Manav Kapur, Executive Director, Steelbird International shares his thoughts on how Indian auto component makers addressing rising demands of EVs.
The steady growth of the electric vehicle (EV) sector in the country has prompted the need for an evolution in the auto component industry as well. The Indian component manufacturers are extensively chalking out strategies to expand their capacity and create new skill sets to adapt to the EV evolution. The Automotive Component Manufacturers Association of India (ACMA) has recently stated that among its 800 members, 60 per cent are ready to supply components to electric vehicle manufacturers and the rest have asserted to be prepared by the end of the year or 2023.
The Indian EV component market was valued at $536 million in 2019 and is projected to grow at a compounded annual growth rate of 22.1 per cent between 2020 and 2030. The auto component industry is expected to invest approx. Rs 16,700 crore in Financial Year (FY) 2023 and approx. Rs 20,800 crore in FY2024 for capital expenditure – among which 25 to 30 per cent is expected to be invested towards electric vehicles.
The Indian auto component industry mostly comprises manufacturers of mechanical and powertrain parts; among which the players in powertrain business are facing a threat due to the evolution of EVs. Experts in the industry believe that electric mobility might put 40 per cent of auto components at risk and component makers will have to re-engineer their business models accordingly. However, the projected penetration of electric vehicles, especially passenger vehicles, is 10 to 20 per cent by 2030; which means auto component manufacturers will have time to diversify the risk and the traditional architect will stay relevant for at least another two or three decades to come.
The Government has been introducing various schemes to encourage the domestic production of auto components for electric vehicles. Under the Production Linked Incentive (PLI) scheme, 75 companies plan to invest Rs 29,834 crore over the next five years. Auto component makers are gearing up to scale up manufacturing of domestically built motors and controllers, battery management systems, chargers and charging stations, remote diagnostic facilities, etc.
Apart from counting on the increasing demand for EVs, automakers are also banking on the rising demand due to electronic components in the conventional internal combustion engine (ICE) powered vehicles. Many auto component makers believe that the faster electrification of Indian vehicles will turn out to be an opportunity for them. While the EV sector will be steadily growing the demand for electric components like smart keys on the one hand, on the other digital clusters and high voltage wiring harness will also grow, and component makers can bank on the opportunity.
Although the electric vehicles will minimize the relevance of traditional auto parts like clutches, radiators and gears, they will also open the doors for manufacturing new parts like electric motors, batteries, inverters and microprocessors. Startups are expected to contribute the most to shaping the EV sector and many new electric auto components makers have evolved in the market while the existing players are re-structuring their businesses to accommodate the EVs.
