How To Start An Automobile Parts Manufacturing Business? [Profit Margin, Steps]

. 7 min read
How To Start An Automobile Parts Manufacturing Business? [Profit Margin, Steps]


Planning to start an automobile parts manufacturing business? Well, if you are interested in the automobile industry, there are several retail and manufacturing business ideas that you can explore.

One such market that you can venture into is manufacturing automobile spare parts. It is an expensive venture, no doubt, with very high initial capital and maintenance costs. However, if you have the funds to start with and a well-structured business plan, it can be one of the most profitable manufacturing businesses to start.

For anyone who is thinking of starting an automobile parts manufacturing business, here is a detailed guide to help you develop a good plan.

1. Study and understand the market

The most important part of starting any business is understanding your niche. Several spare parts are used in the automobile industry. Some of them have a higher demand than others. For example, in the case of cars, the brake coil, clutch kits, exhaust systems, and air filters are high-demand spare parts. So, the first step to learning how to start an automobile spare parts business is to study the market to find a product you wish to manufacture. There are several options to learn more about trending products, including internet search engines and online surveys. You can also use software and apps like keyword planners that tell you what people are looking for when it comes to automobile spare parts.

It is also essential to choose if you wish to become an OEM or Original Equipment Manufacturer, which caters to large auto manufacturer brands. Second, you can start a replacement parts manufacturing business that makes parts that people use to remodel a vehicle after purchase.

2. Make your business plan

A sound business plan lays the foundation for successful automobile parts manufacturing business. The plan includes all the important aspects of your business, such as:

  • The mission and vision statement
  • Product descriptions
  • Manufacturing techniques
  • Management structure
  • Raw material sources
  • Equipment list
  • Budget
  • Marketing techniques.

Making a financial forecast or projection will also help you understand if this is the most profitable manufacturing business to start with all your current resources. This document is also very important to seek funding, such as a loan from the bank or an investor.

3. Get funding options

Even if you have the capital for your business, seeking options for external funding is always recommended for any small-scale manufacturing business ideas. Finding an investor with experience in this industry is also beneficial for you as an entrepreneur. With this, you will learn about the industry and use their experience to guide you when making financial decisions for your business.

The other funding options available are bank loans and getting your friends and family to invest. Bank loans require a detailed proposal with accurate projections. However, there are several subsidies offered to small and medium businesses that make this a great option for a start-up. It is advisable to set aside a part of your funds for any financial emergencies or operational costs related to your automobile spare parts manufacturing business.

You can also reach out to organisations like the Indian Chamber of Commerce that regularly offer grants and funding for new businesses. They can also provide additional support in terms of legal advice to make sure you avoid making mistakes in the initial years of setting up your business.

4.Purchase equipment

Most of the initial working capital in a manufacturing business gets spent on purchasing equipment. With automobile spare parts especially, there are several types of machines needed to set up a factory. The equipment depends upon the niche that you have picked for your automobile parts manufacturing business. There are several machining service providers that you can contact online to get a detailed inventory and estimate for the parts that you need.

Even with a small manufacturing business in this sector, there are added costs for maintaining the machines. It is also important to invest in educating your employees on the health and safety regulations for operating these heavy machines.

Make your automobile parts manufacturing business a legal entity by registering the name and the business. You will need to register the business as a Limited Liability Partnership (LLP), Private Limited Company, Partnership or Proprietorship depending upon the management structure. When learning about how to start an auto parts manufacturing business, there are several legal aspects to consider. Most importantly, the necessary permits and licenses need to be obtained to ensure that your products are industry compliant. Local government websites can help you with all the required details. You can also hire legal experts to give you the right advice in this aspect.

6. Put your team together

When planning to start an auto parts manufacturing business, it is vital to have a team that can execute your ideas correctly. You will need an internal and external crew to run your automobile parts manufacturing business. The internal team requires factory workers, managers, supervisors, procurement specialists, accountants, and other support staff. It is also important to partner with the right transportation and logistics service providers who are part of your external crew. Your company also requires a very strong marketing and PR team to help your brand become more successful in the automobile parts manufacturing sector. Alternatively, you can outsource these services to reduce your costs.

7. Define your business model

There are some key questions that you must ask before starting an automobile manufacturing business:

  • Do you offer a product that is unique in the market?
  • Do you have the right managerial skills and administrative knowledge to run a manufacturing enterprise?

These fundamental questions will help you focus on the baby steps you need to take to achieve success in this sector. Often, with new ventures, the big picture tends to distract from day-to-day activities, reducing the productivity and efficiency of your business. Once this is resolved, you can start planning the business model.

Young businessman working on a tablet of the future showing word business model

Do you want to sell to large auto manufacturers as an OEM or sell as an independent vendor? Whatever route you choose, you will need a strong sales team that can help close these deals. As an independent seller, you have various sales channels for your small manufacturing business. This includes auto retail stores, e-commerce portals, and an exclusive website to drive sales for your products.

When you go ahead and start your automobile manufacturing business, remember to streamline day-to-day activities by hiring the right people. This will allow you to manage the bigger tasks like refining the manufacturing process or finding the right market to sell your products.

That way, you can leverage the potential of the automobile spare parts manufacturing industry to build a successful business for yourself.

Also Read:
1) Biodiesel Manufacturers In India
2) Valves Manufacturers In India
3) Battery Manufacturers In India
4) Toy Manufacturers In India
5) Solar Panel Manufacturers In India
6) Tyre Manufacturers in India

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Q. How does an OEM work?

Ans. OEM or an Original Equipment Manufacturer produces spare parts for bigger automobile manufacturing companies. Since these large corporations cannot produce all the parts on their own, they are constantly looking for new suppliers and manufacturers to partner with.

Q. What is the minimum investment needed for an automobile part manufacturing business?

Ans. The cost of investment depends upon the nature of your business and the scale of manufacturing. For an exact estimation, it is a good idea to get in touch with local experts who know the industry and can help create a financial plan for your business.

Q. Is automobile manufacturing a profitable business?

Ans. In the automobile industry, parts manufacturing is the third largest sector. You can cater to B2B and B2C clients depending upon the nature of your business, whether you are an OEM or a replacement parts manufacturer. Overall, this industry has seen consistent growth and is a great sector to enter if you have the experience.

Q. What are the best automobiles to manufacture spare parts for?

Ans. Currently, the global market is dominated by truck and car automobile spare parts manufacturing. However, if you want to run a small-scale business, you may also consider two-wheeler and three-wheeler spare parts manufacturing.

Q. How to find raw material vendors for automobile parts manufacturing?

Ans. The best place to find the right vendors for your business is online. Search for vendors who are cost-effective and located in proximity to your factory. You can also find vendors on popular e-commerce portals.

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