India's auto components industry still reeling from Red Sea crisis

The Indian auto component industry exported items worth $21.2 billion in 2023-24, marking a five per cent year-on-year growth, he noted

The Red Sea crisis is significantly impacting the multi-billion-dollar India’s auto components industry. Delivery times for containers have doubled, ports like Singapore are congested, and freight rates have risen sharply as ships take longer routes for safety, the Automotive Component Manufacturers Association of India (Acma) said on Thursday.

"The time to deliver containers has gone up substantially, almost twice or thrice. The trade route has become so much more elongated and you avoid the Red Sea and you have to go down to South Africa down to the Cape of Good Hope to access Europe. Europe is almost 33 per cent of our market for exports," Vinnie Mehta, director general, Acma said.

The Red Sea crisis began in October last year when Houthi rebels in Yemen, supported by Iran, fired missiles and drones at Israel, calling for an end to the Gaza invasion.

Subsequently, the Houthis captured and attacked numerous vessels in the Red Sea, leading to extensive air strikes on their missile sites by the US and allied forces.

This crucial trade route, through which 30 per cent of the world's container traffic passes, has experienced a significant decrease in maritime activity, cutting traffic through the Suez Canal and Bab El-Mandeb Strait by half.

"The Indian government also cannot do much because the shipping lines are international. We have to wait and keep our fingers crossed and hope things normalise,” Mehta said.

The Indian auto component industry exported items worth $21.2 billion in 2023-24, marking a five per cent year-on-year (Y-o-Y) growth, he said.

Europe and North America hold about 32 per cent share of these exports.

Shradha Suri Marwah, president, Acma, said freight companies are seeking a congestion charge of about $1,000-1,500 per container.

"This means the cost of shipments is going up. We hope it will get decluttered soon but no one has that answer," she said. 

The industry has imported items worth $20.9 billion, showing a three per cent Y-o-Y growth. About 25.8 per cent of the imports were from Europe, while China was the largest import market, accounting for 29 per cent.

Marwah explained the container shortage is happening because the time to rotate containers has gone up. In addition to the Red Sea crisis, there have also been issues of congestion at ports in Singapore, China, and Sri Lanka.

"Singapore is congested right now. When one part of the world has a crisis (like Red Sea), then the freight starts looking at alternate routes. When transportation on these alternate routes increases, the most efficient ports get congested first. Singapore is an efficient port. It is highly congested right now. That is why their clearance time has gone by 7-14 days. This means the average time for components coming from outside has gone by up to two weeks," she noted.

Automobile dealers have also been complaining about inventory pile up.

"It must be noted that in H1, there is generally a piling up of inventory. It starts to get liquidated in H2 when the festival season picks up. The OEM (auto manufacturer) does sustained production throughout the year because they have capacities planned and they can't double or halve their production in a month," Marwah added.


India recorded a trade surplus of $300 for auto components in 2023-24 amid strong demand and increased localisation

Financial year	Indian auto component industry's exports (in $ billion)	Y-o-Y increase/decrease	Indian auto component industry's imports (in $ billion)	Y-o-Y increase/decrease
2019-20	14.5	-5%	15.4	-13%
2020-21	13.3	-8%	13.8	-10%
2021-22	19.1	44%	18.3	33%
2022-23	20.1	5%	20.3	11%
2023-24	21.2	5%	20.9	3%

Source: ACMA