Yashika Singh

Head of economic analysis,

D&B India

The Indian auto ancillary industry posted a relatively strong performance in the December quarter, mainly due to a recovery in production of commercial and passenger vehicles. Given the improvement in quality and standards and cheaper rates, global players continued to procure auto components from India even during the slowdown. Production of auto components is likely to improve further as domestic demand strengthens and the export market recovers. It is expected that a number of OEMs will increase the localisation content (i.e., use of Indian manufactured auto components) to remain competitive. Thus, increased domestic automobile production, higher localisation and strong demand from the replacement market are likely to help the auto ancillary sector. However, some challenges do remain. Margins are expected to remain under pressure on account of rising steel prices. Also, demand from two major destinations for exports of Indian auto components, i.e. the US and the UK, will take longer to revive. Also, the relatively low level of technological advancement and R&D facilities as against other international competitors such as the Asean countries remains a concern.

The industry, therefore, expects the allocation of a fund for R&D and technology upgradation in the forthcoming Union budget.