in India The Indian automotive components industry - Teknikföretagen

According to an econometric analysis commissioned by Indian Council for Researchon International Economic Relations (ICRIER), it was found that a majorconstraint for smaller automotive components manufacturers to increase the scaleof production is the lack of availability of credit at reasonable rates of interest.According to the report, regarding costs, material costs make up more than 50 percent of the total cost of manufacturers. On the other hand labour costs are quite lowat only 6.5 per cent of total cost. Since, labour costs are the easiest cost componentsto minimize, global manufacturers can use this facet to their advantage by manufacturingin India. 24Increasing demand for automotive componentsThere is a direct correlation between growth in the automotive industry and growthof the automotive components industry. Standalone exports to OEMs and Tier 1vendors will not be sufficient to drive strong growth. Growth is going to be supportedby demand generated by segments within the automotive industry. For instance,it is expected that the passenger cars and utility vehicles segment which was approximately1 million in terms of production in 2003–2004, would increase to 3 millionunits by 2015 thereby helping increase the market size of the automotive componentsmanufacturing industry by generating large scale demand for automotivecomponents. 25Development of infrastructure and competencies in technologyOne of the major bottlenecks for automotive components manufacturers to competeat the global level is the lack of appropriate technology and infrastructure.Shortage of power leads to lesser productivity, poor infrastructure for testing, certificationand homologation, and an inadequate automobile retail trade and serviceinfra s tructure inhibits growth.Hence, competitiveness in manufacturing is the main focus point. It is well knownthat stagnation in manufacturing as a proportion of GDP has an adverse impact onemployment. Since the share of the manufacturing sector in GDP has been relativelystagnant ranging between 15 and 17 per cent over the past two decades, there is aneed to stimulate the manufacturing sector. With increasing growth, the automotivecomponents industry, will not only play a major role in increasing the contribu-24) This information has been obtained from a report prepared by ICRIER on the Indian automotive industry.See Narayanan and Vashisht (2008)25) Reference has been made to Ministry of Heavy Industries and Public Enterprises (2006b)21