The auto components industry although an ancillary industry to the auto industry is one of the major sectors of the economy. This sector accounts for multinationals as well as small and medium-sized enterprises and is expected to reach the size of more than US$200 billion dollars by 2026. Under the current boom of the Electric Vehicles (EVs), the government is pushing toward establishing an entire ecosystem for this segment which will provide further incentives for this sector as a whole.
Let us have a brief overview of the auto components sector and the top companies in this sector.
Sector overview
- The auto components industry today has grown to such heights that it forms about 2.3% of the GDP of the country.
- The sector is growing at a pace of 3.28% CAGR and is expected to reach US$200 billion by 2026.
- The sector directly or indirectly employs approximately 5 million people in the country and the vision of the government to make India an auto hub is set to increase this number to higher levels.
The industry is made up largely of small and medium enterprises with a few multinationals that dominate the market. The auto components sector as a whole is made up of organized and unorganized markets with the organized market catering to large OEMs while the unorganized market focusing largely on the aftermarket category. The increasing demand in the auto industry will be translated into the auto components industry as well and the sector is expected to grow by an increase of 20% to 23% approximately in FY 22. The aftermarket segment saw an increase of 25% and the component sales in the domestic market to the OEMs also saw an increase of 76% in the recent boost to the auto industry as a whole.
Government initiatives
The government has taken many initiatives for the growth and development of the auto components industry. The Government launched the PLI Scheme in November 2020 which had a financial outlay over a 5-year period to the tune of US$ 8.1 billion. The government had received investment proposals from 20 companies under the PLI Auto Scheme worth US$ 6.04 billion. The government expects an incremental output of US$ 31.08 billion from the PLI Scheme.
The Automotive Mission Plan (AMP) 2016-2026 of the Government aims to benefit the auto components industry in the following manner.
- An increase in the contribution of the auto industry to the GDP of the country to over 12%.
- Creation of 65 million incremental jobs directly or indirectly related to the auto sector.
- Implementation of End of Life Policy for the old vehicles in the country.
Future prospects
The auto components industry is set to see a huge increase in the exports segment along with the vision of the government for the auto industry as a whole. The exports in the auto components sector saw an increase of 76% to reach US$9.3 billion in the first half of FY 22. The forecast of the ACMA (Automobiles Components Manufacturers Association) projects the exports of this sector to increase up to US$ 80 billion by 2026. The auto components industry exports are set to cross US$ 400 billion in the current year. This industry for the first time saw a trade surplus of US$ 600 million and is set to become the third-largest globally by 2025.
The growing demand in the auto industry especially in the EV segment is set to increase various new vertices and opportunities in the auto components industry. The rising demand will also see the need to adopt newer technologies and measures by the auto components manufacturers via R&D. The Indian global automotive components trade is set to see an increase of approximately 5% by 2026.
Top companies in the Auto Industry based on market capitalization
The top companies in the auto components industry and their key details are tabled below.
- Motherson Sumi
This is the largest company in the auto components industry in the country when it comes to market capitalization. The company manufactures various products in the auto components sector like vehicle electrical equipment, such as generators, alternators, spark plugs, ignition wiring harnesses, power window and door systems, and assembly of purchased gauges into instrument panels, voltage regulators, etc. the key details of the company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 60,061.68 crores |
| PE Ratio | 40.99 |
| Return on Equity | 13.55 (March 21) |
| Debt Equity Ratio | 0.92 (March 21) |
| Promotor’s Holdings | 68.16% |
| Share price | Rs. 132.95 |
| Dividend Yield | 1.13% |
- Bosch
Bosch is a multinational that has a global presence in the manufacture of general-purpose machinery. The products of the company range from automotive technology, consumer goods, automotive aftermarket products, industrial equipment, and more. The key details of the company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 42,657.24 crores |
| PE Ratio | 31.56 |
| Return on Equity | 5.04 (March 21) |
| Debt Equity Ratio | 0.00 (March 21) |
| Promotor’s Holdings | 70.54% |
| Share price | Rs. 14,460.55 |
| Dividend Yield | 0.80% |
- Minda Industries
The company was incorporated in 1992 and is in the business of manufacturing parts and accessories for motor vehicles. The company is the market leader in the auto components industry as a leading Tier-1 supplier of proprietary automotive solutions to OEMs.
| Category | Details |
| Market Capitalization | Rs. 25,868.64 crores |
| PE Ratio | 73.54 |
| Return on Equity | 10.90 (March 21) |
| Debt Equity Ratio | 0.47 (March 21) |
| Promotor’s Holdings | 67.47% |
| Share price | Rs. 905.70 |
| Dividend Yield | 0.09% |
- Endurance Tech
The company was formed in 1999 and is engaged in the business of manufacturing and selling aluminum die casting (including alloy wheels), suspension, transmission, and braking products with operations spread across the country. The key details of the company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 17,243.86 crores |
| PE Ratio | 34.35 |
| Return on Equity | 15.82 (March 21) |
| Debt Equity Ratio | 0.18 (March 21) |
| Promotor’s Holdings | 75% |
| Share price | Rs. 1,231.65 |
| Dividend Yield | 0.49% |
- Exide Industries Limited
Exide is a very old name in the industrial sector of the company and was incorporated in 1947. The company is engaged in the manufacturing of storage batteries and allied products in India as well as electric accumulator including parts thereof (separators, containers, covers). The key details of the company are tabled below.
| Category | Details |
| Market Capitalization | Rs. 2,30,835.99 crores |
| PE Ratio | 17.65 |
| Return on Equity | 11.69 (March 21) |
| Debt Equity Ratio | 0.02 (March 21) |
| Promotor’s Holdings | 45.99% |
| Share price | Rs. 151.55 |
| Dividend Yield | 1.32% |
Conclusion
The auto components industry is a fast-growing sector in line with the growing pace of the auto industry in the country. The exports from this sector have increased greatly as well as its contribution to the GDP over the years and the industry is set to become the third-largest in the world in the near future.
FAQs
The share of the auto components sector in the GDP of the country is approximately 2.3%.
The FDI in the auto components sector in India is 100% through the automatic route.
The growth rate of the auto components industry between FY16 to FY22 was CAGR if 3.28%.
The auto components industry is set to grow up to US$ 200 billion by the end of 2026.
