Getting Back To Top Gear: The road ahead for Indian auto component manufacturers

As car sales gradually regain momentum, how can auto component manufacturers ensure and sustain not just recovery but growth?

- Shivanshu Gupta

India’s automotive industry was in top gear between 2009 and 2018 – automotive sales grew at nine percent per year, and the auto component industry grew at over 12 percent. Building on this performance, the Automotive Mission Plan 2016–26 (a joint vision of the government and the auto industry) set ambitious goals for the sector. According to the plan, the sector could contribute 12 percent to GDP (over the current seven percent) and add 6.5 crore additional jobs to the current 3.7 crores by 2026. Instead, slowing sales and shifting supply chains over the past couple of years started to squeeze margins.

Adding to the industry’s woes, the global pandemic necessitated a country-wide lockdown in 2020 that continues to have a deep impact on lives and livelihoods. And yet, the picture is not that bleak. With the country gradually opening up and wholesale figures for August 2020 offering a ray of hope with a 14 percent increase in passenger vehicle sales and a three percent increase in two-wheeler sales YoY, auto component manufacturers could rev their motors and move back into top gear. Making tactical changes to their existing capabilities and considering fresh approaches could allow them to thrive in the next normal.

A recent McKinsey report, Shaping the new normal – India’s auto component industry, outlines actions for auto component manufacturers to foster their own growth – which could critically bolster India’s GDP. The three proposed priorities are to localise, optimise and digitise.