India ranks 4th globally in the automobile industry and is expected to become the 3rd largest automobile manufacturer by the year 2026. Apart from being the largest tractor manufacturer in the world, India also ranks as the second-largest bus manufacturer and third largest heavy commercial vehicle manufacturer globally. A major contribution to this remarkable achievement of the Indian automobile industry can be attributed to the robust support provided by the auto ancillary companies in India.
In this article let’s take a look at:
What are auto ancillary companies?
What are the future growth prospects for the auto ancillary sector in India?
Which are the top auto ancillary stocks in India?
What are auto ancillary companies?
Auto Ancillary companies are companies that specialize in manufacturing different types of auto parts equipment used in a vehicle such as a chassis, tyres, wiring systems, lights, battery, brakes, suspension, bearings, pistons, wheels, shock absorbers, gears, headlamps, springs, engine parts, axle shafts, and air conditioning parts, etc.
What are the future growth prospects for the auto ancillary sector in India?
According to the Automobile Component Manufacturers Association (ACMA), Indian exports of components used in the automobile industry are estimated to touch US$ 80 billion by the year 2026 and achieve total revenues of US$ 200 billion.
To meet India\’s electric vehicle (EV) ambitions a total investment of US$ 180 billion in the production of vehicles and creation of infrastructure for charging infrastructure would be necessary until the year 2030. This is a huge opportunity for auto ancillary companies in India.
In November 2020, the government approved a PLI scheme for the auto and auto ancillary industry with an approved financial outlay of US$ 8.1 billion spread over five years.
Which are the top auto ancillary stocks in India?
Let’s take a look at the some of the top auto ancillary stocks in India.
MRF Ltd.
Established in the year 1946, as a small manufacturer of toy balloons, Madras Rubber Factory (MRF) ventured into the manufacturing of tyres in the year 1969 after entering into a technical collaboration with Tire & Rubber company USA. Today MRF ranks as the largest tyre manufacturer in the country and features among the Top 20 Global Manufacturers. With product offerings for categories ranging from 2 wheelers to fighter aircraft, MRF is the country\’s largest OEM to the automobile industry in India.
Bosch Ltd.
Headquartered in Bengaluru, Bosch Ltd is a leading player in the auto ancillary industry with a diverse range of products such as fuel injection systems, aftermarket products for automobiles, auto electricals, car multimedia systems, accessories, starters and body systems.
Motherson Sumi Sytems Ltd.
Motherson Sumi Sytems Ltd. is one of the most promising companies in the auto ancillary sector. It is one of the world\’s top specialized auto component manufacturing companies for Original Equipment Manufacturers (OEMs). With a varied global customer base, the company caters to leading automakers in 36 countries across six continents. Motherson Sumi Systems offers a diverse range of auto components such as wiring harnesses, moulded plastic parts including car exterior and interior parts, rearview mirrors, bumpers, dashboards and door trims, rubber components, and HVAC systems.
Globally many countries are making a gradual effort to move over to electric vehicles to curb pollution and cut down on import bills on fossil fuels. As electric vehicles require more wiring components this would increase the content per vehicle provided by Motherson Sumi Systems by anywhere between 20-30 percent. Besides the shift to electric vehicles means, the demand for the company’s other products such as polymer and mirror-based products would continue.
Balakrishna Industries Ltd.
Established in the year 1961, Balkrishna Industries Limited (BKT) specializes in the business of manufacturing and selling of Off-Highway Tyres (OHT) and caters mainly to agricultural, industrial, and construction earthmovers, port mining, and All-Terrain Vehicles (ATV). The company has five state-of-the-art manufacturing units in India and 4 subsidiaries in Europe and North. Through its well-established distribution network, the company sells its products across 130 countries globally.
Amara Raja Batteries Ltd.
Incorporated in the year 1985, Amara Raja Batteries one of the largest manufacturers of lead-acid batteries in the country for both industrial and automotive. The company is the preferred OEM supplier to automobile companies like Ashok Leyland, Honda, Ford India, Mahindra & Mahindra, Hyundai, Tata Motors, and Maruti Suzuki. The company has a pan-India presence through its well-established sales & service network and also exports batteries to countries in the Indian Ocean Rim.
Minda Industries Ltd.
Incorporated in the year 1992, Minda Industries Limited specializes in the manufacturing of auto electrical parts such as switches including rotary switches starter switches plunger switches and rocker switches, lightings, batteries and blow moulded products, and ancillary services. Minda Industries also manufactures batteries for 2/3/4 wheelers and off-road vehicles. With over company 70% market share in the country, Minda Industries operates eight state-of-the-art facilities in India and one in the ASEAN region.
Endurance Technologies Ltd.
Endurance Technologies is a leading automotive component manufacturer catering to the 2 and 3-wheeler OEM segment in India. Through its European operations, the company mainly caters to 4-wheeler OEMs. The company\’s domestic product offerings include aluminum die-castings, suspensions, transmissions, and braking systems. Endurance Technologies operates 25 state-of-the-art manufacturing plants globally with 16 in India and the rest in Italy and Germany.
Disclaimer: Stocks mentioned in the above list are only for your information and should not be considered as a recommendation to invest.
Key factors to keep in mind while investing in the stocks of top auto ancillary companies in India:
Many of the stocks mentioned above are leading players in the auto ancillary sector in India and have created tremendous wealth for investors in the past. There is tremendous potential for growth in the auto ancillary sector.
Even in the future when the automobile industry gradually shifts from internal combustible engines to electric mobility, the demand for auto parts like tyres, switches, wiring, braking systems, shock absorbers, etc will continue to exist. On the other hand, auto ancillary companies specializing in engine parts or fuel injection systems may become obsolete or even cease to exist unless they diversify their product offerings.
Invest wisely after detailed research.
Read more: How Long-term investing helps create life-changing wealth – TOI.