As electric vehicles (EV) become more and more popular, could the auto parts industry be far behind? Auto parts manufacturers in India are bracing for change. Not only have they lined up massive expansion and investment projects, but they are diversifying, shrinking portfolios and entering into joint ventures (JVs) to venture into a brave new world.
With the parts industry looking to invest $2-3 billion over the next two years, most suppliers say EV parts make up a significant portion of their order books.
Multinational companies such as Stellantis, Fiat's parent company, are looking to source more parts from India to support their EV program. On his recent visit to India, Stellantis group CEO Carlos Tavares said they are open to discussions with component manufacturers and ready to localize work on electric cars given India's low-cost supplier base. Other companies such as Renault and Daimler may also consider sourcing more EV parts from India.
This follows a visible shift to electric mobility in both two and three wheeler industries. By 2030, almost the entire three-wheeler industry and nearly 80% of the two-wheeler industry could become electric. The pace of change in the passenger car (PV) and commercial vehicle (CV) sectors is slower - only 10-15% of PVs and about 10% of CVs are expected to be electric by 2030.
Meanwhile, the Automotive Component Manufacturers Association (ACMA) industry association has held several technical shows for leading original equipment manufacturers (OEMs) in the electric vehicle field, such as Hero MotoCorp, Tata Motors, Ashok Leyland, Hyundai and Volvo Eicher, to showcase domestic manufacturers of components to scale and become globally competitive, says ACMA Director General of Vinnie Mehta. A study by ACMA and the Society of Indian Automobile Manufacturers has identified a $20 billion opportunity for electrical component localization over the next five years.
This shift is being propelled by policies such as the Faster Adoption & Electric Vehicle Manufacturing Scheme and production-related incentive schemes. It could make India an attractive alternative source of high-quality auto parts for the world in the next five years.
Auto parts companies focusing on engine parts, forging, casting, etc. are proactively diversifying or entering into JVs to make cost-competitive electrical parts using the competencies they have in casting and forging, said Hemal Thakkar, director at Crisil Market Intelligence & Analysis.
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