The Hindu Business Line : Auto components make robust strides

NOTWITHSTANDING the looming threat from competition due to inking of free trade agreements, the past year has seen the domestic auto components industry take robust strides to emerge as a global force.

According to estimates of the Automotive Component Manufacturers Association, the industry's exports are expected to be at least $1.3 billion this fiscal (a 30 per cent increase over last year), while the overall growth is expected to be about 25 per cent this year.

Meanwhile, 2004 not only saw the industry ramp up capacities to meet growing domestic/global demand, but also saw a growing number of players look overseas to set up base through acquisitions.

Key acquisitions included Bharat Forge's purchase of German auto components company CDP Aluminiumtechnik for a value of 6.30 million euro, Amtek Auto's buy of the UK-based GWK and Sona Koyo Steering Systems' acquisition of a 21 per cent stake in Fuji Autotech , France.

"As more Indian auto component companies achieve higher scale, there would be an increased trend of inking overseas acquisitions, particularly in the European region, as it gives access to a ready and global client base," points out a market analyst.

Further, this also helps Indian companies get access to advanced technology.

Industry officials further add that the trend of overseas acquisition would only be strengthened further in the coming year with two major Indian auto component firms - Rico Auto and Omax Autos - reportedly scouting for acquisitions in Europe.

Meanwhile, the domestic industry is also in the process of aggressive capacity expansion, primarily to cater to the export markets.

A recent study by McKinsey had said that exports of auto components from India could be in the region of $20-25 billion by 2015.

According to an industry official, investments on capex by domestic automotive component companies are estimated at about Rs 2,000 crore on an annual basis.

Key investments towards capex in the components sector include the proposed Rs 1,000-crore investment by Bosch, Rs 350 crore by Bharat Forge, Rs 200 crore by Goetze India and Rs 125 crore by Sona Koyo Steering Systems, among others.

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