Foreign Auto Component Manufacturers Begin Increasing Production in India

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DELHI – In a sure sign of increasing emerging market wealth creation, Brose, the European auto component manufacturer has recently doubled the capacity of its Pune plant in India, and is expecting the Indian market to grow in double digits.

A leading global manufacturer of vehicle door latches and liftgates, seat adjustment systems and window regulators, Brose India currently supplies components to General Motors, Ford, Nissan, Tata Motors, Mahindra and Honda. According to the company, one in every three vehicles worldwide is equipped with at least one Brose product.

“The Asian region is growing faster than Europe, so a large part of the investment is moved to the Asian region. If the Indian region needs more money, HQ is willing to send funds. Once the market bounces back, we expect it to grow by 10-12 percent this decade,” said Ashwani Aggarwal, Managing Director of Brose India.

“The Indian facility is booked for over the next two-three years and we are also in the process of setting up new capacities to meet growing demand from the domestic and international original equipment makers (OEMs) of luxury and passenger cars. We want to penetrate more into this market. We have set our sights at 15 percent,” he continued.

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The German company has committed over US$315 million to foreign investment in 2014, much of which is expected to find its way to Indian manufacturing facilities. Each year, Brose invests around 8 percent of its turnover in business expansion and research and development – with around 20 percent of this fund funneled into Asian operations.

After entering the market with an engineering center in 2008, Brose quickly expanded its operations in India to include a manufacturing facility for window regulators in 2011and plant for producing manual seat adjustors in 2012.

The company’s newest investment will expand its manufacturing capacity to an estimated 2.4 million units per year by 2015, and is projected to generate a turnover of nearly US$70 million by 2019.

“Four new large projects are under executions for Indian automobile companies which will require installing additional capacities,” Aggarwal said.

Currently, Brose produces 350,000 units of manual seat height adjusters and 1.2 million manual and power window regulators annually in India. “About 25-30 percent of these units are being exported for the European and Thailand markets,” Aggarwal elaborated.

“This development in India is almost exactly matching that of China 15 years ago. In those days the Chinese auto market was relatively small, and no-one would ever believe they would ultimately manufacture more vehicles than the United States. Yet as Brose is finding, the Indian auto market is a high growth target, and this is indicative of India’s emergence as a consumer society just as China was before it,” commented Chris Devonshire-Ellis of Dezan Shira & Associates.

“There are increasing correlations between how China developed and grew, and how contemporary India looks today,” he continued.

In light of Brose’s investment, several other manufacturers close to the production of recreational vehicles will likely begin eyeing India as a prime destination for the relocation of operations.

“The passenger vehicle market currently stands at 3.1 million and is expected to grow to 5 million by 2020 so we think that five years is a good time to achieve the goal,” concluded Aggarwal.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email india@dezshira.com or visit www.dezshira.com.

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