The auto components industry will continue to grow aggressively despite slower growth in car sales and a looming recession in Western countries, according to Sunjay Kapur, president of the Automotive Component Manufacturers Association of India.
"I feel growth will be more aggressive, given the growth in commercial and passenger vehicles," Kapur, who is the chairman of Sona Comstar Ltd., told BQ Prime at the Auto Expo 2023: Components show.
"There's also the aftermarket, which is a large addressable market in the whole Southeast Asian market," he said. "So there are a lot of options here for growth, whereas there are challenges in North America."
Sharp increases in benchmark rates by the Federal Reserve have made some western markets worry about a recession in the next few quarters, limiting the export opportunity of India's auto component industry. North America and Europe, two key markets that are at risk of recession, make up more than 60% of all of India's exports.
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Adding to this, the slowing growth in the domestic passenger vehicle industry, which makes up nearly half of the industry's sales, means the auto component makers may find the demand scenario challenging.
In fiscal 2022, exports for the first time exceeded imports, leading to a 23% rise in turnover for the auto parts makers to Rs 4.2 lakh crore.
While the exports and imports are even after six months of fiscal 2023, the industry may find it difficult to repeat the trade surplus feat in the ongoing financial year due to increased imports of electronics.
There's been a heavy import of electronics because of the nature of the change in the vehicle, which is moving from a traditional to a more connected and electronics-heavy vehicle, Kapur said. But the import dependence will reduce as localised manufacturing increases, he said.
Electricals and electronics are a rapidly growing category within the auto components industry. The category's sales grew 35% to $2.64 billion in the first six months of fiscal 2023, while the industry's revenue rose at the same pace to $33.8 billion.
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