India’s auto-component manufacturing would double from $70 billion in 2022 to $145 billion in 2030, according to a report by Niti Aayog. The government think tank also sees component exports trebling to $60 billion by 2030 from the existing $20 billion.
“This growth would position India as a formidable player in global markets, achieving a trade surplus of $25 billion and increasing its share in the global value chain (GVC) of auto components from 3% to 8%,” says the report.
To achieve this, the report outlines a comprehensive set of interventions across multiple domains. It recommends fiscal interventions, which include operational expenditure (Opex) support to scale up manufacturing, with a special focus on capital expenditure (Capex) assistance for the development of tools and dies, IP transfer and branding support which are crucial for automotive component manufacturing.
Highlighting that most manufacturing supply chains across the world are concentrated in clusters, the report recommends cluster development to strengthen supply chains, reduce logistics costs, and establish common R&D and testing facilities, thereby accelerating product development. The report also emphasises on skill development initiatives to ensure a steady pipeline of talent, which is essential for driving sectoral growth.
On the non-fiscal front, the report suggests interventions such as business improvement support to enhance global competitiveness, encouragement of joint ventures (JVs) and free trade agreements (FTAs) to foster international collaboration and market access, adoption of Industry 4.0 and enhanced quality standards to improve manufacturing efficiency initiatives to position India as a key global player in the automotive component sector.
“These policy measures, if effectively implemented, will be crucial in enabling India to scale up its automotive component production, increase exports, and strengthen its standing in global markets,” says the report.
The report highlights that India’s automotive component manufacturing sector faces a cumulative cost disability of nearly 10% compared to China, making it less competitive in the global market.
It says that despite advantages in areas like labour, fuel, and power costs, structural inefficiencies make India a less attractive investment destination for automotive component manufacturing, limiting its ability to compete globally.