There is a hindrance in the auto component supply chain due to the Red Sea crisis. The Red Sea, which accounts for almost 30% of the world's shipping container traffic, is at present facing a conduit crisis which led to the diversion of routes and congestion at alternative ports, Shradha Suri Marwah, President, ACMA, and CMD, Subros, said.
Repercussions of such a crisis are directly faced by Indian automakers with increased time, inventory, and expenditure in exports. “We are having issues around the Red Sea and Singapore port. While there's no issue in terms of components, moving in and out is a major problem. And that is causing a lot of trouble because the time to market is going up, time to produce is going up, inventories are going up, due to which working capital gets dropped,” added Marwah.
Due to such a crisis now companies are opting for alternative paths such as Singapore Port. However, sudden increase in traffic at alternative ports leads to increased time for supply of demand by about 7 to14 days.
“On the front of trade, whilst overall merchandise exports from India witnessed degrowth in FY24, auto components exports have grown despite geopolitical challenges and increase in logistics costs. That apart, growth in imports has been less, leading to trade surplus, indicating thrust by the industry in front of localisation,” she said.
In FY 23, exports grew 5.5% growth Y-o-Y to USD 21.2 billion from USD 20.1 billion. This accounts for 32% of exports from North America, 33% in Europe, and 24% in Asia respectively. Among these drive transmission and engine components are the two largest contributors to the exports.
Vinnie Mehta, Director General of ACMA, said that for FY24, India has observed higher export growth than imports indicating a positive outlook for the auto component industry. Exports grew by 5.5% while imports increased only 3% in FY 24. This might be because of the focus on localisation, Mehta said.
Auto components sales in the aftermarket have also grown immensely this fiscal due to positive response in the used vehicle market. This can be owing to higher e-commerce penetration in organized sectors which directly escalated demand, he said. The turnover of the aftermarket in FY 24 stood at USD 11.3 billion while in the previous FY, it was USD 10.6 billion. Supply to EVs accounted for 6% of auto components industry turnover, double of what was in the previous FY.
ACMA Mobility Foundation
During the press conference, Mehta disclosed that ACMA has initiated the ACMA Mobility Foundation which welcomes startups to be a part of ACMA. This step is taken to drive innovations and collaborations with advanced technology interfaces.
The industry has largely tailwinds including as the domestic vehicle demand continues to hold, an emphasis on infrastructure development, stable exports and new entrants in the mobility space.
Some of the challenges include geopolitical issues, increasing freight costs, and high GST rates on auto components.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
