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Yevgen Sokolnikov

Yevgen Sokolnikov is CEO and co-founder of boodmo.com, a leading online marketplace of auto components in India

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India Poised to be the Global Hub for Auto Component Marketplace

India is expected to break into the league of top three vehicle producing nations by 2025, customers must be aware of quality labels and corresponding right vendors. Reputed online stores, which have emerged in the past couple of years, could offer a great solution in this regard.

The growing working population & expanding middle class base are the key demand drivers for the online auto component industry in India. E-commerce has today become the ‘standard’ in retail. Easy access of internet by all age groups and the option of choosing from a huge variety of products, have made shopping effortless now.

However, when we talk about online sales of auto spare parts for cars, this segment still remains largely under-tapped in India, leaving a huge potential for its digitisation and growth.

Unorganised to organised market with digitisation

Automotive spare parts market in India is largely unorganised. The unavailability of spare parts with original cost and getting the genuine products are two basic problems being faced by customers, currently. As there are not much alternatives available in an offline market, digitally enabled automotive spare part sector could successfully resolve these problems, while offering a plethora of choices. Digitisation will lead to transition of this large unorganised sector into an organised one, creating a win-win situation for both auto players as well end customers.

In India, online sales, executed directly by original manufacturers of auto spare parts and a few online marketplaces, is still a niche area. However, to expand business and cater to the increasing demand of customers, the industry players need to embark on this journey. Shifting the market online will not just lead to increased margins from disintermediation, but also help build a closer relationship with customers, leading to better profitability and retention.

Emerging market for online players

India is expected to break into the league of top three vehicle producing nations by 2025, customers must be aware of quality labels and corresponding right vendors. Reputed online stores, which have emerged in the past couple of years, could offer a great solution in this regard.

Government has also implemented GST to support the industry with lower material cost. Reduction in excise duties in motor vehicles sector to facilitate cheaper imports of spare parts, will further spur the demand for auto components for global brands.

India has the competitive advantages in terms of cost-effective manufacturing base which keeps costs lower by 10-25 per cent relative to operations in Europe & Latin America. Added to it is the presence of a large pool of skilled & semi-skilled workforce amidst a strong educational system. India is also the third largest steel producer globally, thus a cost advantage in terms of raw material supply is definitely helping the industry.

India is fast emerging as global hub for e-auto component sourcing. Notably, India is geographically closer to key automotive markets like the Middle East & Europe and has the burgeoning domestic demand.

Indian Govt pushing the auto industry for growth 

The government is providing the adequate continued policy support in the form of Auto Policy 2002. In September 2015, Automotive Mission Plan 2016-26 was unveiled, which targets a fourfold growth for the sector. The strong support for R&D & product development by establishing National Automotive Testing and R&D Infrastructure Project (NATRiP) centers pan India leads to access to innovation for the sector. The 100 per cent FDI allowed under automatic route for auto component sector has facilitated the investment.

The major global OEMs have made India a component sourcing hub for their global operations. India is also emerging as a sourcing hub for engine components, with OEMs increasingly setting up engine manufacturing units in the country. For companies like Ford, Fiat, Suzuki & General Motors, India has established itself as a global hub for small and big engines.

India is constantly improving product development capabilities with increased investments in R&D operations & laboratories, which are being set up to conduct activities such as analysis, simulation and engineering animations. The growth of global OEM sourcing from India and the increased indigenisation of global OEMs is turning the country into a preferred designing and manufacturing base.

New car brand entrants and car models speak for the expansion of the industry vis a vis increase in online purchases 

Various foreign car brands are also expected to enter India following the huge demand and potential in the segment. With the launch of the new models of foreign brands like Hyundai’s Kia Motors and Genesis, Toyota’s Daihatsu and Lexus and Honda’s Acura, we could clearly establish the need for organised spare parts market, offering real products.

Also, as matter of fact, even customers are now more habitual to online purchasing than buying from physical stores. Customers look and browse over different options available in different range according to their requirements. Additionally, obtaining automotive parts online directly from the manufacturers or from online marketplaces selling genuine products will eliminate the middle men and hence, will be more cost effective. Besides, there will be genuine price benefits, reliability and at times, discounts, in online purchasing.

Online shopping is not just the current trend, it has become the need. Research tells us that consumers will be more dependent on online purchasing in future. The transformational change with digitisation and big data analysis empowering sales will for sure result in increased dealer footfall, cross-selling, up-selling and assurance to customers about genuineness of products.

To ensure long-term, sustainable growth, e-auto companies will need to focus on offering choices to customers with compatible supply.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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