Led by huge demand, the Indian auto components sector is all set for a glorious future
No doubt, India enjoys a cost advantage with respect to casting and forging as production costs in India are 25-30% lower than their western counterparts. However, with increase in input costs and rising steel prices, the industry now seems to lose this price advantage to their Asian peers including China, Thailand, et al as these players offer a cost advantage of about 12% over their Indian counterparts. Moreover, “the auto components industry in India today is highly fragmented.
However, this presents a simultaneous opportunity as well as a challenge for the players,” avers Yezdi Nagporewalla, Auto analyst with KPMG. These factors, coupled with an unfavourable tariff regime, are now pushing India towards becoming a net importer of auto components. Moreover, “concerns about quality also remain. We still lack original R&D activities. But I am sure that these issues will get resolved soon,” adds Minda. However, “the challenge is to manage the rising cost of raw material and at the same time stay competitive,” avers N. K. Dhand, Chairman and MD, MGT.
Certainly the industry is transforming, and the boost in demand will see the emergence of several new players in the industry. But, to improve upon the domestic auto component industry, the players surely need to adhere to global standards, be quality conscious, inculcate some original R&D activities while maintaining globally acceptable innovative standards.
No doubt, India enjoys a cost advantage with respect to casting and forging as production costs in India are 25-30% lower than their western counterparts. However, with increase in input costs and rising steel prices, the industry now seems to lose this price advantage to their Asian peers including China, Thailand, et al as these players offer a cost advantage of about 12% over their Indian counterparts. Moreover, “the auto components industry in India today is highly fragmented.
However, this presents a simultaneous opportunity as well as a challenge for the players,” avers Yezdi Nagporewalla, Auto analyst with KPMG. These factors, coupled with an unfavourable tariff regime, are now pushing India towards becoming a net importer of auto components. Moreover, “concerns about quality also remain. We still lack original R&D activities. But I am sure that these issues will get resolved soon,” adds Minda. However, “the challenge is to manage the rising cost of raw material and at the same time stay competitive,” avers N. K. Dhand, Chairman and MD, MGT.
Certainly the industry is transforming, and the boost in demand will see the emergence of several new players in the industry. But, to improve upon the domestic auto component industry, the players surely need to adhere to global standards, be quality conscious, inculcate some original R&D activities while maintaining globally acceptable innovative standards.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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