The Investment Commission has targeted an investment of $5 billion for the auto component industry to increase India's share of the global auto components market pie from the present 0.4 per cent to 3-4 per cent.
The sector has attracted investments worth $530 million in the past five years, and has another $500 million pledged to it.
The auto component industry in the country is currently worth $8.7 billion, with exports of $1.4 billion.
However, the industry is highly fragmented with fewer than five players having revenues above $250 million. Inflexible labour laws and scarcity of automotive engineers are key deterrents to the growth of the sector, according to a commission report.
For the auto industry, the commission has targeted an investment of $13 billion in the next five years.
The report pointed out that India has a low vehicle penetration of only three cars and 50 two-wheelers per 1,000 people and investments of only $1.5 billion in the past five years with another $ 2 billion committed towards capacity expansion by global car makers Honda, Suzuki and Hyundai. Lack of accredited and modern testing facilities is a major concern of development of this section.
The Commission expects a doubling in domestic demand and over ten-fold growth in exports in the auto component sector and R&D investments.
The government wants India to be a global hub for the manufacture of vehicles and components, and the initiative is expected to take-off in September this year.
The initiative hopes to provide an opportunity to synchronise the activities of the government and the automobile industry.
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