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What are the challenges faced by the Auto Ancillary Market in India?

The auto ancillary industry in India is experiencing a period of significant disruption and transformation. A coming together of technology-focused companies and automotive companies is blurring the division and expanding the reach of the traditional automotive players. Moreover, consumer behavior is also changing and evolving from an ownership-centric mind set to a service-oriented one. To cater to this changing consumer preference, supply chain is expected to play a vital role for this transformation.

Global brands have also turned their focus toward providing customer experience instead of steadfastness and revenue. The major players in the auto ancillary market in India possess the capacity to offer customers the experience that they desire. Customers expects these brands to mirror a similar availability and reconciliation that are currently offered by the automotive manufacturers. They expect consistency and continuity in the brand.

Most auto ancillary industry players in India are confronted with a number of difficulties, with the standout being the shift in the consumer mind set from proprietorship to access. Consumers have gradually started considering the auto components as a service, as against an absolute necessity. Here’s a look at five of the major challenges and disruptions in the auto ancillary industry –

  1. Attracting talent- As the auto ancillary manufacturing industry in India continues to transform; manufacturers are looking to attract the top and the brightest talent in order to cater to the growing demand from consumers.
  2. Overcapacity in production – Like any other industry, the auto ancillary industry in India continually face ups and downs. Overcapacity becomes a significant challenge when a manufacturers have already invested in resources like staff and materials for producing a definite quantity. But during a downturn, they realize that they need not require producing as much as they had planned for. This typically results is over-expenditure that can hamper cash flow and leads to wastage of resources. One of the most effective ways to prevent overcapacity is to ensure efficient production scheduling and responsiveness toward manufacturing demand-supply chain.
  3. Globalization – Enhanced competition from local as well as global players is a challenge for market players as it implies a significant cut in market prices for several vehicles, which in turn forces manufacturers to reduce margins to maintain the revenue stream.
  4. Sustainability – What concerns consumers most is sustainability of the components produced by the auto ancillary OEMs. Manufacturers, hence, are continuously struggling to generate more eco-friendly components and to be more competent in manufacturing.
  5. Urbanization – At present consumers have a dissimilar set of criteria for their cars, numerous of which are relevant to urbanization. They comprise smaller vehicles, better manoeuvrability, and enhanced fuel mileage. So components need to compatible with such automobiles.

Automotive components manufacturing industry serves as the single source of consumer authenticity, giving a total history of the consumer’s associations with multiple channels. India possesses a young population with high purchasing power, which is leading to an increase in first-time vehicle purchases. With the growing sale of automobiles across the country, the demand for car components is expected to witness a surge in the foreseeable future.