Investment of up to US$3 billion is needed over the next decade to turn out engine, suspension and braking parts, and drive transmission and steering components, meeting projected demand.
Dec. 14 – Coming off a particularly strong year, Indian suppliers of automotive parts are boosting their manufacturing capability to respond to rising orders at home and abroad.
Total revenue in the sector grew 20 percent year-on-year to reach US$22 billion in the fiscal period ending March 2010. Consumption surged in the latter half, driven primarily by the domestic market.
Engine parts accounted for the majority of business with a 31 percent share. Transmission and steering components also performed strongly, contributing 19 percent to total revenue. Body, chassis, suspension and braking parts made up 12 percent each.
Exports remained relatively flat at US$3.8 billion amid the slow economic recovery in the United States and Europe, two of the line’s biggest destinations. Vehicle manufacturers and tier 1 companies accounted for 80 percent, and the rest came from the aftermarket.
In the next 12 months, turnover is likely to grow 18 percent and exceed US$26 billion. Overseas sales are expected to improve and hit about US$5 billion.
India’s automotive parts industry is forecast to become more robust in the coming years. Riding on the back of a strong domestic vehicle sector, business is projected to reach over four times its current value by 2020.
As regards exports, the sector is looking to expand beyond traditional destinations. Several are exploring emerging markets such as Brazil, South Africa and Iran.
To bridge the demand-supply gap, automotive part-makers are accelerating investment in additional capacity after holding off on capital expenditure two years ago.
During the slowdown in 2008, facilities that were supposed to be put in place were not installed as companies were uncertain, said Rajesh Uppal, CIO of Maruto Suzuki India. This continued even after the market started recovering in the beginning of 2009. Between April last year and March 2010, India’s automotive components industry spent about US$1.7 billion in expansion and greenfield projects. Even so, scaling up has been lagging behind demand.
Srivats Ram, managing director of Wheels India, said US$2 billion to US$3 billion is required yearly to establish the necessary facilities within the next decade.
ACMA has also posed to government officials the need for a technology development and upgrade fund for manufacturers, in particular SMEs.
Jayant Davar, vice chairman and managing director of Sandhar Technologies, counted poor infrastructure, insufficient power, lack of skilled personnel and low return on investment among the factors limiting capital expenditure. He added that OEM manufacturers need to work closely with component providers, guide them and invest in the production chain to ensure supply.
Makers also have to look at competitors and invest in people and technology, with several low-cost countries posing a potential threat. Imports from China, in particular, have steadily risen in the past few years.
This article was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.