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India’s auto parts industry recorded a drop in revenue after five years, hit by a prolonged slowdown in the domestic market and the global impact of the coronavirus pandemic.

Revenue in the fiscal year ended 31 March fell 11.7% to 3.5 trillion rupees ($49.2 billion), the Automotive Component Manufacturers Association of India (Acma) said on Wednesday.

“The auto parts industry had last seen a marginal drop of 2% YoY in FY13-14. Post that, it has been growing on the back of growing demand for vehicles, exports and in the aftermarket," Vinnie Mehta, director general, Acma said in a phone interview.

He said sale of parts to automakers, exports and aftermarket sales contributed 60%, 25% and 15%, respectively to the auto component industry’s annual turnover.

A decline of 18% in domestic vehicle sales in FY20 led to parts suppliers recording a fall of about 17% in total sales to automobile companies during the year at $40.5 billion.

Meanwhile, parts exports declined to $14.5 billion in FY20, from $15.2 billion in FY19. The automotive aftermarket recorded a turnover of $9.8 billion, marginally lower from $10.1 billion in FY19.

“Subdued vehicle demand, investments made for transition from BS-IV to BS-VI, liquidity crunch, lack of a clarity on policy for electrification of vehicles and slowdown in key export markets, among others, had an adverse impact on the performance of the components sector in India as also on its expansion plans," said Deepak Jain, president, Acma.

Jain said the auto parts industry is seeing business returning to pre-covid levels in segments such as two-wheelers and tractors but muted demand for commercial vehicles continues to be an area of concern.

“The auto component industry faced acute challenges on the front of working capital, production and dysfunctional logistics. The industry’s performance is expected to return to pre-covid levels by the festive season," Jain said. He, however, warned that intermittent lockdowns in states where factories are located and a shortage of skilled labour remain threats to production ramp-up plans.

Jain said Acma has recommended the government to accord “continuous production industry" status to the automotive industry to allow regular operations despite local lockdowns.

The industry body said also that total imports of auto parts fell to $15.4 billion in FY20, from $17.7 billion in the previous year. China was the biggest exporter of auto parts to India with a 26% share, followed by South Korea at 14%.

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