The coming of age of the Indian components industry
The 10th Auto Expo, being organised by the Automotive Component Manufacturers Association of India (ACMA), Confederation of Indian Industry (CII) and Society of Indian Automobile Manufacturers Association(SIAM), is scheduled to take place from 5th to 11th January 2010 at Pragati Maidan, New Delhi. The Indian automotive components industry with a turnover of more than $ 18 billion (Rs 84,111 crore approx.) is expected to gain significantly through new tie-ups, partnerships and marketing initiatives during this edition of the Expo.
While the expo is expected to generate direct order bookings for component manufacturers, it is the long-term collaborations, joint ventures and business initiatives that would result in major gains for the Indian component manufacturers.
As per the Automotive Mission Plan and ACMA’s own vision, the auto component industry is expected to reach an overall size of $ 45 billion (Rs 210,909 crore) industry by 2016. Investments in the auto component industry which were at US$ 7.2 billion in 2007-08 are likely to touch US$ 20 billion by 2015-16.
The Auto Expo will act as a platform for highlighting the progress the auto-component industry has made over the last 2 years since the previous Auto Expo in terms of its growing capabilities and capacity, specially in the area of new product development and adoption of latest product and manufacturing technologies, particularly to meet the rapidly changing requirements in terms of Emission reduction, enhanced safety, security and comfort. Both Indian and foreign business visitors will have ample opportunity to see products on display as well interact with senior officials of component companies at the venue grounds.
The display will include a wide range of new and locally designed/developed auto-components which have much higher durability and extended life, higher levels of performance, lighter in weight and components using new materials. New designs of component systems like engine management systems, new age electronics like Navigation Systems, vehicle security systems etc. This expo will position the Indian auto-component manufacturers as the most ideally suited to manufacture components for small cars, thus making India a key hub for production of small cars and two wheelers in the world. This is a significant position of global leadership for the component industry as the world is now moving towards smaller and more fuel efficient vehicles given the challenges of global warming and the need to reduce our carbon footprint. This augurs well for the future global outsourcing potential of components as well.
After reeling under a bout of recession, a result of adverse global conditions, the Indian component industry is finally picking up, riding on increasing sales of vehicles in India. While domestic component manufacturers are participating in the show in large numbers, foreign companies, especially from Germany and China have also responded encouragingly. In fact the Chinese auto-component and accessory manufacturers have substantially increased to 500.
Exhibitors including small and medium enterprises, from the component industry have taken up a total of 38,000 square metres of space at the expo venue which is approximately 10 per cent more that the space taken at the last expo. The expo will witness the largest ever overseas participation with country pavilions from Canada, China, Finland, France, Germany, Italy, Japan, Spain, Taiwan and the UK. Luxembourg will be the new entrant at the expo in 2010.
Indian Auto component industry has come a long way
Way back in 1953 the Tariff Commission in its report to the government had stressed on the need for a balanced and integrated development of the automotive industry by promoting the emergence of a strong auto component sector. As a result of this recommendation leading entrepreneurs were invited by the government to establish an auto component manufacturing industry.
With the government announcing policies encouraging investment in this sector, the 1980s saw the establishment of several Indo-Japanese joint ventures in the component industry, as Japanese automobile companies began setting up base here. The Maruti Suzuki joint venture for passenger cars was in a big way responsible for the birth of true, blue-blooded auto component companies in India.
The 1990s saw further positive changes with global OEMS and Tier I suppliers starting operations in India. Currently more than 60 per cent of exports of auto components are to Europe and the US. More than 70 per cent of the exports go to OEMS and Tier I suppliers and only 30 per cent to the global after market, indicating the global acceptance of Indian auto components.
Looking back, in 1997-98 the industry had a turnover of a mere US $ 3.1 which grew to $ 9.8 billion in 2003-04. In the 1990s more than 80 per cent of the exports were made to the international aftermarket. Now, thanks to Indian auto components having improved considerably in quality, exports are more to high AQL (Accepted Quality Level) countries.
India is now a supplier of a range of high-value and critical automobile components to global auto makers such as General Motors, Toyota, Ford, BMW, Fiat and Volkswagen, amongst others. Makers of luxury cars are increasingly looking at making India a sourcing hub for components, besides using more local components in cars for the Indian market. BMW, Skoda Auto, Audi, Mercedes Benz are all sourcing and using Indian components in many of their vehicles.
Domestic market to provide fillip
Even though global car sales recovery continues to gain momentum, it is the Indian automobile industry that has show some significant improvements in the last few months. This will have a direct bearing on the fortunes of the components industry. In November 2009 the auto industry saw the highest ever growth of 45.8 per cent in a single month. While the passenger vehicle industry grew 66.5 per cent, the commercial vehicle industry grew by 98 per cent. Significant double digit growth is expected to continue in this industry.
All this will herald increased business for auto components industry in India.
But Indian auto component manufacturers that have inked global joint ventures and partnerships can also be reassured by the fact that vehicle purchases in developed countries like the US, Canada and Europe are showing signs of recovery. The recent ‘cash for clunkers’ scheme in the US and the “scrappage scheme” in Europe pushed the sale of small cars in these regions. For Indian auto component manufacturers, it created yet another opportunity for business as it increased their pie of global exports.
With several Indian companies having forged global alliances, the industry has come of age. While the quality of Indian components meeting global standards, their investments in research and development too have increased significantly.
The 10th Auto Expo in New Delhi will give a glimpse of the significant strides the Indian auto component industry has taken in the last few years. This will be reflected in the new age products and technology that would be displayed at the show.
