Auto component makers no longer fearful of EV transition - ACMA

The India's auto components industry is overcoming the initial scepticism and fear to align itself with the ongoing EV transition, said Vinnie Mehta, Director General of ACMA. 

“Five to six years ago, there was a lot of apprehension,” Mehta noted. “Nobody says anything anymore. It's an interesting transition that we are doing.”

This may be associated with the fact that the once-reluctant manufacturers are now adapting, and some have emerged as leading global suppliers of EV components to major automakers.

In contrast, concerns about job losses and declining business opportunities dominated the conversation within the Automotive Component Manufacturers Association of India (ACMA) earlier.

Modest Numbers

Despite the shifting mindset, EV volumes in India remain modest relative to the traditional vehicle market. In the last year, India produced around 100,000 electric cars and 900,000 electric two-wheelers, dwarfed by the 20 million two-wheelers and 5 million cars powered by internal combustion engines (ICE).

The government’s goal of 30% EV penetration by 2030 means that ICE vehicles will continue to dominate, accounting for 70% of the market. Mehta emphasizes that the expanding vehicle market leaves ample space for both EVs and traditional vehicles, stating that the auto components industry will be "much bigger than what it is today".

However, Mehta did not commit to specific targets for the localization of EV components, citing a “chicken and egg” scenario, with low production volumes making indiginisation efforts more costly. Localization efforts, he suggests, are still finding their footing as the market grows.

ACMA’s broader push for localization has been underway for several years. A few years ago, ACMA and the Society of Indian Automobile Manufacturers (SIAM) set goals to localize 3% of auto component imports within 2-3 years, and an additional 10-15% over the subsequent five years.

By 2022, ACMA had already surpassed the initial target, achieving 6% localization of the Rs 120,000 crore worth of imported components, saving Rs 7,000 crore in foreign exchange. Localization, Mehta argues, is crucial for safeguarding against the depreciating rupee, which loses 5-7% of its value annually.

Currently, the average localization rate in India’s vehicle industry is about 70%, with component makers exporting roughly 30% of their production. As the industry continues to pivot towards EVs, the balance between local and global market demands will be crucial in defining the next chapter of India’s automotive sector.