Auto Component Engineering IT & ITeS-BPO Leather PREFACE | FOREWORD |EXECUTIVE SUMMARY | METHODOLOGY | CLUSTER OVERVIEW| COMPANY LISTING|LAUNCH EVENT| SPONSORS| D&B EDITORIAL TEAM Alphabetical Listing Total Employees Turnover Revenue Range Region Exported Offerings

Overview of the Auto Component Industry

The Auto Component Industry is one of the fastest growing sectors in the world economy with a global turnover of US$ 185 billion. Over the past couple of years, the industry has been increasingly striving to attain cost competitiveness globally. The growing demand for automobiles coupled with the outsourcing trend has steered the growth of the auto component industry worldwide with Asian countries like Japan, China, South Korea and India emerging as the major automobile manufacturers in recent years.

Low cost sourcing has given India an edge to nurture the fast-growing auto component industry, over its global competitors. Indian auto components industry posted a turnover of around US$ 15 billion in FY07. The industry has exported goods worth almost US$ 2.9 billion in FY07. It grew at a rate of 27% (CAGR) from 2001-06 and is estimated to grow at 13% (CAGR) in 2006-14, while the exports of auto components is expected to grow at 24.4% (CAGR) in 2006-15.

Source: ACMA

Faced with pricing pressures and weak demand in the early 1990s, automobile manufacturers from the US and Europe were on a look out for alternative sourcing and liberalisation policies of the Indian government proved to be a boon for them as well as the domestic auto manufacturers. To enhance their competitiveness, foreign manufacturers XVII started outsourcing components from countries like India which manufactured comparable quality at low cost, thus shifting their manufacturing bases and technology. Gradually Indian manufacturers have made their presence felt by acting as global suppliers and consequently adapting to international standards by acquiring ISO and QS certifications. Also the presence of automobile manufacturers like GM, Ford and Toyota has helped Indian manufacturers to improve quality of components supplied.

Major Indian car manufacturers like Maruti Udyog, Hindustan Motors, Mahindra & Mahindra, Bajaj, Premier Auto, Telco etc are forming technical and product collaborations or JVs with foreign MNCs. Currently, the Indian auto component industry manufactures an entire range of auto components like, engine parts, drive, transmission parts, suspension and braking parts, electrical parts, and body and chassis parts.

Source: ACMA

The key growth factors

• Strong engineering skills, high quality and relatively low cost.
• Adaptation of modern technology.
• Increased competitive pressures on global automakers which leads them to diversify to countries like India.
• Opening up of the Indian economy, liberalisation of import-export policy, government initiatives such as setting up of NATRIP, reduction of peak rate duty, reduction of custom and excise duty on small cars, etc.
• Developing infrastructure i.e. roads. Many in the pipeline projects of road development like golden quadrilateral, National Highway Development Programme, etc.
• Increased per capita income of Indian people as well as easy financing options are resulting in an increase in the domestic demand for automobiles.

The future ahead

The increasing number of auto exhibitions across the country gives an indication of the rising interest at the consumer level too. Automobile manufacturers from India are seeking joint ventures, collaborations, mergers and acquisitions world wide to compete with their full arsenal with prominent examples being M&M tying up with Renault and Maruti with the technology giant Suzuki. Against the backdrop of such ambitious growth plans of the Indian automobile industry, the Indian auto component industry is estimated to touch a turnover of US$ 40 billion by 2014. In a nutshell growing economy, strong domestic and global demand, adoption of as well as adapting to innovative technology will lead the Indian auto component industry make a mark globally.

Cluster Insights

The following Cluster Insights are aimed at grasping the pulse of the small and medium enterprises operating in the auto components sector. The attempt is to chart their operational structure, business practices, future plans, etc., for which purpose, we have considered the companies profiled in this publication.

Key characteristics of the cluster

• The average revenue growth of the auto component companies in the last two years has been around 25%.
• 85% of the companies possess quality certifications like ISO 9001: 2000 or TS 16949.
• 49% of the companies are involved in exports.
• 79% off the companies caters to the OEMs.
• America and Europe are the most preferred export destinations.
• 15% companies manufacture and market branded products.
• Around 31% of the companies were established between 1990s & 2000 while 67% of the companies were relatively older companies with operations started prior to 1990.
• The companies operated at an average capacity utilisation of 78%.
• Around 44% of the companies have two or more manufacturing facilities.

Ownership Pattern

The ownership pattern of the auto components companies in the cluster is inclined towards the private limited company.

• Around 45% of the private limited companies belong to the turnover range of Rs 10 - 100 mn.
• In the last two years, partnership firms showed the highest revenue growth of 33% followed by private limited company (23%).
• The average capacity utilisation of the private limited companies is 83%.

Product Segment

• Under the engine parts segment, 50% of the companies belong to the turnover bracket of Rs 10 – 100 mn.
• 93% of the companies involved in engine parts cater to OEMs whereas 50% of the companies deal in the building of the body & chassis cater to both i.e. replacement market and OEMs.
• 29% of the companies dealing in suspension & braking parts earn more than 50% of their earnings from the international market.

Turnover Bracket

Companies with a turnover range of Rs 100-250 mn were found to be operating on an average 82% of their installed capacity.

• Europe is the most preferred export destination for companies in the turnover bracket of Rs 10 – 100 mn while companies in turnover bracket of Rs 100 – 250 mn preferred the American region.
• 50% of the companies in the turnover bracket of Rs 10 – 100 mn are involved in exports.
• The average revenue growth in the last two years for companies in the turnover range of Rs 10 – 100 mn is 26%.

Growth and Future Plans

The companies expect the average revenue growth of 31% in the next two years.

• 10% of the companies have shown more than 40% revenue growth in the last two years wherein the majority of the companies belong to turnover bracket of Rs 10 -100 mn.
• 21% of the companies expect more than 40% revenue growth in the next two years.
• Majority of the companies have envisaged future plans. The plans range from capacity expansion and modernisation, to enter untapped markets and diversification. 45% of the companies are planning to expand their plant capacity while 26% are planning to enter new domestic and international markets.

Cluster benefits and hindrances

Marketing, availability of raw materials and infrastructure turned out to be the key beneficial factors from the cluster formation whereas government subsidies, taxes & duties, manpower training and funding were cited as the key hindrances.