India emerges as auto outsourcing market
Pradeep
Rane
09 June 2004
During
FY04 Auto components exports are estimated at over $1bn
up from $760mn in FY03. The Auto Components Manufacturers
Association has set an annual export target of $5bn
by FY10.
The cost advantage and pool of skilled engineers are
attracting global auto and auto parts manufacturers
to India.
For
instance, auto parts giant, $10 billion Textron Inc
and $7.2 billion Eaton sent outsourcing delegations
to India to participate in Global Outsourcing Summit
organised by ACMA during Auto Expo in Jan 2004.
Also global majors such as Electrolux, Caterpillar,
Kautex, Textron and Eaton have planned to outsource
auto components such as machined castings, water/oil
pumps, heavy and simple fabrications, etc. This could
be worth $1.3 billion by 2005.
It is learned that MTU Friedrichshafen, one of the worlds
leading manufacturers of high-end diesel engines, is
looking to India as a high potential source for auto-component
supplies.
It
is now clear that Indian auto compenent producers are
getting special attention from global majors.
Some known names like Renault, Navistar and Detroit
Diesel have also established their procurement offices
in the country.
Bharat
Forge is the leader in auto component segment.
The company has established a strong brand equity and
boasts of hugely impressive client list. The process
quality and capability to provide designed forged components
at low cost, vis-à-vis its US / UK counterparts
(30 per cent cost savings) will keep it in the prime
league. Bharat Forge will continue to be a big beneficiary
of outsourcing.
Among others, MICO due to its parents increased focus
on outsourcing components from India will be a big player
in the export market. Sundaram Fasteners will also benefit
due to its long-term relationship with GM and its proposed
venture in China.
According to anlaysts with B&K Securities, a host of Indian companies are committing themselves for huge jump in the global market. These include, Sona Koyo, Motherson Sumi, Amtek Auto, Rico Auto, Omax Auto, etc.
A large part of export from India is accounted for by
the few MNCs that are setting shops in India.
"Recent momentum in auto components outsourcing
space is encouraging. However, due to high entry barriers
in the global market, outsourcing remains a long term
story for the most," says
analaysts.
Also acquisitions will form part of the central growth
strategy for large and globally competitive component
manufacturing companies, both in India and in other
markets. Bharat Forge, Amtek and Sundram Fasteners will
be seen the most aggressive Indian companies in this
space. Smaller players like Rico Auto are also considering
acquisition opportunities domestically as
well as globally.
During the past quarter, Bharat Forge inked the deal
to acquire assets of CDP - a German forging manufacturer.
With this acquisition, Bharat Forge is aimimg at targeting
highly lucrative car market in EU countries.
Bharat Forge is also carrying out feasibility of setting
up a plant in China.