in India The Indian automotive components industry - TeknikfÃ¶retagen

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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
ventures with local suppliers. It started localizing content for its Corolla and Qualismodels. Now the local content in the models is 55 and 74 per cent respectively.Gradually, Toyota has turned India into a regional hub for its components used inits other models in foreign markets. There are similar successes that have led to thetremendous growth of this industry and helped it develop. 9Contribution of the automotive components industry to the economyThe turnover of the automotive components industry in the year 2006–2007, wasUSD 15 billion registering a growth rate of 21 per cent, with exports of USD 2.9billion during the same year, registering a growth rate of 15 per cent. In 2005–2006,exports grew by 28 per cent to USD 1.8 billion but that figure is very low against theworld trade of USD 185 billion in automotive components. Thus exports do notform a large proportion of output in the automotive components industry.However, components exports are becoming an important growth driver for growthof the automotive industry overall and is expected to assume greater responsibilityin future. At the same time, India is also a major importer of automotive componentswith more imports than exports. In the year 2006–2007, India imported USD3.3 billion worth of automotive components. 10STEADY GROWTH IN TURNOVER and international tradeAll values are in Rs. Billion and figures are in numberIndicators 2003–2004 2004–2005 2005–2006 2006–2007Turnover 306.40 385.00 534.00 645.00Exports 57.95 76.15 108.63 126.43Imports 64.99 85.60 109.22 146.44Direct employment 2 500.00 2 500.00 2 700.00 2 850.00Source: Ministry of Heavy Industries and Public Enterprises9) This information has been obtained from a report prepared by McKinsey & Company. See Luthra et. al. (2006)10) Reference has been made to Ministry of Heavy Industries and Public Enterprises (2008) and Ministry of HeavyIndustries and Public Enterprises (2006a). Ministry of Heavy Industries and Public Enterprises (2006b) has alsobeen referred9
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Page 27 and 28: ReferencesAhya, C, A Xie, S Roach,
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