in India The Indian automotive components industry - Teknikföretagen

After the end of the PMP in 1991, the GOI introduced the Memorandum of Understanding(MoU) route to enable localization of components. After success fullocalization, an increasing number of vehicle manufacturers (domestic and foreign)started outsourcing components rather than producing them inhouse and this ledto growth of the automotive components manufacturing industry. 6Contribution to output and exports to the economyIn the 1990s the rate of growth of the automotive industry was slow, and hence therate of growth of the automotive components industry was also slow. In the year1998–1999, the total value of production was Rs. 126.83 billion registering a growthof only 6 per cent. Value of exports in the same year was only 11 per cent of productioni.e. Rs. 14 billion but registered a reasonable growth of 13 per cent. Growth inexports though was taking place over a relatively small base. 7Why global manufacturers found India attractive and started setting up shop• Process engineering skills – processes can be redesigned so that manufacturingprocesses can be made more labour intensive and less capital intensive, therebyenabling manufacturers to reduce costs by using cheaper labour• Product engineering skills – Indian manufacturers have developed the credibilityto use smart product design to enable manufacturers to be more efficient. One Indiansupplier for instance, took just six months to design a steering system for anautomaker that was trying to develop the same product in other LCCs for morethan four years• Capital engineering skills – with regard to capital engineering, India’s advancedtooling and machining industry makes it possible to produce capital locally andefficiently 8An increasing number of multinationals started realizing these factors at the end ofthe 20th century and started sourcing components from India. Toyota was one ofthe first to see India as a source for components in 2001. The company made joint6) Reference has been made to Ministry of Heavy Industries and Public Enterprises (2008)7) Information has been obtained from Ministry of Heavy Industries and Public Enterprises (2000)8) Reference has been made to Automotive Components Manufacturers Association and McKinsey (2006)8