The Hindu Business Line : Software example — `Auto component cos can benefit from outsourcing'

IF the Indian software industry grew to support the software needs elsewhere, Indian auto component manufacturers can also look at a similar strategy to grow.

They need not necessarily require a strong local market before looking at the global market. With cost and competitive pressures driving more and more vehicle manufacturers to source from low-cost countries, component manufacturers have a huge opportunity before them.

The component manufacturers, including those in the small-scale sector, are fully aware of this opportunity and a large number of them are getting ready to tap the opportunities that come their way.

This is what participants said at a panel discussion on "India as the automotive manufacturing and sourcing hub - The supply chain challenge," organised as part of a conference on automotive supply chain management by the Confederation of Indian Industry here.

Mr Ravi Santhanam, Managing Director, Hindustan Motors Ltd, said that globally the components sector accounted for 60 per cent of the $1,000 billion automotive business.

Automobile companies were under pressure to introduce new features. At the same time, they were also under pressure from shareholders to increase operating margins.

The only way they could do this was look at the components suppliers. At least, 50 per cent of the $600 billion components business could be outsourced to countries like India.

He pointed out that software companies such as Infosys, Wipro and TCS grew despite not having a large domestic market. The software industry grew to support software needs elsewhere and something similar was happening to the auto components industry, he said.

Mr S.K. Biswas, General Manager - SCM, Tata Cummins Ltd, felt that a strong local presence was not needed for component manufacturers to grow globally.

Turnover was not necessarily an indicator of growth and the issue before component manufacturers was they needed to be good locally and use these strategies to grow in the global market. Component manufacturers needed local strengths in terms of management, not in terms of turnover.

Mr S. Seetharamaiah, Managing Director, Susira Industries, said the component industry was mature, pursued the quality journey vigorously, and put passion and perfection into their products. He was confident that small sized companies would do well as a silent revolution was taking place in these companies.

Mr Santhanam said India's competitive edge derived from its engineering and managerial talent, and not just from the cost-effective labour. However, if Indian component manufacturers did not respond to the opportunities thrown up by American and European vehicle manufacturers outsourcing their requirement, these manufacturers would then ask their suppliers in their countries to shut up shop and shift their plants to some low cost destination. If the component manufacturers grabbed the opportunity, then they would see the kind of growth that the software majors witnessed.

More Stories on : Automobile Components | Outsourcing

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