September 28, 2021

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Auto component industry turnover falls second year in a row: ACMA

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The challenges on the front of availability of semiconductors, escalating prices as also availability of raw materials, challenges on the front of logistics including non-availability and high prices of containers, among others, continue to hinder a smooth recovery.

New Delhi: Automotive Component Manufacturers Association of India (ACMA), the apex body representing India’s auto component manufacturing industry, on Tuesday announced that the turnover of the automotive component industry stood at INR 3.4 lakh crore (USD 45.9 billion) for the period April 2020 to March 2021, registering a de-growth of 3% over the previous year. This is for the second year in a row that the turnover of industry has moved to the negative zone.

The decline from FY20 to FY21 is easy enough to understand. Two back to back waves of COVID-19, sharp rise in commodity prices and semiconductor shortage in 2019-2020 wiped out the industry’s revenue.

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In its Industry Performance Review for the fiscal year 2020-21, ACMA said that exports of auto components witnessed a drop of 8% to INR 0.98 lakh crore (USD 13.3 billion) in 2020-21 from INR 1.02lakh crore (USD 14.5 billion) in 2019-29. Europe, accounting for 32% of exports, saw a decline of 4%, while North America and Asia, accounting for 30% and 26% respectively, remained stable.

Slowdown in the domestic market also reflected on imports of components into India. Component imports fell by 11% to INR 1.02 lakh crore (USD 13.8 billion) in 2020-21 from INR 1.09 lakh crore (USD 15.4 billion) in 2019-20. Asia accounted for 66% of imports followed by Europe and North America at 13% and 17% respectively. Imports from Asia declined by 9%, while those from Europe by 13% and from North America by 17%, it added.

The aftermarket in FY 2020-21 also dropped majorly due to the sluggish performance of the CV industry. The turnover of the aftermarket stood at INR 64,524 crore (USD 9.8 billion) down by 7% over the previous year, the industry body said.

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“While the first quarter of FY21 was a complete washout, the industry regained significant ground in the second quarter onwards. The component industry, in tandem, posted a subdued performance in FY21 with a drop of 3% over the previous year, registering a turnover of Rs.3.4 lakh crore (USD 45.9 billion),” Vinnie Mehta, director general, ACMA said.

According to Deepak Jain, president, ACMA, the automotive value-chain faced significant disruptions in FY21.

“The nationwide lock-down in wake of the pandemic, one of the severest in the world, put the entire supply chain in a disarray. The entire industry took a significant time to stabilise again post the gradual unlocking of the economy. While vehicle sales and production improved quarter-on-quarter from second quarter of FY20-21 onwards, however the first quarter of FY 21-22 was once again confronted with another round of disruptions due to the second wave of the pandemic. While this wave was a much severe humanitarian crisis, the lockdowns, however, were regional, in line with the Government’s ethos of ‘Lives and Livelihoods’ resulting in lesser adverse impact on economy and production,” he added.

Elaborating on the headwinds being faced by the industry, Jain said with the economy progressively returning to normal and as vehicular demand picks-ups, we are cautiously optimistic about the performance of the industry for this year.

While vehicle sales and production improved quarter-on-quarter from second quarter of FY20-21 onwards, however the first quarter of FY 21-22 was once again confronted with another round of disruptions due to the second wave of the pandemic.Deepak Jain, President, ACMA

“The challenges on the front of availability of semiconductors, escalating prices as also availability of raw materials, challenges on the front of logistics including non-availability and high prices of containers, among others, continue to hinder a smooth recovery. We are also wary of a third wave of pandemic and hope that the current revival in demand will be a sustained one. We are optimistic that the lessons learnt in managing the first two will stand us in good stead in managing the third one as well,” the ACMA president explained.

On the policy front, ACMA said that it is grateful to the government for the recent announcement of the Production Linked Incentive (PLI) scheme for the ACC Battery Storage, which is a right step towards creating a holistic ecosystem for manufacturing and sustaining of electric mobility in the country. That apart, while the PLI scheme for auto and auto component industry has been announced, the industry awaits its finer details.

The PLI scheme for auto and auto components is expected to create an export competitive auto component industry and also give a thrust to its localisation. The industry is also keen on an early announcement of the details of the RODEPT (Remission of Duties and Taxes on Export Products) scheme that will refund embedded taxes and duties, previously non-recoverable, to make component exports price competitive.

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The industry has bounced back handsomely during the second half of last fiscal with many auto component suppliers registering record revenue and profits during Q4 FY2021.

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