Society of Indian Automobile Manufacturers (SIAM) recently hosted its Automotive Sourcing Conclave under the theme 'Towards Building a Resilient Supply Chain.' The event gathered stakeholders from the automotive and allied industries, including government representatives, OEMs, and component manufacturers. With the Indian automotive industry poised as the third-largest globally, the discussions underscored the critical need for localisation and robust supply chains to sustain growth and mitigate external shocks.
India's Role In The Global Automotive Value Chain
India's automotive sector is a vital pillar of its economy contributing 6.8% to the national GDP and 35% to manufacturing GDP. In FY24, the industry achieved a record production of 28.4 million vehicles. Driven by the 'Make in India' initiative and policy frameworks like the Production Linked Incentive (PLI) scheme, the sector has made strides in localisation. During Phase 1 of the initiative, localisation efforts reduced net imports by INR 7,000 crore, exceeding the initial target of a 3–4% reduction to 5.8%.
Localisation As A Key To Resilience
With Phase 2 aiming for a 16–20% localisation rate by FY25, the collaboration between SIAM and the Automotive Component Manufacturers Association (ACMA) has been pivotal. Joint efforts have identified 53 critical components for localisation, particularly in electronics and electrical systems. Notable strides have also been made in localising printed circuit boards (PCBs), a major component in modern vehicles.
However, deeper localisation requires a comprehensive approach. This includes the development of raw material ecosystems, such as copper and specialised inks for PCBs, and leveraging government support to attract investments in electronic components. Government-backed initiatives for semiconductor manufacturing in India, such as partnerships with global leaders like Micron and Renesas, further bolster this localisation drive.
Supply Chain Vulnerabilities
The discussions highlighted the impact of recent global disruptions including the COVID-19 pandemic, volatile commodity prices, and geopolitical tensions. Despite these challenges, India's automotive supply chain has demonstrated resilience. The localisation of high-tech items remains a top priority particularly as the industry transitions to newer powertrains like EVs, hybrids, and hydrogen fuel cells.
Regulatory support has played a crucial role in maintaining supply chain stability. Quality control orders (QCOs) and measures to ensure minimal reliance on imports are among the initiatives discussed. The government’s PLI Auto Scheme has already driven investments worth INR 18,000 crore by March 2024, with projections to cross INR 21,000 crore within the fiscal year.
Sustainability In Supply Chain Management
Technology emerged as a central theme in discussions on supply chain innovation. Artificial intelligence, IoT, and blockchain technologies are being increasingly adopted to optimise inventory, predict market trends and ensure traceability. The industry is also focusing on carbon-neutral goals with sustainability becoming integral to supply chain strategies. Circular economy practices, waste reduction, and compliance with emerging global norms, such as the European Critical Raw Materials Act, are shaping future roadmaps.
Collaborative Ecosystems For MSMEs
Micro, Small, and Medium Enterprises (MSMEs) form the backbone of India's automotive component supply chain. However, they often lack the resources to adopt advanced technologies or meet stringent quality standards. The conclave emphasised the need for collaborative frameworks to pool resources for common facilities like heat treatment plants and sustainable transportation solutions. Such models could enhance the resilience of smaller suppliers while aligning them with global market demands.
The deliberations reinforced the importance of collaboration between OEMs, suppliers, and the government. Policies that promote ease of doing business, secure access to raw materials, and provide a long-term regulatory roadmap are essential. Investment in workforce development and infrastructure, such as ports and transport networks, will further support the industry’s growth trajectory. Also, the industry urges the government to have a clear roadmap for upcoming regulations and QCOs.
Also Read