania India, L&T Komatsu, Tata Hitachi, TATA Marcopolo and others.
Considering the potential for generation of large employment opportunities and spin off effects from the downstream industries in this sector the section that covers the automotive sector in the Karnataka Industrial Policy 2014-19 has proposed to provide an enabling environment to attract further investments.
The State government would incentivise and institutionalise the R&D environment for the auto sector in the State. It has plans to commission the ‘Karnataka Automobile Research & Innovation Centre’. It would also be an incubation centre. The centre is proposed to be established on a PPP model with State support.
The policy also has proposed to set up an industry group to study and recommend measures for the growth of the auto component sector in the State.
The Automotive and Auto Components Industry has a strong presence in the State of Andhra Pradesh owing to a broad base of automotive component manufacturers and a large pool of highly trained and skilled manpower. The State has the potential for USD 2 billion investment and USD 3.50 billion output, according to a recent analysis by Automotive Components Manufacturers’ Association of India (ACMA).
Andhra Pradesh has more than a 100 automotive component manufacturers (including firsttier suppliers and OEMs) which specialise in various auto components such as gears, pistons and axles. Over half the cylinder liners and clutch plates in India are being produced in Andhra Pradesh.
Andhra Pradesh offers excellent port logistics as it has 1 major (Visakhapatnam) and over 14 notified minor and deep water ports. This infrastructure provides ample opportunities to industries to develop export trade relations with various countries across the globe. The State is actively encouraging the private sector to improve the port infrastructure and 6 ports are under various stages of development in the public-private-partnership (PPP) mode.
The Andhra Pradesh government has identified automobiles as a key thrust sector for industrial development. The sector is preferred for its potential to generate employment opportunities and foster innovation and growth. The Automobile & Auto Components Policy 2015-20 of the State aims to generate new employment opportunities for at least 2 lakh people and attract new investments of at least Rs 20,000 crore in this sector by 2020.
The Government of Andhra Pradesh seeks to build upon the strong presence of automotive component manufacturers and large pool of highly trained manpower in setting up dedicated Suppliers’ Manufacturing Centres and Auto Clusters to leverage economies of scale and produce world-class product quality.
The Automobile & Auto Components Policy 2015-20 focuses on industry-academia partnerships promoting apprentice-model and scalable for-profit vocational training. The policy also offers a holistic package of incentives on infrastructural support, subsidising common infrastructure development and aiding marketing, patenting and quality certification. To develop a healthy ecosystem, special incentives are formulated for associated ancillary units in mega integrated projects.
Despite few issues the South states continue to charm the automotive industry for reasons that are unique to this region. Due to Golden Quadrilateral, these states are connected and get faster link to the ports. As the availablity of Ports are more in these states, it is more attractive for the manufacturers to support the Make in India campaign as they can export to many countries through these ports. The governments of these states are also very aggressive to attract investments in their respective states and a healthy competition makes a win-win situation for both states and investors.
DICV recently exported 5000th truck from Kamarajar port, near Chennai