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This chapter is aimed at understanding how the small and medium enterprises (SME) operate in the auto components and electronic goods in the Pune cluster; likewise, it attempts to chart the operational structure, and the business practices of SMEs.

Section A: Auto Component Industry

Pune is a manufacturing hub for auto components besides being a preferred destination for the IT sector. The cluster has been able to attract investments due to its proximity to Mumbai, its availability of well-qualified, talented professionals and abundant, skilled IT manpower.

In fact, the Pune cluster is often referred to as the Detroit of the East, considering the concentration and growth of the automobile and auto ancillary industries in the cluster. Many important global majors like General Motors, Volkswagen, JCB and Ford (to name a few) are present within this cluster

The Government of Maharashtra has decided to construct a six-lane highway to connect Talegaon, Chakan and Ranjangaon with Pune to improve the city’s infrastructure.

Some major highlights from our study of auto component companies based in Pune are as follows:

Ownership pattern

The ownership pattern of Pune-based auto component companies is largely dominated by private players forming 67% of the entire sample, followed by proprietary and partnership firms that accounted for 20% and 13%, respectively.

Further, there is a high concentration of auto components manufacturing companies in the cluster that cater to both OEMs and replacement markets. While around 55% of private limited companies cater to OEMs, 66% of proprietary firms are vendors for both OEMs and the aftermarket segments.

More than half of the companies surveyed produce components like hydraulic power and pneumatic clamping parts, lighting system for automobiles, air induction system and many more. OEMs account for majority of the demand for body chassis and engine parts; among the companies that produce engine parts, almost 50% cater to OEMs while the remaining 50% serve both OEMs and the replacement market.

User Segments

Auto components companies in the Pune cluster have slowly transformed from being a supply destination for low-value auto components, to being a hub for a variety of critical and high-end auto parts that cater to multiple sub-segments of the auto industry. A look into the segments served, revealed that LCVs have a 19% share in the total target market served by the companies, followed by HCVs that have a 15% share. Both three-wheelers and two-wheelers have 14% share each.

 

Turnover Classification

According to the survey results, around 41% of the surveyed companies registered a turnover in the Rs 10 mn - Rs 100 mn range and 20% had a turnover between Rs 100 mn–Rs 250 mn.

Exports

Almost 27% of the companies in the sample are engaged in exports. Majority of the companies export to the American countries; Europe and Asia (excluding Middle East) is the second most popular export destination.

Production details

Majority of the auto components companies in Pune use automatic and semi-automatic machines for their production processes.

Investments in Plant & Machinery

According to the survey, 46% of the auto components companies in the cluster invest invest between Rs 10 mn - Rs 50 mn in plant and machinery.

IT adoption among SMEs

D&B attempted to understand the IT deployment patterns and spending across auto components manufacturers in this survey. The results revealed that IT adoption was gaining wide acceptance among the auto components manufacturers that were operating across Pune and about 80% of the surveyed SMEs implemented IT processes in their businesses.

Hardware especially desktops, printers and scanners had a majority share in the IT budget of the SMEs. Software applications like ERP, accounts software and CNC were a few of the widely-adopted IT applications among auto components producers.

Going forward, SMEs need to focus on establishing a prompt delivery culture with the help of technology to achieve longterm, sustained growth and to combat tough competition from other clusters and from global players. In the coming years, most auto components manufacturers expect to reasonably increase their IT budgets. The need of the hour is to focus on competitiveness by aligning the IT expenditure with the business objectives.

Issues and challenges

In terms of challenges confronting the industry, the auto components industry in Pune is found to be mostly affected by the taxes and octroi charges levied by the government, which hike up the companies’ operational costs.

In terms of the competitive landscape, China poses major competition, as it has an edge over the Indian industry with its good infrastructure and cheap raw materials.

Another difficulty that the players in the cluster is the time taken for arranging working capital funds, which leaves almost no room for strategic planning and for building growth avenues.

Section B: Electronic Goods Industry

The electronic goods industry can be considered a sub-segment of the engineering goods industry. Companies in this industry manufacture consumer electronic goods, industrial electronic goods, communication and broadcasting equipment, strategic electronics, computer peripherals and electronic components. Television sets, process control instruments, power devices, pumps, transmission equipment, personal computers, among others are the type of goods manufactured at these companies.

Ownership pattern

Pune’s electronic goods industry is largely dominated by private limited companies and these companies constituted 60% of the surveyed electronic goods companies. Proprietary companies accounted for 33% of the industry while partnership firms accounted for 7%.

The survey also revealed that around 93% of the companies that are operating in the segment in the Pune cluster are standalone manufacturers.

Products manufactured

A look into the type of products manufactured by the sample companies revealed that approximately 60% of the companies surveyed in the Pune electronic goods cluster manufactures industrial goods, 20% manufactures electronic components, 13% manufactures electronic goods and 7% manufactures computer peripherals.

Turnover classification

According to the survey, around 73% of the sample companies in the electronic goods segment has a turnover in the range of Rs 10 mn - Rs 100 mn, approximately 14% has a turnover in the range of Rs 100 mn - Rs 250 mn, and 13% has a turnover of below Rs 10 mn.

Exports

Approximately 60% of the surveyed companies are engaged in some export-related activity. Europe is the one of the most preferred export destination.

Production details

Majority of the surveyed companies prefer semi-automatic and automatic machineries for their production activities.

Investments in plant & machinery

According to the survey, 57% of the electronic good companies in the cluster invest up to Rs 5 mn in plant and machinery, and 22% companies invest between Rs 5 mn - Rs 10 mn in plant & machinery.

IT adoption among SMEs

The survey also attempted to understand the degree of IT usage in the electronic goods cluster in Pune. According to the results, the cluster was found to be IT-compliant in its day-to-day operations, and approximately 73% of the companies had implemented IT solutions.

The surveyed electronic goods companies spent a major part of their IT budget on hardware such as desktops, printers and scanners, among others, and spent less on software in their everyday operations. Design purpose software, billing software, CAD, CAM, among others were some software used by the companies.

Issues and challenges

The companies operating in this segment face many challenges and issues while undertaking their day-to-day business activities. In this regard, many companies have cited incidence of high taxes and octroi charges by the central and state government as the number one challenge that hampers production and business activities. The second major challenge cited by the respondents is fluctuating prices of raw materials and competition from other states, clusters and countries.