Competitiveness of the Indian Auto Component Industry
Article by - Sanjib
Datta ,
Faculty Member ,ICMR Case Studies and Management Resources.
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Acquisitions by major Indian
Players
|
Indian Company |
Company/Plant
acquired/Set-up abroad |
Located in
|
Size of the deal ($ mn) |
|
Amtek Auto |
Smith Jones Inc.
|
US |
20 |
|
Amtek Auto |
GWK Group |
UK |
37 |
|
Bharat Forge |
Carl Dan Peddinghaus GmBH*
|
Germany |
116#(euro) |
|
Sundaram Fasteners |
Dana Spicer Europe* (Forging
unit) |
UK |
2.6 |
|
Sundram Fasteners |
Sundram Fasteners (Zhejiang)**
|
China |
5 |
|
G. G. Automotive Gears
|
Name not disclosed. US
company that manufactures high precision custom gears and planetary gears.
|
US |
110 |
Source: Businessworld, 23rd February 2004
* Plant **Plant set-up #Approximate
According to Suresh Krishna, Chairman and Managing Director, Sundram
Fasteners, there are three basic reasons that prompted Indian component
companies to venture abroad. First, having established a reasonable domestic
presence, big Indian component makers are now looking for an international
presence. Second, having improved their productivity, quality and reliability,
Indian companies feel more confident venturing abroad. Third, the Indian
government's investment friendly policies and hassle-free environment for
overseas acquisitions have encouraged Indian companies to take the acquisition
route. With these overseas acquisitions, the Indian companies can tap the
original equipment (OE) market abroad. The Indian companies can supply their own
products to these customers.
R&D Capability
In recent years the world's leading
automakers and Tier I suppliers have opened their R&D centers in different parts
of the country. The cost of R&D in India is low compared to any developed
country and skilled manpower is available. In the long run the entry of foreign
companies would benefit the Indian industry as people working in foreign firms
would acquire insights and skills which otherwise would be impossible to
acquire.
In India there is not a single auto component manufacturer which does original
R&D. Only a few companies have recently started design and development (D&D).
D&D is the initial stage of R&D and it works as a support function for R&D in
auto component industry. Every major auto component manufacture starts with D&D
before venturing into full scale R&D. R&D in auto component industry involves
developing a component as per the requirement of vehicle maker/OEMs/Tier I
supplier. It involves developing the original design of the component, making
prototypes and testing and then mass production of the component. R&D in auto
component industry requires high technological capabilities and Indian companies
are on a learning curve.
|
|
Design and Machining Capability
(Scale 1 = Low, 10 = High)
|
|
Germany |
India |
US |
Brazil |
Mexico |
Che. Republic
|
China |
|
Availability of Skilled Labour
|
7.5 |
7.4 |
7.2 |
6.4 |
6.3 |
5.9 |
4.8 |
|
Availability of Qualified Engineers
|
8.5 |
7.5 |
7.4 |
6.6 |
6.6 |
6.3 |
4.2 |
Source: Automotive Component Manufacturers Association of India
India's strength in software can be utilized in R&D in the
auto component sector. Already some of the major Indian companies have started
working in this direction. Companies like Rico Auto and Sundaram Fastners have
set up laboratories that are equipped with the latest CAD/CAM/ CAE software.
They are using these software for reverse engineering, designing and testing
auto parts.
According to ACMA, India has the huge potential to export embedded software
(for automobiles) for the developed markets. According to Vishnu Mathur,
Executive Director, ACMA, "The major demand for such products will, however,
principally come from the developed markets"[1]. To leverage the strength of
India's software skills, ACMA has recently entered on an agreement to network
Indian software companies with its members. ACMA is currently in talks with
several software companies and is also trying to identify systems/sub-systems
in which manufacturing can take place. Embedded software handles many critical
control functions such as ABS braking systems, airbags etc. Embedded software
is also used for safety, climate control and so on.
Where does India Stand?
|
Parameters
|
India
|
China
|
Thailand
|
Taiwan
|
|
Quality of
Supply
|
1
|
4
|
2
|
3
|
|
Ability to
Supply Consistent Quality
|
3
|
4
|
2
|
1
|
|
Price
Competitiveness
|
4
|
1
|
3
|
2
|
|
Design and
Engineering Capability
|
1
|
4
|
3
|
2
|
|
Customer/
After-Sales Support
|
3
|
4
|
1
|
2
|
|
Maturity
of the Auto Components Industry
|
1
|
4
|
3
|
2
|
|
Government
Regulations
|
4
|
3
|
1
|
2
|
|
Attractiveness of the Domestic Market
|
2
|
1
|
3
|
4
|
|
Compliance
and Transparency
|
2
|
4
|
3
|
1
|
Source: Frost & Sullivan
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[1]Business Line, Feb 25th 2003
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