In 1953, the Tariff Commission in its report to Government had stressed the need for a balanced and integrated development of the Automotive Industry by promoting the emergence of a strong auto-component sector. As a result of this recommendation the leading entrepreneurs were invited by Government to establish an autocomponent manufacturing industry.
In the pre-1985 era, the auto component sector was a protected market with high import tariffs. The market was oriented primarily towards supply of components to domestic manufacturers.
In the 1980s, encouraged by the establishment of many Japanese OEMs in the passenger car, two-wheeler and LCV industry in the country, a number of Indian companies entered into joint ventures with Japanese companies and exports also commenced.
The Phased Manufacturing Programme (PMP) introduced in Indian automotive sector in the 1980s for localization had laid the foundation for the development of auto component industry. This programme enabled the auto-component industry to modernize its technology, improve quality and to imbibe good manufacturing and shop-floor practices and to transform itself into a highly capable sector of the industry, while at the same time contribute to localizing the component base. In 1990s global OEMs and Tier 1 suppliers started operations in India. This paved the way for a large number of new Joint Ventures in the component industry with European and American component manufacturers and gave the Indian component industry an all-round expertise to manufacture components for applications in Japanese, European as well as American vehicles.
After the PMP programme came to an end in 1991, Government introduced the MOU system that continued to place emphasis on the aspect of localization of components. With support from this policy, the component industry developed further capability to manufacture the new breed of auto-components required for the new generation vehicles.
As a result of successful localization of these components, Vehicle manufacturers started outsourcing more and more components rather than manufacturing in-house. Entrepreneurs were encouraged to develop components and set up facilities. Whenever required, OEMs supported component manufacturers through equity participation, technical collaboration, etc.
Currently the Auto component Industry manufactures a wide range of products in India for both domestic consumption and exports. The total size of the component industry is close to USD 14 billion out of which USD 9.4 billion is the domestic OEM market, USD 2.6 billion is the domestic aftermarket and USD 2.0 billion are the direct exports of components. More than 60% of the exports of autocomponents are to Europe and USA. More than 70% of the exports go to the OEMs and Tier I suppliers and only 30% to the global aftermarket, indicating the high level of maturity in quality and technology that has been achieved by the component industry.
Currently the Auto component Industry manufactures a wide range of products in India for both domestic consumption and exports.
