Increased Logistics Costs Strain Auto Component Industry, Says ACMA

The Automotive Component Manufacturers Association (ACMA), the representative body of Indian auto component manufacturers, declared on Thursday that logistics continue to be a major obstacle despite a rise in export demand. The Red Sea crisis and other geopolitical events are causing disruptions to the automobile component supply chain and demand.

According to Shradha Suri Marwah, President of ACMA and CMD of Subros, "the Red Sea, which handles nearly 30% of the world's shipping container traffic, is currently facing a crisis that has led to the diversion of routes and congestion at alternative ports." The current crisis is causing an increase in time, inventory, and export costs, which is directly affecting Indian automakers. Working capital is being impacted by the delays, longer time to market and production, and higher inventory brought about by the problems at the ports in Singapore and the Red Sea.

Companies are choosing other routes, including those via Singapore Port, in response to these inconveniences. Deliveries in the supply chain have been delayed by around seven to fourteen days as a result of the abrupt spike in traffic at these alternate ports.

"Despite the overall merchandise export decline from India in FY24, auto component exports have grown amid geopolitical challenges and increased logistics costs," Marwah noted. With major contributions from North America (32%), Europe (33%), and Asia (24%), exports increased by 5.5% annually to USD 21.2 billion. The main factors influencing this export development were the drive transmission and engine parts."

The Director General of ACMA, Vinnie Mehta, emphasized that FY24 saw greater export growth in India than import growth, suggesting a promising future for the auto component sector. "Exports grew by 5.5% while imports increased by only 3%, reflecting the industry's focus on localization," Mehta stated.

Driven by growing e-commerce penetration and rising demand in the used vehicle market, the aftermarket sector also experienced significant growth. Aftermarket revenue increased to USD 11.3 billion in FY24 from USD 10.6 billion in the prior fiscal year. Electric vehicle supply made up 6% of industry revenue, which is double what it did in the previous fiscal year.

Mehta unveiled the ACMA Mobility Foundation, a program to encourage creativity and cooperation with cutting-edge technology firms, during the press conference. The industry benefits from sustained domestic car demand, infrastructural expansion, consistent exports, and new entrants in mobility. However, there are still difficulties, such as geopolitical problems, growing freight expenses, and high GST rates on automobile components.