Overview of Auto Components Sector SMEs in Auto Components Future Outlook Alphabetical Listing Region Wise Listing Revenue Wise Listing Employee size Wise Listing    PREFACE | FOREWORD | EXECUTIVE SUMMARY | METHODOLOGY | INDUSTRY REPORT | SME INSIGHTS| COMPANY LISTING| SPONSORS

Current trends indicate a smooth run for the auto component industry. In fact, since 2000, this is one sector which has made a global mark and has been identified as a sunrise industry. The industry is transforming from being highly domestic-centric, to a force ready to face global competition.

The factors that will drive growth for the auto component industry are:

• The growth expected in the domestic automobile industry will give a fillip to the auto component sector. The Indian automobile industry offers great potential considering the low penetration along with rising income levels and a rapidly growing middle class. These factors will see a boost in demand for vehicles, especially passenger cars and two wheelers. These two segments are estimated to grow at between 10-12% for at least the next five years.

• The entry of global OEMs, making India as their manufacturing base, has given a big boost to the industry. For instance, Skoda plans to source parts for its European operations from its Indian base and raise indigenisation level for Indian models to 70%. This trend has also enabled Indian companies to gain a competitive edge in the global market. Further, the model of cluster-based development prominent in this sector will provide economies of scale.

• Export of automobiles has also emerged as a key component of growth. Rising exports of Indian-made vehicles like M&M’s Scorpio model, Bajaj Auto’s Bikes, Tata Motors’ City Rover are indirectly increasing the demand for Indian auto components. Also, the export of India-made models of global OEMs like Hyundai’s Santro Xing and Suzuki’s Alto has given a boost to the industry.

• De-regulation and the Government’s policy initiatives have facilitated growth and focus has now shifted towards attracting foreign direct investments. Also, the Government’s initiative towards road development will give a boost to demand for vehicles and indirectly auto components.

• The Government’s initiatives towards opening up channels of finance.

• Investments coming in for research and development will keep the industry abreast of the latest technology.

Entry of global OEMs has transformed the Indian automobile and auto components landscape. India is being perceived as a major market for cars and two wheelers by global OEMs. Before the end of 2006, at least 30 new car models are expected to be launched by foreign OEMs.

These factors portend a robust auto ancillary industry in India and the overall expected good growth will provide several opportunities for the emergence of new enterprises. Extending their reach to global markets is the pre-dominant outlook among the top auto component manufacturers in the country. The vision to compete globally comes from the inherent strengths the Indian auto component industry possesses. Some features are:

• Cost reduction of 25-30% in production in the domestic market compared to overseas
• Low labour costs
• Designing, engineering and technical skills
• Established quality systems
• Availability of raw materials
• Adaptability to new technology

• Investments in research and development, coming in from global OEMs. This stands out positively in favour of India. Key players are not only willing to invest in R&D but also in mechanical and engineering operations. These investments are expected to increase in the near future

Though India rides on these inherent strengths, a few risks exist that the auto component manufacturers may have to confront.

• A global slowdown can derail the prospects of the industry.
• Volatility in the prices of metals and other inputs could erode the industry’s cost competitiveness. Further, global OEMs expect a commitment of 5-10% reduction in prices every year.
• Tier I manufacturers taking up greenfield projects overseas.
• Intense competition from counterparts in other emerging economies may add pressure on margins of manufacturers.
  

The Indian auto component industry is poised for robust growth till 2010. There is a perceptive exuberance in the industry and growth estimates indicate a booming industry. Going by current trends in production and exports of auto components, indicate a doubling of the domestic auto component industry by 2010. The production of auto components could grow to US$22 bn by 2010. Similarly, India’s exports of auto components could grow to US$4.5 bn as compared to US$1.8 bn in 2005. Expected growth in production and exports of auto components is shown in the graphs below.

This growth outlook implies opportunities for the small and medium enterprises. The overall trend is encouraging, but remaining competitive in this changing scenario will be the toughest challenge. The combination of low manufacturing costs along with quality systems would give an edge to companies in terms of pricing and quality. Expansion and diversification will help break into new markets. It would be imperative for these companies, which are largely based on traditional management practices, to imbibe technology in a big way. The SMEs can exploit these opportunities through joint ventures, collaboration and technical tie ups. Knowledge, specialisation, innovation and networking will determine the success of the SMEs in this globally competitive environment.