The 14th IAA India Day, which is an industry platform and an expression of the close partnership between India and Germany, sees Vinod Aggarwal and Sunjay Kapur drive home the India growth story.
22 Sep 2022 | 6793 Views | By Ajit Dalvi
Among the several countries that India trades with, Germany occupies a special position. It is India’s largest trading partner in the European Union and one of the leading sources of foreign direct investment. At present, there are over 2,000 German companies, 650 joint ventures and 700 manufacturing units in India, many ...
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Among the several countries that India trades with, Germany occupies a special position. It is India’s largest trading partner in the European Union and one of the leading sources of foreign direct investment. At present, there are over 2,000 German companies, 650 joint ventures and 700 manufacturing units in India, many of them in the automotive sector across both the vehicle manufacturing and component sectors and extending into training too.
The IAA, the world’s largest trade fair held in Hanover, has always had an India focus. Over the years, the IAA-India-Day has developed into a meeting point and an international mobility platform for industry representatives and is an expression of the close-knit partnership between India and Germany.
Organised by VDA (German Association of the Automotive Industry, ACMA (Automotive Component Manufacturers Association, SIAM (Society of Indian Automobile Manufacturers) and IGCC ( Indo-German Chamber of Commerce), the IAA-India-Day builds upon the work the done by the Indo-German Working Group on Automotive.
Panel discussion at IAA-India-Day 2022: L-R: Suresh KV, Country Head, ZF India; Rajinder S Sachdeva, COO, VE Commercial Vehicles; Vinod Aggarwal, President, SIAM; Hildegard Müller, President, German Association of the Automotive Industry (VDA); Dirk Matter, MD, Indo-German Chamber of Commerce, Dusseldorf; and Sunjay Kapur, President, ACMA.
This year, on September 21, the 14th IAA-India-Day was held at the Convention Centre, Hanover Trade Fair, with the focus on the co-operation between India and Germany in the commercial vehicle sector. Thus, it was only fitting that Vinod Aggarwal, the president of SIAM, and MD and CEO of VE Commercial Vehicle, open the proceedings of the annual event.
SIAM President Vinod Aggarwal: “We’re expecting speedy growth”
The CV industry is the barometer of a country’s economy and, therefore given the strong growth the Indian CV sector is currently displaying, the SIAM president was bullish about growth this year and in the coming years.
Aggarwal said: “The Indian economy, at $3 trillion, is growing very well and is the fifth largest in the world, having recently overtaken the UK. India’s per capita income will also grow very well in the coming years. In 2022, the CV industry’s market size was 716,000 units. We are expecting very speedy growth in this sector – at a CAGR of 14% to 1.2 million units by 2025. The sectors which are going to give a boost to this industry are infrastructure and real estate, e-commerce, and transportation and logistics which are fundamental to the economy. Therefore, the confidence level on this growth is very high.”
The CV industry is a cyclical one and after FY2019, when sales crossed the million mark – 10,07,319 units / 17.61% YoY growth – demand dropped to 717,593 units in FY2020 (-29%) and 568,559 units (-21%) in FY2021, albeit the pandemic-induced loss of sales was also a determining factor. However, demand is back and FY2022’s 716,566 units indicate that demand for CVs has returned to pre-Covid days. According to Aggarwal, who made a detailed presentation, first-quarter FY2023 numbers (April-June 2022) are “very encouraging” and the situation is the same for CV exports which are showing a smart uptick.
The SIAM president said, “The entire Indian automotive industry is very well placed. India is among the top 2 two-wheeler manufacturers in the world, the seventh-largest CV maker and the fourth largest PV manufacturer. This order is expected to improve more and more in the future.
Our business environment is pushing this growth for the CV industry and there are four key factors for this: self-reliant India, evolving regulations, infrastructure, digitalisation and alternate fuels.”
ACMA president Sunjay Kapur: “India a great opportunity as a manufacturing base”
The Indian auto component industry is firing on all cylinders, having recorded its highest-ever turnover of Rs 4.20 lakh crore (US$ 56.5 billion) in FY2022, up 23% and also a trade surplus of $700 million for the first time. To briefly put it, this sector is also optimistic as the Indian economy revives and vehicle demand exhibits stability.
ACMA president Sunjay Kapur, who is also chairman of Tier 1 supplier Sona Comstar and the co-chairman of the CII Smart Manufacturing Council, said: “We have seen phenomenal growth this year and we are at pre-pandemic levels. Definitely, we are encouraged by the growth and, if nothing out of the ordinary impacts us, we don’t see this growth stopping and we will continue to see double-digit growth.”
He added, “India’s passenger vehicle market at 28 vehicles per thousand per capita has a lot of potential. India is still a very aspirational market for vehicle purchase and at 3 million vehicles sold last year, we see this as a very great opportunity to grow.
“Our exports grew 43% to $19 billion and we had a trade surplus of $700 million for the first time. The aim is to continue to invest in technology and reduce our dependence on imports. This has really got to do with the China+1 strategy, where we have seen a lot of exports come out of India because of the kind of investments happening in technology.”
Kapur continued, “At ACMA, we work very closely with the International Purchase Offices of various Tier 1 suppliers and OEMs to boost exports. It is a great opportunity for India as a manufacturing base from a quality perspective and from a talent point of view.”
He pointed out to the huge opportunity in the Indian aftermarket sector. “We have also had a 15% growth in the aftermarket to $10 billion – very quickly evolving into a more formal with the right standards and practices. There is a lot of activity in the start-up space and lot of e-commerce. It’s a great opportunity. Given that the global aftermarket size is $300 billion, there are great collaboration opportunities to tap into this space – more vehicles, more prolonged usage, and more second-hand vehicles, which is also a global phenomenon.”
Commenting on the Productivity Linked Investment scheme in India, Kapur said: “India has got a great PLI Scheme which encourages companies to invest in future technologies. Seventy-five companies from the automotive industry have been approved by the government and the outlay is large in terms of money that comes into companies for incentives if they meet the criteria. The FAME 2 scheme relates to the EV industry and states which are pushing electrification have their own EV policies. We are going to see a lot of movement towards clean energy – hydrogen, ESG and electric.”
“ACMA also has a great ecosystem with start-ups and we are working with a number of them to develop and mentor them. We onboarded two non-auto companies which are in the electrical space and we believe that it is a great growth opportunity. We have traditionally built our business on joint ventures. Back in 1987, when the auto component industry flourished, we began with JVs. This is again a great opportunity for partnerships between the two countries, Germany and India continue to be strong partners and anything that we can find in terms of technology is a great opportunity. Also, the Tier 2 and 3 category is a growing space and continues to look for technology and there are opportunities here.”