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India could become a regional parts sourcing hub for some industries

G Balachandar Chennai | Updated on December 17, 2020

R Dinesh, Managing Director of TVS Supply Chain Solutions   -  THE HINDU

Manufacturing capabilities, consumption and focus on exports will support

India could emerge as a strong regional hub for parts sourcing of some industries due to the country's manufacturing capabilities and high consumption levels.

The consumption market in India is going to support the growth of several industries and industry experts reckon that local demand coupled with focus on exports will drive global sourcing from India.

“If you produce in India, parts could be stocked here and shipped to countries in Asia and the Middle East wherever components are required. For example, if Airbus has a stocking location in India, there are many countries in Asia where there will be fewer planes and for these countries, spare parts could be supplied from India as a regional hub,” says R Dinesh, Managing Director of TVS Supply Chain Solutions (TVS SCS).

Also read: Auto parts sector sees PLI scheme driving it to global destinations

A key element of the global supply chain realignment is withdrawing from China and focusing on alternative geographies.

“India has the potential to emerge as a parts sourcing hub for aerospace, defence and engineering products. In segments like aerospace manufacturing, China is not a key supplier to many OEMs as several of them have their facilities in their own countries. Though India is a natural choice as an alternative to China, there is competition from other South East Asian countries such as Vietnam and Singapore,” says Shashank Tripathi, Partner and Leader – Aerospace and Defence, PwC India.

It is gathered that if a product has x value, the spare parts are typically 4 times x value over a period of say three years. This is where India can capture the business using its supply chain expertise and capabilities.

“Global realignment, large domestic market and proactive policies under Atmanirbhar Bharat will increase India’s share of parts exports,” says Vinodkumar Ramachandran, Partner and National Leader - Automotive and Industrial Manufacturing, KPMG India.

Skilled people

Apart from a domestic market (consumption), there is also the wide availability of skilled people as well a good maturity level of the industry (in terms quality, cost and delivery) in India.

“It is evident from the ability of our auto component suppliers to make products as per global standards and also through the quality awards that have been received by several players,” says Ashim Sharma, Partner & Group Head Business Performance Improvement Consulting at Nomura Research Institute.

While in the case of the auto segment, most of the big countries will have a production base, but in some sectors only some countries have manufacturing capabilities. India has developed expertise in a few sectors. High consumption in the domestic market is also an advantage for those companies to consider Indian as a strong regional hub for spare parts.

Wind energy sector

In the wind energy sector, only 5-6 countries, including India, globally have manufacturing capabilities. With 70-80 per cent localisation, the current annual manufacturing capacity of wind turbines in India is about 10,000 MW, one of the largest in the world. India is also fourth largest in terms of installed capacity globally in the wind sector.

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Dinesh said TVS SCS has been in discussion with a couple of customers for strategic sourcing and strategic replenishments in the wind energy sector. “We are saying we will serve the world spare parts requirements. Because production is taking place here,” he adds.

“In order to fully cater to the opportunities, India needs to hand hold certain sections of the value such as the tool, mould and die industry which forms the backbone for several parts to be manufactured,” says Sharma.

Published on December 17, 2020

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