+ Electronics: The Fuel for New Age Automobiles - CII Blog

Indian Automotive Industry has seen phenomenal growth and progress in last two decades coupled with intensified use of electronics. This has coincided with huge growth and proliferation of information technology and digitization, as also, triggered by growing concerns around vehicular emissions, safety and impact on environment. 

Indian electronics manufacturing ecosystem is still in a nascent stage which is predominantly an assembly operation. Although, the value of India’s domestic electronics has grown from US$27.20 billion (Rs 1,90,366 crore) in 2014-15 to US$76.0 billion (Rs 5,33,670 crore) in 2020-21, however, this has very high value of import content which continues to increase. In case of automotive electronics imports, it accounted for US$2.14 billion (~Rs 15,000 crores) in FY2019-20 which was 11 per cent of total automobile imports. The key reasons for such high level of imports are lack of local supply chain, technical/design capability for semiconductors & Display Fabrication Units (FABs) manufacturing, and absence of globally competitive scale.  

Additionally, high import dependency for electronic parts has heightened the vulnerability of Indian automobile industry from global supply chain disruptions as witnessed from recent shortage of semiconductors leading to loss of sales opportunity estimated at Rs 1,800-2,000 crore in the past few months. This import dependency of Indian automotive industry is bound to increase due to advent of C.A.S.E. (Connected, Autonomous, Shared and Electric) mobility. It is estimated that demand for India’s automotive electronics will increase from US$4.29 billion (Rs 30,000 crores) in FY2019-20 to US$10 billion (Rs 70,000 crores) by 2026. 

India’s overall electronics market is expected to grow to reach US$400 billion by 2025. If India does not take steps to localize electronics now, it will not only be left behind but also have huge impact on country’s Trade deficit.  Having one of the largest demands for electronic parts, India is an attractive investment destination for their large-scale manufacturing. This can also provide India an opportunity to leverage its global leadership in software side. However, to realize this, India needs to address a few challenges like cost disadvantages arising out of high land, logistics, capital transaction costs, etc.

Recognizing above challenges, Government has recently approved PLI for semiconductor and display ecosystem with an outlay Rs 76,000 crore (> US$10 billion) to setup over 20 semiconductor design, components manufacturing and display fabrication (FAB) units. This step is highly synergic to earlier PLIs announced in the areas of electronics, autos and ACC (Advanced Chemistry Cell) having potential to enhance India’s deep localization capability, thereby improving the cost dynamics of Indian manufactured products, making end products competitive and safeguard India from global supply chain disruptions.

This has been contributed by Mr. Vikram Kirloskar, Past President, CII; Chairman, CII Manufacturing Council and Vice Chairman, Toyota Kirloskar Motor Ltd.

The article first appeared in CII ARTH. Access the publication here – https://journal.cii.in