Indian Auto-Parts Industry To Take 3-4 Years To Return To  Growth, Says ACMA
A worker assembles a wire harness at the Motherson Sumi plant in Faridabad. (Photographer: Brent Lewin/Bloomberg)

Indian Auto-Parts Industry To Take 3-4 Years To Return To Growth, Says ACMA

Indian auto-parts makers, who have witnessed a double-digit contraction this year as the Covid-19 pandemic disrupted the economy, would take three-four years to return to growth.

That’s according to the Automotive Component Manufacturers Association, which said the overall turnover of such companies, which rose 18% year-on-year to $57.1 billion in 2018-19, has contracted by more than a third in the first half of FY21 to $15.9 billion.

“Even if we grow at an average of 8-9%, it will take 3-4 years to actually come back to the peak levels that were seen in FY19,” Deepak Jain, president of the association, told reporters on Wednesday while releasing a report on the performance of the sector in the first half of FY21.

“In the backdrop of the pandemic and the lockdown, the automotive industry faced unprecedented challenges in the first half of FY 2020-21,” Jain said, adding that resulted in component makers clocking near-zero revenues in the first quarter.

He, however, said while component makers are witnessing strong recovery in the third quarter—albeit at a lower base. Yet, Jain expects the industry to contract in double digits for the full year ending March 2021.

ACMA also said headwinds like higher raw material costs, commodity price escalation and supply chain issues, especially pertaining to semiconductors, could cause “some hindrance in volumes”. “These are the key hurdles in the V-shaped recovery in the sector,” he said.

BloombergQuint had earlier reported that a shortage of microprocessor chips threatens a nascent recovery in the automobile sector.

Highlights of the report:

  • Exports of auto components declined by 23.6% to $5.2 billion in H1 2020-21, from $7.4 billion in H1 2019-20.
  • Imports of auto components declined by 32.7% to $5 billion in H1 2020-21, from $8.2 billion in the same period last year.
  • Purchases by OEMs (original equipment makers) from auto-parts makers declined by 42% to $11.6 billion in H1 2020-21, from $22 billion in the same period last year.
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