The Hindu Business Line : `Auto component industry to see 5-fold growth in 10 years'

WHILE India enjoys certain advantages to become a global outsourcing hub for auto component industry, there are also some hitches that needed to be corrected if the full potential of the country is to be realised, according to Mr V.K. Viswanathan, Joint Managing Director, MICO India.

Delivering the keynote address at the AutoComp 2005, organised by the CII in Coimbatore on Thursday, he said the Indian auto component industry is expected to grow five-fold in the next 10 years to reach an annual sales volume of $35 billion and the exports volume might reach $8-9 billion.

Explaining the reasons for the optimism, he said the cost of auto designing in India is less than one twelfth of the cost of doing the same job in the US and the cost of manufacturing in India is also less than one tenth than in the US.

The cost-effective talent pool available in India has encouraged many OEMs and tier I companies to establish in-house design houses in India to meet both domestic and global needs.

But, there were some challenges too, and he cited poor infrastructural facilities with respect to airports, sea ports, roads and power in which India lagged behind some of its Asian rivals like China and the labour laws here are also restrictive and inflexible and these required attention.

Mr Viswanathan pointed out that some of the multinational car manufacturers have started using India as an export hub for their vehicles.

He said that Hyundai derived nearly 20 per cent of its turnover from exports and Ford and Suzuki also used their Indian operations to meet the demand for their vehicles overseas. Indian automobile manufacturers like M&M and the Tatas also were increasingly eyeing foreign markets.

He said the size of the auto component industry in India was expected to grow from $7 billion to $35 billion by 2015. The volume of exports is estimated to go up from $1.1 billion to $8-9 billion by that time.

Mr K.V. Shetty, Managing Director, IP Rings Ltd, said: "The auto component industry in India is `on the verge of a boom'. It needed to invest around $ 15 billion over the next 10 years at the rate of $1.5 billion annually, which was three times its current investment plans."

He said OEMs in developed countries like North America and Western Europe, looking to cut cost by 20-25 per cent, were turning to cost competitive suppliers from Brazil, China, India and Thailand. The easing of trade barriers will also make competition for the domestic manufacturers intense, he said.

Mr N. Krishna Samaraj, Chairman, CII, Coimbatore, said: "India scored over China on several parameters like quality of supply and ability to supply consistent quality and design and engineering capability in so far as the auto component industry was concerned."

Mr K. Ramaswamy, Chairman, AutoComp 2005, said the Indian auto component exporters were increasingly meeting the needs of OEM markets rather than replacement market which, apart from standing testimony to the quality of products supplied, also helped in better price realisation and offered economy of scale.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page