India's auto component industry all set for electric vehicle shift

ACMA president, Sunjay Kapur says that the 75 companies eligible for the auto components production-linked incentive (PLI) scheme, have to invest Rs 250 crore each in five years to get the incentive

India’s auto component industry is all set to hitch its wagon to the electric vehicle (EV) revolution. According to a recent survey by the Automotive Component Manufacturers Association of India (ACMA), 60 per cent of its 800 members say that they are ready to supply to EVs, while the rest say that they will be prepared to do so later this year, or latest by 2023.

Says ACMA president, Sunjay Kapur, “The investment cycle by auto component companies to prepare themselves for EVs has already begun, and is on track. From the supply side, the EV revolution will give component makers a brand new market segment to operate in. They can supply different kinds of components like telematics, batteries, and cater to the requirements of a new ecosystem which is being created.”  

He points out that despite the difference in the drive train and the fact that EVs are powered by a battery, many other components like seats, steering systems, brakes, mirrors (might have more electronics) are the same in EVs as they are in internal combustion engine (ICE) vehicles.

Giving his assessment of the kind of investments auto components will need to make to supply to EVs, Kapur says that the 75 companies eligible for the auto components production-linked incentive (PLI) scheme, have to invest Rs 250 crore each in five years to get the incentive.

“This means that together, they have to make a minimum investment of  Rs 18,600 crore in five years to build future technologies in the automobile industry.”

He adds that though the bulk of the money will be used for EVs, some will go towards building technology which is currently imported.

Kapur also points out that to justify the volume, exports must be given a priority. “To justify the volume we have to look at the global market as the Indian piece is still small, especially in passenger cars. But just like global trends, we will also grow and we are heading that way,” he says.

The auto component industry has zeroed in on certain areas where India can become a global hub for the manufacturing of EV components, says Kapur. These include electric motors, steering, drive trains, amongst others. The good news is that there are a lot of opportunities now as both the US and Europe are open for the Indian manufacturing industry.

A key problem, though, is electronics, says Kapur. “I think the choke point is electronics and that is something that we are going to have to invest in heavily.”  He also points out that one way would be to forge alliances between the automotive industry and the electronic industry to see how the former can localise and reduce its dependence on imports.

For that to happen, companies have to invest in technology and research and development (R&D). However, the average R&D spends by auto component companies in India is a mere 0.5 per cent of their total spends, whereas to ensure localisation and become global players, it should be over 3 per cent, says Kapur.

Hopes & Concerns

• 800 auto component companies say they are ready to supply products for electric vehicles by 2023

• 75 companies eligible for PLI in auto components would collectively have to invest Rs 18,600 crore in 5 years

• High volumes of production will lead companies to look at exports, as domestic market is still small

• Makers zeroed in on certain products where India can become a global hub

• India, though, is weak in electronics for EVs. R&D in this space also remains lacklustre