Indian Auto Component Sector De-Grows By 11.7%: ACMA

Automotive Component Manufacturers Association of India (ACMA) has announced the findings of its Industry Performance Review for the fiscal year 2019-20. The apex body stated the turnover of the automotive component industry stood at Rs. 3.49 lakh crore (USD 49.2 billion) for the period April 2019 to March 2020, registering a de-growth of 11.7 percent over the previous year.

ACMA also requested the government for enhancing vehicle demand in the country through reduction in GST on all vehicle categories to 18 percent and introduction of an incentive-based scrappage policy.

For the components sector, ACMA continues to recommend a uniform 18 percent GST rate across the auto component sector; currently, 60 percent of the auto components attract 18 percent GST rate, while the rest 40 percent, the majority of which are two-wheelers and tractor components, attract 28 percent. The latter high rate has led to flourishing grey operations in the aftermarket. A benign rate of 18 percent will not only ensure better compliance but will also ensure a larger tax base.    

Deepak Jain, president of ACMA said that the 17% shrinkage of the domestic auto industry led to imports (including China) shrinking by 11% in FY19-20. Exports, on the other hand, were down by just over 3%.

“Imports from China are driven by OEM sourcing strategies but the pandemic showed up the vulnerability that comes from over-dependence on China so the industry is re-evaluating the supply chain,. Indian component makers and vehicle companies are now working on multiple sourcing strategies and are looking at other markets as well as stepping up localization,” added Jain.

The auto component aftermarket in FY 2019-20 remained stable despite a downturn in the vehicle industry. The turnover of the aftermarket stood at Rs 69.381 crore (USD 9.8 billion) growing marginally by 2.8 percent over the previous year. 

Exports of auto components witnessed a degrowth of 3.2 percent to Rs.1.02 lakh crore (USD 14.5 billion) in 2019-20 from Rs 1.06 lakh crore (USD 15.2 billion) in 2018-19. Europe accounted for 30 percent of exports, saw a decline of 11 percent, while North America and Asia, accounting for 30 percent and 27 percent respectively remained stable. 

Coming to imports, The slowdown in the domestic market also reflected on imports of components into India. Component imports fell by 11.4 percent to Rs.1.09 lakh crore (USD 15.4 billion) in 2019-20 from Rs.1.23 lakh crore (USD 17.7 billion) in 2018-19. Asia accounted for 65 percent of imports followed by Europe and North America at 26 percent and 8 percent respectively. Imports from Asia declined by 7 percent, while those from Europe by 22 percent and from North America by 17 percent.