Operating
Landscape
Indian Auto Industry in Upward Trajectory
The Indian automobile sector had completed a successful FY 2022-23 and is starting the upcoming year with a hopeful perspective, aiming to regain the sales levels experienced before the Covid-19 pandemic. Despite challenges such as the semiconductor shortage and uncertainties caused by the Omicron variant, the industry made efforts to capitalise on the strong groundwork established in FY 2022-23 With extensive digitisation, the rapid expansion of the economy, and lessons learned from the previous years of the Covid-19 pandemic,, these factors were anticipated to be valuable assets as demand, particularly in the passenger vehicle segment, continues to display resilience.
The domestic production of automobiles in India witnessed a Compound Annual Growth Rate (CAGR) of 2.36% from FY16 to FY20, resulting in the manufacturing of 26.36 Million vehicles in FY20. Specifically, the production figures for two-wheelers, passenger vehicles, commercial vehicles, and three-wheelers in FY22 were 17.71 Million, 3.65 Million, 0.80 Million, and 0.75 Million, respectively. In FY22, the total output across various vehicle categories, including passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles, amounted to 22,933,230 units. The export of automobiles is projected to register CAGR of 3.05% from 2016 to 2026. The Government of India has high expectations for the automobile sector, aiming to attract an estimated investment of US$ 8-10 Billion from both local and foreign sources by 2023
Furthermore, numerous automobile manufacturers were seen taking strides towards adopting to novel technologies, particularly in the realm of electric mobility. This inclination is projected to lead to the introduction of a multitude of new models in both the four-wheeler and two-wheeler categories throughout FY 2023-24.
The automotive industry has received significant support through favourable Government policies that have been recently announced. These policies include the allocation of ₹ 76,000 Crores for a semiconductor manufacturing scheme, the extension of the FAME-II scheme until 2024, enhanced incentives for the two-wheeler segment, a production-linked incentive (PLI) scheme worth ₹ 26,000 Crores for the automobile and auto component sector, as well as a PLI for advanced chemistry cell amounting to ₹ 18,000 Crores. These measures have provided substantial backing to the sector as it adopts and implements innovative technologies. It has been also noted that the worldwide demand for auto components manufactured in India, coupled with the increasing emphasis on electric vehicles, has created numerous opportunities for component manufacturers to capitalise on.
Automotive Components Industry Trends In India
Between the FY 2015-16 and 2022, the automotive components industry exhibited a Compound Annual Growth Rate (CAGR) of 6.35%, reaching a total value of US$ 56.60 Billion in FY 2021-22. During the same period, exports experienced a CAGR of 11.89%, amounting to US$ 19 Billion in FY 2021-22. This industry accounted for 2.3% of India's Gross Domestic Product (GDP) and generated direct employment opportunities for 1.5 Million individuals. Projections indicate that by 2026, the automobile component sector will contribute 5-7% to India's GDP. In the period spanning from April 2021 to March 2022, the turnover of the automobile component industry stood at ₹ 4.20 lakh Crore (equivalent to US$ 56.5 Billion), representing a revenue growth of 23% when compared to FY 2018-19. Anticipated growth suggests that the auto components industry will reach a value of US$ 200 Billion by FY26. According to ICRA, the revenue of auto ancillary businesses is estimated to witness an 8-10% increase in FY23.
According to the Automobile Component Manufacturers Association (ACMA), the export of automobile components from India is projected to reach US$ 30 Billion by 2026. Concurrently, the Indian auto component industry aims to achieve a revenue target of US$ 200 Billion by the same year. India holds a formidable position in the global market, with notable achievements, such as being the largest manufacturer of tractors, the second-largest manufacturer of buses, and the third-largest manufacturer of heavy trucks worldwide. The Indian automotive industry, including component manufacturing, is anticipated to reach a value between ₹ 16.16 trillion and ₹. 18.18 trillion (equivalent to US$ 251.4 Billion to US$ 282.8 Billion) by 2026. The sector has attracted substantial investments from both domestic and foreign manufacturers, with foreign direct investment (FDI) inflow amounting to US$ 33.54 Billion between April 2000 and June 2022.
In October 2022, we announced our partnership with South Korean firm Daesung Eltec, to bring in next-generation advanced driver system solutions to India. This marked the era of new partnerships to contribute to ever growing automotive components industry in India.
Regulatory Environment
The regulatory environment for automobile component manufacturing companies in India has undergone significant changes in recent years, reflecting the Government’s commitment to promoting sustainable and technologically advanced practices in the automotive industry. The Indian automotive sector is heavily regulated to ensure safety, emissions compliance, and adherence to quality standards. In line with global trends, India has been actively pursuing policies to reduce vehicular pollution, enhance road safety, and foster the adoption of electric vehicles (EVs). The implementation of Bharat Stage VI (BS-VI) emission standards in 2020 and the National Electric Mobility Mission Plan (NEMMP) have set the stage for a greener and more sustainable future for the automotive industry.
Furthermore, the Government of India has shown a strong commitment to promoting localised manufacturing and self-reliance in the automotive sector through initiatives such as Make in India and Atmanirbhar Bharat (Self-reliant India). These initiatives aim to reduce dependence on imports, enhance domestic manufacturing capabilities, and foster innovation. As a result, automobile component manufacturing companies like us need to align our strategies with the Government’s vision and actively participate in initiatives that drive indigenisation, research and development, and technology transfer. Embracing these regulations and initiatives not only ensures compliance but also provides opportunities for growth and differentiation in the highly competitive automotive market.
Social and
Environmental Factors
Integration of ESG Factors
Social and environmental factors play a critical role in shaping the operating landscape for our businesses worldwide. As sustainability and corporate social responsibility gain prominence, stakeholders increasingly expect businesses to operate in a socially and environmentally responsible manner. Uno Minda Group recognises this expectation and is committed to addressing these factors proactively. In India, social factors encompass aspects such as labour practices, human rights, community engagement, and inclusivity. We recognise that manufacturing sector need to ensure fair and safe working conditions for their employees, promote diversity and inclusion, and engage with local communities to build long-term relationships based on trust and mutual benefit.
| Procurement from Local Suppliers | CSR expenditure | Livelihoods Benefited |
|---|---|---|
| 86% | 11.4% | 19300+ |
Environmental factors are of paramount importance in the automobile component manufacturing industry as the sector has a significant impact on carbon emissions, resource consumption, and waste generation. In India, the growing concern for environmental sustainability has led to increased regulations and initiatives aimed at reducing the sector's environmental footprint. Uno Minda Group recognises the importance of environmental stewardship and is actively engaged in adopting green manufacturing practices, optimising energy efficiency, and minimising waste generation. The Company is also exploring opportunities for sustainable materials sourcing and adopting cleaner production technologies. By aligning its operations with environmental standards and leveraging innovative solutions, Uno Minda Group aims to mitigate its environmental impact and contribute to India's sustainable development goals.
Integration of ESG Factors
The regulatory, social, and environmental landscape in the industry presents both challenges and opportunities. By actively addressing these ESG factors, Uno Minda Group is committed to ensuring long-term value creation, while contributing to the well-being of its stakeholders and the communities it serves.
Through adherence to regulatory requirements, We maintain compliance with evolving norms, such as emissions standards, safety regulations, and import-export guidelines. Moreover, the Company understands the importance of fostering a positive social impact by ensuring fair labour practices, promoting diversity and inclusion, and engaging with local communities.
Environmental sustainability is a key focus area for Uno Minda Group, with efforts directed towards reducing its carbon footprint, optimising energy efficiency, and minimising waste generation. The Company's dedication to sustainable manufacturing practices, exploration of sustainable materials sourcing, and support for electric mobility initiatives reflect its commitment to mitigating its environmental impact and contributing to India's sustainability goals. In embracing ESG factors, Uno Minda Group strives to create value not only for its stakeholders but also for the broader society and environment. By integrating sustainability into its operations, the Company is well-positioned to navigate the evolving external environment while driving innovation, fostering resilience, and supporting the transition to a greener and more inclusive automotive industry.