The entry of foreign OEMs and auto component manufacturers is an added advantage to the Indian domestic manufacturers to improve their product along with their manufacturing technology.
There was a huge demand for vehicles in Indian auto component industry in 2010 and 2011. As compared to the decline in 2009, the auto component industry bounced back strongly in 2010 and 2011 with a growth of 28 per cent and 35 per cent turnover’s respectively. But, in the year 2012, there was a decrease in the growth rate of 16 percent in the auto sales, mainly because of high interest rates and immense fuel prices along with economic slowdown, according to CARE Research.
In 2012, 70 % of the total industry size of around Rs. 2,014 billion was contributed by domestic OEM, 14% by replacement market and the balance 16 per cent by exports. Hence the Indian auto component industry is directly dependent on the huge share of domestic sales. As per the forecast made by CARE Research, the growth in 2012-13 will be moderate as compared to the past few years because of high interest rate scenario, with the addition of increased fuel prices and slowdown in economy.
The Indian auto component manufacturers are adopting internationally accepted quality standards like six sigma, ISO, and many more that has attracted the global OEMs, due to which the Global OEMs are making their products to be localised in the Indian markets. Hence, the global OEM’s are increasing the level of indigenisation in phased manner to keep costs low without any compromise on the quality. There is an increase of import bill for global OEM’s because of depreciation of rupee in India and because of which, the global OEM’s source a large portion of their inputs from overseas market.
The indigenisation level of domestic players is around 95 % in 2011-12, as compared to foreign OEMs stands between 65-70% which is expected to reach around 80 percent by the end of 2014 according to the forecast made by CARE Research.
As per the research, in2011 and 2012 exports have grown by 55 per cent and 41 per cent respectively compared to imports which have witnessed a growth of 33 per cent in both 2011 and 2012. Due to the increased number of global OEMs, moving their operations to India, has provided an export base as well as provide opportunity for domestic component manufacturers to expand their customers. The Global OEM’s also provide opportunity for domestic manufacturers to become a part of global supply chain of these OEMs.
India is foreseen as the hub for sourcing auto components by the leading global OEMs. The Indian auto component manufacturers have improved their quality and scale with the entry of global auto component manufacturers, due to which there is a rise in investments towards research and development during the last one decade which has helped the Indian auto component industry to built reputation in overseas markets and bag global orders, as quoted by D. R. Dogra, MD and CEO CARE Ltd.