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China Reaps Benefits of India's Expanding Auto Aftercare Market

Level of mainland auto component exports to India continues to surge, with sector now valued at US$39 billion.

Photo: Auto components: A maturing sector across India.
Auto components: A maturing sector across India.
Photo: Auto components: A maturing sector across India.
Auto components: A maturing sector across India.

India's automotive component industry reported a turnover of US$39 billion for the financial year 2015-16. Across the same period, the country is also estimated to have imported some $13.8 billion worth of auto components. In total, such imports represent 30-35% of the components utilised by the country's Original Equipment Manufacturers (OEMs).

Overall, the level of imported components is said to have significantly increased in the past 10 years, a development driven by a number of global manufacturers relocating automotive production facilities to India. At present, China is said to be the lead exporter of auto components to the country.

Over the last five years, the level of auto-component imports to India has increased at a compound annual growth rate (CAGR) of about 12.8%. This has seen the value of such imports rise to $13.8 billion from $10.9 billion in 2011. The primary components imported are said to include piston rings, brake assembly units, bimetal bearings, transmission shafts, wheel rims and motorcycle parts.

In 2016-17, imports of truck and bus radial (TBR) tyres rose by 9% to hit a new high of 120,000 units a month. Overall, imported tyres have come to account for 40% of all TBR replacements in India.

Some 92% of all such imports are currently sourced from China, with the overall level of TBR tyres imports having grown by 200% over the past three years. This has seen them rise to 120,000 units a month in 2017 from 40,000 units a month in 2014. In the same period, China's share of such imports rose to 92% from 40%.

In terms of the value of the domestic aftermarket, this has risen from $6.8 billion in the period 2015-16 to its current level of $8.4 billion, an impressive year-on-year growth of 25.78%. This rapid rise has been attributed to both the country's growing number of car owners and the aging nature of many of the vehicles still in everyday use.

In light of this, the growth of this sector is expected to be sustained in the coming years. In more specific terms, the Automotive Component Manufacturers Association of India (ACMA) has forecast that the country's automotive aftermarket – comprising both spare-part sales and support systems – will grow at a consistent rate of 10.5% for the next two years.

In terms of e-commerce – a staple of the auto-components sector in many developed economies – this is still in its relative infancy in India. This is largely due to many of the major players only having a limited presence in the country, resulting in the availability of only a small portfolio of products and low customer awareness. There also remains a number of trust issues associated with historical problems when buying auto parts online.

In 2014, the online auto aftermarket in India was estimated to be worth $20 million, less than 1% of the value of the overall components sector. With a CAGR of some 7%, it is now predicted to be worth $150 million by 2020. In addition, there are now said to be huge opportunities emerging in the B2B sector on account of the rapid rise of a raft of reliable, independent workshops, many of which have already won a high level of customer approval.

In term of future industry growth, conditions within the country are seen as likely to support the sector's exponential development. Among these advantageous factors are aging vehicles, poor road conditions, habitual overloading, extreme weather, a lack of regular maintenance, rising vehicle sales and increasing average annual mileage.

Mitra Dave, Mumbai Consultant

Content provided by Picture: HKTDC Research
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