ACMA Industry Outlook
At the beginning of the second half of fiscal 2019-20, the Auto Components Manufacturers Association (ACMA) took stock of the industry’s performance for the first half of the current fiscal. The assessment is expected to help the industry fastrack recovery and subsequently growth.
Stepping into the second half of the fiscal year 2019-20, the Auto components sector desperately wants to fastrack recovery from a prolonged slowdown experienced by the industry in 2019. To help the industry further its cause, the Auto Components Manufacturers Association (ACMA) recently took stock of the industry performance in the first half of fiscal 2019-20. The objective of the industry performance review is expected to lay the foundation for a corrective course of action and help the industry fastrack recovery. At the meet, some of the key findings gave a snapshot of the industry turnover, extent of de-growth, export and import performance and the performance in the aftermarket segment. Averred Vinnie Mehta, Director General, ACMA said, “The second half of 2018-19 saw a significant slump in vehicles sales that continued well into the first half of 2019-20. The component industry, in tandem, posted a somewhat subdued performance.” Mehta besides touching upon performance indicators of the review also drew attention to the sales to OEMs in the domestic market valued at Rs.1,50,743 crore (USD 22 billion). “We are concerned over the 15.2 per cent decline in sales to the OEMs in the domestic market,” he expressed.
As per the ACMA review, the Indian auto components industry in the first half of the fiscal (H1 2019-20) registered a de-growth of (-) 10.1 per cent over the first half of last
“We are concerned OVER THE 15.2 PER CENT decline in sales to the OEMS IN THE DOMESTIC MARKET.”
fiscal (H1 2018-19) in its turnover. The sector that contributes 2.3 per cent to India’s Gross Domestic Produce (GDP) and 25 per cent to the manufacturing GDP, clocked a turnover of Rs.1.79 lakh crore ( USD 26.2 billion). the turnover estimates include the entire supplies from the components industry, to the on-road and off-road Original Equipment Manufacturers (OEMs), and also takes into account the aftermarket and exports. It also takes into account the component supplies captive to the OEMs and by the unorganised and the fringe players. On the exports front, the industry registered a 2.7 per cent growth, valued at Rs.51,397 crore (USD 7.5 billion) in H1 2019-20 compared to Rs.50,034 crore (USD 7.3 billion) in H1 2018-19. The exports markets had Europe account for 32 per cent of the overall exports. North America and Asia accounted for 30 per cent and 26 per cent of the exports respectively. The traction in exports is said to have been contributed by products like drive transmission and steering, engine components, body/ chassis, suspension and brakes. In comparison to exports, imports registered a de-growth of (-) 6.7 per cent to Rs.57,574 crore (USD 8.4 billion) for the same period in comparison to Rs.61,686 crore (USD nine billion) in H1 2018-19. Asia contributed to 62 per cent of the imports followed by Europe and North America contributing 28 per cent and eight per cent respectively. In the aftermarket segment, the industry registered a four per cent growth amounting to Rs 35,096 crore (USD 5.1 billion) in comparison to Rs.33,746 crore (USD 4.9 billion) in H1 2018-19. Expressed Deepak Jain, Presient, ACMA, that the degrowth mirror-images the slow down occurring in the OEM space, which has been hit during these tough times.
On the need for government intervention in an attempt to retain and continue growth from a longterm perspective for the Indian auto component industry, Jain highlighted some of the key industry recommendations including a uniform GST rate and redefinition of the MSMEs qualifying criteria. “One of the key recommendations of the industry has been a uniform 18 per cent GST rate across the auto component sector. Currently, 60 per cent of the auto components attract 18 per cent GST. The remaining 40 per cent that includes two-wheelers and tractor components attract 28 per cent.” Jain went on to blame the high GST slabs for the flourishing grey market operations in case of the aftermarket segment. “A benign rate of 18 per cent will not only ensure better compliance but will also ensure a larger tax base,” he added. On the need to redefine MSMEs, Jain opined that there was a need to relook the classification of MSMEs, from looking at investment in plant and machinery to considering turnover as the key criteria. “It has been a long-standing request of the industry. Considering MSMEs constitute over 70 per cent of the auto component industry, a change in the definition will enable a wider section of the industry avail government incentives,” he explained.
For the industry to fastrack the road to recovery, it is crucial that OEMs perform well given that the direct correlation with the performance of the auto components industry. At the performance review, Jain emphasised upon this well-known fact. “The automotive industry is facing a prolonged slowdown. The vehicle sales in all the segments have continued to plummet for the last one year,” he stated. “Considering the auto component industry grows on the back of the vehicle industry, a current 15 to 20 per cent cut in vehicle production has adversely impacted the auto
“The industry competitiveness relies on quality, localisation, costs and the ability to fulfil the customer needs.”
components industry performance and investments,” he opined. Pointing at the transition to BSVI and implementation of safety norms as immediate considerations to chalk out a future roadmap, the value-addition from the component industry, added Jain, is expected to only progressively increase.
The importance of technology transfer can’t be ruled out either. Averred Sowmya Chaturvedi, Supply Chain Head, Indian Area Business Organization, Cummins India Ltd, “Technology collaboration has become the most important aspect for the future. This opens up a platform for global tech and skill exchange.” Of the view that the ongoing technological upgradations are expected to fructify, the stakeholders of the auto components industry are urged to work in tandem to embrace this change. “The automation of engineering processes and connectivity of workstations will require a new set of thinking and skills,” opined Chaturvedi. Citing the industry shift to an asset lean model, Kavan Mukhtyar, Partner and Leader, Automotive at PwC India said, “We are moving away from ownership to renting/sharing model.” Drawing attention to Infotainment, connectivity and IoT as the future of mobility technology for autonomous vehicles, Mukhtyar spoke of the need to turn disruption into growth. “This brings a huge challenge and also an opportunity for the automotive component industry. The current downward trend is a temporary phenomenon and we must look forward to a revival soon,” he expressed.
Sunjay Kapur, Vice President at ACMA and Chairman, Sona Comstar expressed confidence of the prospects of the industry working its way out to a phenomenal run by regaining the lost momentum. “We have an opportunity to grow from a USD 120 billion to a USD 450 billion industry,” he opined. Urging the stakeholders of the components industry to put in the requisite efforts, to become future ready, future compliant and most importantly future relevant, Kapur highlighted the efforts made by ACMA to get the supply chain ready for smart, intelligent and connected vehicles. He explained that the industry competitiveness relies on quality, localisation, costs and the ability to fulfil the customer needs. Meanwhile, the ongoing efforts from ACMA as a catalyst in sensitising the industry about the changes demanded by the future and the future course of action to facilitate a course correction would continue, he added.
M.J. Purohit, Chairman and Managing Director, Axiom group, said, “The current need of the auto components industry is to adapt to the knocking needs of electrification.” He urged the industry to open up to the infrastructural needs of the paradigm shift, the industry is staring at. “The government and the industry must look up to the impending needs of project financing, infrastructure requirements and time required, to implement the e-mobility requirements. The Indian auto components sector will only then, be able to deliver on its promises,” he opined. “As an industry body, we have been advocating this all along through what we call our cluster programmes. Till date, ACMA must have made interventions in more than 1000 plus auto component manufacturing plants across the country,” claimed Mehta. “Our cluster programmes’ focus is not only on improving productivity and quality, but a lot of attention is paid to the safety aspect and resource optimisation,” he signed off.
“The current need of the auto components industry is to adapt to the knocking needs of electrification.”
“The need to turn disruption into growth brings a huge challenge and also an OPPORTUNITY.”