Electronics: The Fuel For New Age Automobiles

Rapidly evolving regulations governing emissions and safety, as well as technological disruptions such as connectivity and e-mobility, could lead to increased demand for electronics in the automotive sector. In India, the electronics content is expected to account for nearly 45 per cent of the total cost of an automobile by 2030.

India is the fourth largest automotive market in the world and the seventh largest automotive manufacturer (Figure 1), according to an India Brand Equity Foundation (IBEF) report. It is expected to emerge as the world’s third-largest auto market (source: IHS Auto Market) by 2021. In the last seven years, the country has increased its annual production of vehicles by 1 million units, resulting in an output of 4 million vehicles last year. However, considering the rapid economic development, the ongoing urbanisation, a burgeoning consumer class, and supportive regulations and policies, the 5 million milestone can be reached within the next five years. The market is expected to become even stronger with respect to domestic demand and exports, backed by the presence of established domestic and international original equipment manufacturers (OEMs).

According to the IBEF report, automobile exports in India grew 20.78 per cent year-on-year during April-November 2018. They are expected to grow at a CAGR of 3.05 per cent during 2016-2026. Manufacturing for the Indian automotive industry (including component manufacturing) is expected to reach 16.16-18.18 trillion (US$ 251.4-282.8 billion) by 2026. The industry is also targeting to increase exports by five times during the period 2016 to 2026.

The unprecedented growth of the Indian automotive sector is mainly supported by four factors — favourable policies, growing demand, rising investments and marketing opportunities. The Indian government’s Automotive Mission Plan: 2016-26 indicates a clear vision for this sector. The government aims to develop India as a global automotive manufacturing centre.

Moreover, India has significant cost advantages that can lead to savings of around 10-25 per cent on operations for manufacturing units based here, vis-à-vis those based in Europe and Latin America.