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Sourcing Auto Components - Destination India
Infiniti Research Limited, Sep 2004, Pages: 161
The Indian automotive industry has grown at a staggering pace over the last few years. The US$ 6.8 billion industry has registered a CAGR of 17% between 1998-2003 and is projected by ACMA (Auto Components Manufacturers Association of India) to grow at a 15% CAGR till fiscal 2012.
The opening up of the sector over the last decade has caught the attention of global auto majors as the only market rivaling China in terms of potential market size and growth opportunity. As the automobile industry has grown and matured, the Indian auto components industry has also grown tremendously, and is rapidly achieving global competitiveness both in terms of cost and quality. Infact, industry observers think that while Indian automobile market will grow at a measured pace, the auto components industry is poised for a take-off and is one of the handful of industries where India has a distinct competitive advantage.
In the 1990s, economic liberalization allowed foreign automakers such as Hyundai, Ford, Toyota and GM set up base in India. The local component manufacturers did not have the requisite size, technology or quality to meet the needs of these international carmakers. On the other hand, the high import tariffs and price sensitiveness of the Indian car buyer made it unviable for these companies to import components from their global suppliers. Therefore, the carmakers had to persuade their overseas components suppliers to set up local manufacturing base in India. For example, Delphi followed after General Motors opened its plant in the state of Gujarat in 1995 and Visteon followed Ford in 1998.
As these companies developed and stabilized their Indian operations, they realized the cost advantage of manufacturing components in India – typically lower by about 30%. They began to explore the possibility of exporting back these low cost, high quality components to their global factories and thus reduce their overall costs.
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