Competitiveness of the Indian Auto Component Industry
Article by - Sanjib
Datta ,
Faculty Member ,ICMR Case Studies and Management Resources.
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continued : R&D Capability
Sona Koya, an Indian auto component
maker has set up an engineering designing solution center in Gurgaon and world's
leading OEMs outsource their engineering designs from Sona Koya. Sona Koya's
strengths lies in 3D digital image of a component, prototype and testing.
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The Indian companies have also proved their competence in making minor
modifications to existing products that either result in new uses for the
product or significant cost cutting. For example, Bangalore-based Motor
Industries Company (Mico) has indigenously developed a high-pressure single
cylinder pump for its parent company, Bosch. The newly developed pump was
highly advanced compared to the existing pump. Though Bosch did not handhold Mico by providing drawings, the product was derived from an existing product.
Today, Mico has been designated Bosch's global development centre for
single-cylinder, multi-cylinder and mechanical rotary pumps.
Product Liability
The Indian auto component companies
need to adhere to strict quality control to prevent any defects in the designing
and manufacturing of their products.
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The World's leading OEMs follow strict
product liability rules while going for any contract with their suppliers. Under
product liability rules any supplier could be penalized by its client if the
product fails to meet the set quality standards and results in line stoppages,
recalls and claims.
In India the domestic insurance companies such as Tata AIG started providing
product liability insurance to the Indian auto component makers. This will give
the Indian auto component manufacturers the confidence to do more business with
foreign automakers. With product liability insurance in place the acquisition
and execution of export contracts will be easier for the Indian companies.
The Road Ahead
World's major automakers have
announced their intention to develop India as a major sourcing hub for auto
components. Indian enjoys enormous cost advantage in manufacturing, R&D, skilled
labor and software. However, it can't relay on its low cost advantage for a long
time. Countries like China, Thailand and Mexico are also becoming very
competitive so far as cost is concerned. Moreover, over the years these
countries have built large scale of production and technological competence. The
recent success of Indian auto component industry is partly due to the fact that
major automakers in the world were compelled to outsource from countries like
India and China to cut costs. Sooner or later the global auto industry will come
out of recession. Then cost won't be the only deciding factor for the automakers
while sourcing components. The majority of the Indian auto component companies
operate in the lower end of the value chain (like casting and forging) of the
industry. Globally, the product life cycle and the product lead time is
shrinking fast. To succeed, Indian auto component companies should develop
capabilities to keep pace with major automakers.
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