Auto component industry to witness a double-digit decline in FY21: ACMA

Auto component industry to witness a double-digit decline in FY21: ACMA

The auto component industry registered a 34% slump to Rs 1.19 lakh crore in H1 FY21.

The Indian auto component industry will see a double-digit decline in FY21, after recording a 34% slump in the first half of the current financial year, due to the Covid-19 pandemic hammering, said the industry body Automotive Component Manufacturers Association of India (ACMA).

In the first half of FY21, turnover of the auto component industry stood at Rs 1.19 lakh crore, down 34% as compared to Rs 1.82 crore registered in the H1 FY20. The performance of the industry was mainly impacted due to the first quarter performance of the fiscal, when the country’s auto sector had almost zero revenue due to the country-wide lockdown announced in March 2020. Also, the restrictions that were applicable in the second quarter too affected the sectoral performance.

Meanwhile, the country’s auto component industry can take 2-3 years, depending on the recovery pace, to work out a whole sector Capex planning. As ACMA also claims, the domestic auto component industry has been set back by 3-4 years due to the pandemic and it could take 2-3 years to reach the peak levels of 2018-19. Back in the financial year 2018-19, the Indian auto component industry registered its peak performance of around $57 billion.

PIC

Talking about the sectoral performance, Deepak Jain, President, ACMA, said, “Going forward, obviously this year as well, because of the lockdown and the challenges we continue to face, we will have a double-digit contraction. As you know 34%, we have already contracted in the industry in H1. Although we are optimistic about our H2 performance, we will not be able to completely recover from the Q1 and Q2 fiascos.”

However, Jain said that the performance of the auto component industry during the festive season has been encouraging and indicated that the vehicle demand will be sustained in the coming months.

ACMA President believes the PLI scheme, recently announced by the Indian government will help the auto component industry and the auto sector at large to revive and be self-reliant in the coming days. “With the increased focus of the auto industry on deep-localisation and the recent announcement of PLI schemes for the automotive sector and cell/battery manufacturing by the government, augur well towards making the auto-component industry a self-reliant one,” Jain said.

Line of cars

Chip crisis

The auto component industry is suffering from several challenges apart from the Covid-19 crisis. These include increasing commodity prices, unavailability of raw materials, semiconductor crisis etc. These are proving to be major hurdles due to a V-shaped recovery in the auto sector.

Talking about the semiconductor crisis, ACMA President said that due to a spike in global demand from the consumer electronics industry, there is a supply constraint for the semiconductors, which the auto sector is facing currently.

However, Jain said that it is difficult to quantify how much of an impact the semiconductor crisis will have, adding that ACMA is working with its members on how to overcome the challenge.

Exports

As ACMA reported, exports of the auto components in the H1 FY21, declined by 23.6% to Rs 39,003 crore, as compared to Rs 51,028 crore in H1 FY20. Europe accounted for 31% of exports, but recorded a 28% decline, while North America and Asia contributed 30% and 29% respectively, registering 28% and 30% slump respectively.

Imports

In terms of imports, the auto component industry registered a decline of 32.7% to Rs 37,710 crore in H1 FY21, as compared to Rs 56,066 crore in H1 FY20. As ACMA said, imports from all around the world witnessed a steep decline, majorly due to the slump in domestic auto sales.

Aftermarket performance

The aftermarket segment of the auto component industry registered a 15% decline to Rs 31,116 crore in H1 FY21, as compared to Rs 36,607 crore in H1 FY20.

Also Read: Hero Motors Company targeting Rs 1,000 crore international revenue by FY22

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