India’s global auto components trade expected to grow 5% by 2026, according to McKinsey
India is in a good position to increase its market share in the global auto components trade to 4%-5% by 2026. In the wake of COVID-19, programs like ‘Make in India ‘and ‘Aatamnirbhar Bharat’ are being undertaken by the industry to avoid future disruptions in the supply chain. As the supply chains shift, India will be able to increase its share in the global auto components trade.
The country contributes only a small percentage of the total imports to its biggest buyers – 2.2% in the US, 1% in Europe and 0.6% in China. To grow trade, India could benefit from a targeted exports expansion and imports substitution programme, according to a report by McKinsey on Indian auto component industry. For exports expansion, India has to learn from countries like Germany, China, Japan and Korea that are major exporters of auto components.
These countries have added advantages such as the presence of large original equipment manufacturers (OEMs) in the domestic market, greater ease of doing business, a significant spend on research and development – between 2% and 5% of GDP- and their top-25 rank in infrastructure. Additionally, McKinsey reported, India could pursue higher exports in product categories where the country has a competitive edge, such as shafts, bearing and fasteners.
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