Sales of electric vehicles in the local market will continue to increase, with or without subsidies, and despite the slowdown being witnessed the last two months after the reduction of incentives under FAME II (Faster Adoption and Manufacturing of Electric Vehicles), Sunjay Kapur, President, Automotive Component Manufacturers Association (ACMA) said.
Kapur informed with deeper focus on localisation of advanced technologies, vehicle electrification will continue to rise in the local market driven by cost economics. These investments in developmental capabilities will also help the industry neutralize threats if at all Tesla’s Chinese suppliers were to set up base in the country.
“The Production Linked Incentive (PLI) has addressed cost disabilities and laid out a roadmap for the industry to move towards cleaner forms of mobility”, Kapur said.
The government slashed incentives on electric two-wheelers by a third to INR 10,000 per kWh (from the earlier INR 15,000 per kWh) with effect from June 1, 2023 raising acquisition costs for end users. Since then, sales of electric two-wheelers have fallen – to 56,000 units in July and 44,000 units in June – when compared with average monthly sales of 60,000 units recorded in the last financial year.
The share of electric vehicles in overall revenues of component makers tripled to last fiscal year to 2.7%, from less than 1% the previous year. Despite the pressure being seen on sales of electric two-wheelers at the moent, Kapur held vehicle electrification will continue to be on a growth path in India.
Separately, Kapur said increased focus by the auto industry on deep-localisation and the INR 44,038 crore production-linked incentive (PLI) schemes announced by the government for advanced chemistry cell batteries, auto and auto components makers will aid in developing India into an attractive alternative source of high-end auto components.
In the last financial year itself, auto component manufacturers recorded a trade deficit of USD 200 million, down from USD 2.5 billion five years back in FY19. Kapur said automakers across the world have embarked on a ‘China Plus One’ strategy to de-risk supply chains post the pandemic. “Component sourcing from India is on a rise. Globally, manufacturers have started recognizing our ability to adapt and adopt technology”, he informed.
Auto component exports increased 5% to a record USD 20.1 billion in 2022-23. While shipments to North America went up 8%, those to Europe and Asia increased 3% and 4% respectively. North America is the largest overseas market for Indian parts makers, accounting for 32% of overall exports last fiscal. To be sure, imports rose by 11% to USD 20.1 billion during this period, but import dependency has been on a decline the last five years, ACMA said.
Imports continued to be dominated by China. “The dependence on China exists and cannot go away overnight. But we will have to continue to invest and look at collaborations to replace that,” said Kapur.
Separately, Kapur said the industry body does not perceive any threat if the government were to permit American electric carmaker Tesla’s Chinese vendors set up shop in the country as local parts makers have already invested in and developed capabilities to supply to any vehicle manufacturer in the world. Kapur said, “We do not feel this (Chinese suppliers setting up base in India) anymore. We are invested in technology. The reason for any OEM (original equipment maker) to come to India is not only because of the size of the market today, but also to tap into the local sourcing base.”
Overall, the auto component industry in India grew by 32.8% to a record USD 69.7 billion (this includes sales to vehicle makers, aftermarket and exports) in the last financial year. Vinnie Mehta, Director General, ACMA, said “On back of significant vehicle sales in the country, a robust aftermarket and steady exports, the auto component industry demonstrated its best-ever performance in FY23. Higher value addition by component makers also aided this performance.”
Percentage growth figures of total turnover of the auto component industry, sales to OEMs and aftermarket are in Rupee-terms while those of exports and imports are in Dollar-terms, as required by the government, ACMA said.
