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AU TOMOT I V E
Ernst & Young, a global leader in professional services, helps
companies to identify and deal with a broad range of business
issues and to capture growth, improve financial performance and
manage risk. Around the world, beginning at the local office level
and extending to each countrys national offices, our professionals
are aligned with key industry groups. At Ernst & Young India,
Automotive is one such industry group.
For information, please contact: Randhir S Kochhar
Transaction Advisory Services, Ernst & Young Private Limited
B 26, Qutab Institutional Area, New Delhi 110 016
Tel: +91 11 5159 4190 (Direct), +91 11 2661 1004 (Board)
Fax: +91 11 2661 1012/13
Email: randhir.kochhar@in.ey.com
ADVANTAGE INDIA 3
GOVERNMENT INITIATIVES 5
MARKET
Size and Growth 9
OPPORTUNITIES 18
CONTACT FOR INFORMATION 28
AU TOMOT I V E
The Indian automotive industry has been witnessing dynamic
growth over the years.
The domestic Indian passenger car market (including utility
vehicles) totalled 900,000 units (with a CAGR of 10 per
cent over the past 4 years) while the exports were
130,000 million units (with a registered CAGR of 68 per
cent over the past 4 years) during financial year 2004
The Indian two-wheeler Industry is one of the largest
in the world, and is expected to maintain robust growth
in the future
At the back of this phenomenal automotive growth
is the success of the Indian auto component industry.
Presently a US$ 6.7 billion industry, it is expected to
almost treble in less than eight years time to US$ 17
billion by 2012
India offers a distinct technological and cost-competitive
advantage, which global Original Equipment Manufacturers
(OEMs) and automotive suppliers are leveraging for both
manufacturing and research facilities.
A U T O M O T I V E PAGE 3
ADVANTAGE INDIA
The Indian automotive industry has a significant labour cost
advantage. Indias automotive sector has the worlds second
largest pool of skilled labour. The country with its high
education levels also provides the worlds largest pool
of qualified engineers.
Competitive cost advantage
English, a widely spoken
language in the country
English is a widely spoken language in India that provides an
edge to the local workforce, enabling work on long-term
design and engineering projects with overseas customers.
Global comparisons: avai labi l i ty of ski l led manpower, 2003
Global growth in working-age populat ion (15-64)
Source: UN, Morgan Stanley
Scale of 1 to 10 with 1 = Low and 10 = High; Souce: IMD Competitiveness Yearbook 2003
Global comparisons: avai labi l i ty of qual i f ied engineers , 2003
India is already the IT
outsourcing destination
of the world
Product quality already at
par with global standards
A mature Indian auto
industry
Indias global reputation in IT instils confidence in global OEMs
and Tier 1 companies. India can supply auto parts for their
global requirements as well as play a role in design and
development of auto components, systems and aggregates.
Indias emission norms based on Euro II norms are stringent,
placing it ahead on the vehicle quality curve.
The Indian auto component manufacturers are well-positioned
to integrate with the global automotive supply chain, either
as Tier 2 or 3 suppliers or as value providers through
engineering and software services backed by high quality
and state-of-the-art technological products. Global Tier 1
auto component makers like Dana Corporation, Delphi, Visteon
and Denso plan to leverage Indias technological advantage
over other competing Asian countries by setting up
manufacturing units in the country to produce the most
complex auto components. Dana Corporation is relocating
four of its plants, located in US and Europe to India via its
local partner, the Anand Group.
India has a well-developed and reliable financial and legal
system.
Scale of 1 to 10 with 1 = Low and 10 = High; Souce: IMD Competitiveness Yearbook 2003
Source: World Bank Development Indicators
India: The cost and ski l l s advantage
I n d i a Ch i n a I nd i a s
A d v a n t a g e
(%Di f f e r ence )
MIDDLE MANAGEMENT (> 5 YRS) 1,400 2,500 -44%
SUPERVISOR (5 YRS) 300 800 -63%
SKILLED WORKER (I YR) 61 125 -51%
UNSKILLED WORKER 42 65 -35%
US$ per Month
A U T O M O T I V E PAGE 5
GOVERNMENT INITIATIVES
The Indian automobile regulatory policy has undergone
progressive change over the last decade.
In June 1993, the First Automobile Policy was announced.
It abolished the requirement of licences to set up
an auto manufacturing plant in India, which was the
first step to allow private and foreign investment
in the automobile industry.
In 1995, the Government introduced a company-specific
Memorandum of Understanding (MoU) route for
manufacturers of cars and multi-utility vehicles. The
policy allowed investments in the automobile industry
with a capitalisation restriction of at least US$ 50 million
over a three-year period.
With effect from April 1, 2001 Quantitative Restrictions
(QRs) on import of automobiles have been removed,
thereby phasing out the MoU policy. With the removal
of QRs, automobile manufacturers do not need import
licences, either to import cars in the kit form or as
completely built units (CBU). The MoU policy has
been replaced by a new three-tiered tariff structure.
Import Tari f fs
Product Basic Customs
Du t y
CBU 60%
CKD/SKD* 20%
Components 20%
*Completely Knocked Down Units / Semi Knocked Down Units
Auto Policy, Government of India, 2002
The Government of India approved a comprehensive
automotive policy in the year 2002, to promote an integrated
automotive sector that can achieve sustainable growth.
The policy, inter alia, seeks to:
make India an international hub for manufacturing
small, affordable passenger cars and a key centre
for manufacturing tractors and two-wheelers for
sales worldwide
ensure a balanced transition to open trade at minimal
risk to the Indian economy and the local industry
provide a conducive environment for modernisation
and facilitate indigenous design, research and development
assist development of vehicles propelled by alternative
energy sources
develop safety and environmental standards at par with
international standards
Identifying the lack of volumes (both in the automotive and
components sectors) as a major impediment constraining
efficient production, the policy proposes a set of measures:
Foreign direct investment. Automatic approval has been
granted to foreign equity investment up to 100 per cent
for the manufacture of automobiles and components.
Import tariff. Import tariffs have been fixed in a manner to
facilitate development of manufacturing capabilities as opposed
to mere assembly. For motor cars and multi-utility vehicles
(MUVs), the import tariff has been designed to give maximum
fillip to manufacturing without extending undue protection.
PAGE 7
Incentives for Research and Development (R&D).
The Finance Bill 2005 provides a weighted deduction of
150 per cent for in-house R&D expenditure in the auto
component industry. Further, the policy proposes to include
vehicle manufacturers for a rebate on the applicable excise
duty for every 1 per cent of the gross turnover of the
company expended during the year on R&D.
Environmental aspects. Adequate fiscal incentives have been
given to promote use of low emission auto fuel technology
(in line with the Auto Fuel Policy). The auto policy states
the Governments intent to align domestic policy with the
international practice of imposing higher road tax on used
old vehicles to discourage their use. Recognising the need
to support the development and introduction of vehicles
propelled by alternate fuels (hybrid vehicles, vehicles operating
with batteries and fuel cells), the policy proposes a long-term
fiscal structure to be put in place to facilitate their acceptance.
Other measures. Recognising the importance of small cars
(cars not exceeding 3.80 meters in length) in the domestic
market and the potential India holds to become an
international hub for the manufacture of small cars, the policy
emphasises the need to spur growth in this segment through
fiscal incentives. Considering the importance of the MUV
segment in the rural and semi-urban areas, the policy states
the need to provide fiscal incentives to this segment.
A U T O M O T I V E
Environmental standards:
The National Auto Fuel Policy
The principal environmental standards in India are the Euro I
and Euro II norms, which regulate vehicular emission in terms
of pollutants such as carbon monoxide (CO), hydrocarbons,
nitrous oxides (NOx) and suspended particulate matter.
The Government of India announced the National Auto Fuel
Policy, which recommended Euro II (Bharat II) norms. These
norms are in place in Delhi, Mumbai, Chennai, Kolkata,
Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and
Agra. The Policy also suggested that the norms be further
extended to the entire country from April 1, 2005. The
Mashelkar Committee has recommended that Euro III
equivalent emission norms for all categories of vehicles
should be introduced in seven megacities April 1, 2005
onwards, and subsequently extended to other parts of the
country from 2010. Estimates suggest that the automobile
industry would require investments in the range of
US$ 5-7 billion for manufacturing vehicles compatible
with the proposed emission norms.
PAGE 9
Two-wheelers on a robust
growth path
The Indian two-wheeler market is one of the largest
two-wheeler markets in the world, with the present estimated
size of 5.4 million units a year.
Over the last five years, the two-wheeler market in India
has grown at a CAGR of 10 per cent and is projected to
maintain this robust growth rate in the future. Motorcycles
comprise approximately 78 per cent of the two-wheeler
market, with the remaining 22 per cent being shared
between scooters and mopeds.
MARKET
Size and Growth
The passenger car market is projected to grow at a CAGR of
12.3 per cent over the next few years. Growth in the mid-size
and premium car segments is expected to outpace the overall
market growth.
2003-04 (A): Total units - 696,207
Source: CRIS INFAC, Annual Passenger Car, October 2003
Passenger car market
growing at a sustained pace
A U T O M O T I V E
Auto ancillary industry
to strengthen
Nearly two-thirds of the auto component production is
consumed directly by OEMs, around one-fifth goes to
after-market sales and the remaining is exported. The market
is dominated by the organised sector that comprises nearly
400 players, covering 78 per cent of the demand. The
remaining demand is met by the fragmented unorganised
sector. Presently a US$ 6.7 billion industry, the Indian auto
component industry is projected to grow at a CAGR of
15 per cent. It is expected to almost treble in eight years to
US$ 17 billion by 2012 (Source: Automotive Component
Manufacturers Association of India (ACMA) quoted in a
Study of the Indian Automobile Industry, AT Kearney).
Indian auto anci l lary industry: revenue shares of various component
categories, f iscal year 2003
Source: CRIS INFAC
A U T O M O T I V E PAGE 11
Indian auto anci l lary industry: revenue shares of various component
ca tegor i e s
F Y1999 FY2000 FY2001 FY2002 FY2003 CAGR
ENGINE PARTS 696 870 804 848 1000 8.9%
ELECTRICAL PARTS 152 217 261 283 304 20.1%
TRANS & STEERING 435 478 457 565 609 9%
SUSPEN. & BRAKING 370 435 413 435 457 6.3%
EQUIPMENT 152 174 217 239 348 23.7%
OTHER 370 543 848 1152 1521 43.2%
TOTAL ORGANISED
SECTOR 2174 2739 2978 3522 4239 18.2%
SSI SECTOR
ESTIMATED 652 826 891 1043 1283 18.4%
TOTAL COMPONENTS 2826 3565 3869 4565 5522 18.3%
Source: CRIS INFAC
All values in US$ million; FY: Financial Year
Sales break-up: Indian auto component industry, f iscal year 2003
Source: CRIS INFAC
Market Structure
For nearly three decades after independence, the Indian
automobile industry comprised only two automobile
companies, Hindustan Motors and Fiat. The industry was
licensed, highly regulated and government-controlled during
this period. The early 1980s saw the entry of a new player,
Maruti Suzuki, a joint venture of Suzuki Motor Corporation,
Japan and the Government of India.
The early 1990s witnessed several reforms initiated by the
Indian Government aimed at encouraging private and foreign
investment through delicensing, government-decontrol and
deregulation of various sectors of the economy. In June 1993,
a new automobile policy was formulated allowing foreign
investment in the automobile sector, abolition of licences
and a reduction in duties across the board to enable the
sector to become globally competitive. This resulted in several
new players entering the Indian automobile industry, including
General Motors, Ford, Hyundai, Honda, and several others.
Changing laws
attracted numerous
players in the passenger car
segment
Market shares of players in the domestic passenger car market
(Apri l 2003 - March 2004)
PAGE 13
Foreign players in India
Name India Partner Col laborator Fore ign Year of
e q u i t y I n co rpo ra t i on
DaimlerChrysler India Private Limited None DaimlerChrysler AG 100% 1995
Fiat India Automobiles Pvt. Limited None Fiat Auto SPA, Italy 100% 1997
Ford India Limited Mahindra & Mahindra Ford Motor Company, USA 84.10% 1995
General Motors India Limited None General Motors Corporation, USA 100% 1995
Hindustan Motors C K Birla Group None - 1940s
Honda Siel Cars India Limited Siel Limited Honda Motor Company Limited, Japan 99% 1995
Hyundai Motor India Limited None Hyundai Motor Company, Korea 100% 1996
Maruti Udyog Limited Government of India Suzuki Motor Company, Japan 54.20% 1982
Tata Motors Limited Tata Group None - 1945
Toyota Kirloskar Motors Limited Kirloskar Group Toyota Motor Corp., Japan 88.90% 1997
A U T O M O T I V E
Tata Motors an indigenous success story
Tata Group is among Indias largest business houses. The
group has interests in seven key industry sectors. These
include engineering, chemicals, consumer products, energy,
communications and information systems, materials and
services. It holds a leading position in many of these sectors.
One of its oldest and most prominent companies is Tata
Motors, earlier known as Tata Engineering. Tata Motors
is the foremost, the largest and the only fully integrated
automobile manufacturer in India. It ranks among the
worlds top ten producers of commercial vehicles.
Its product range covers passenger cars, multi-utility vehicles
and light, medium and heavy commercial vehicles for goods
and passenger transport. Seven out of ten medium and
heavy commercial vehicles in India bear the Tata mark.
Over the years Tata Motors has made substantial
investments in building companies that add value,
facilitate and support its diverse range of business activities.
The company enjoys a significant demand in export markets
such as Europe, Australia, South East Asia, the Middle East
and Africa. Tata Motors vehicles currently sell in over 70
countries. Tata Motors registered an annual turnover of
US$ 2.8 billion in 2003-04.
It launched Indias first indigenously designed and
manufactured passenger car - the Indica V2 - which has
been a phenomenal success, standing testimony to the
companys research and engineering expertise. Tata Motors
has followed this up with the launch of its sedan Indigo and
its variant the Indigo Marina.
Tata Motors is spreading its wings abroad. It has acquired
Daewoo Commercial Vehicle Co. (DWCV) Korea, the truck
making arm of Daewoo. With this deal the company gets
access to Daewoos 93 models in cargo, dumper, mixer
and tractor categories that it can introduce in other
markets. DWCV produces around 20,000 heavy-duty trucks
in the 200-400 horse power range. This deal will help
Tata Motors diversify into higher horse-power ranges.
A U T O M O T I V E
India represents one of the largest two-wheeler markets in
the world, with an estimated size of 5.4 million units a year.
Two-wheelers are used extensively in the country, both at
the rural and semi-urban level. India is the two-wheeler capital
of Asia with an average of 27 two-wheelers per thousand
people, compared to Chinas 8 two-wheelers per thousand
people (Source: World Bank).
The Indian two-wheeler market in India is oligopolistic in
nature, with the top three companies accounting for over
80 per cent of the total industry sales. Hero Honda Motors
Limited, a joint venture between Honda Motors, Japan and
the Indian-based Hero Group, is the largest manufacturer
of two-wheelers in the world with a 38 per cent market
share of the domestic 5.4 million units two-wheeler market.
Bajaj Auto is the second largest player in the two-wheeler
market with a 22.3 per cent share. The company uses
indigenously developed technology for its two-wheelers.
TVS Motor Company is the third largest player with a 20.9
per cent market share, with a majority of its sales coming
from the southern states of India.
PAGE 15
Two-wheelers market,
one of the largest in the
world and still growing
Market shares of players in the domestic two-wheeler market
(Apri l 2003 - March 2004)
Source: SIAM
Auto ancillary,
transforming through the
years
The Indian auto parts industry is significantly fragmented with a
large number of players having a turnover of less than US$ 10
million per year. The industry directly employs about 250,000
people and has an annual turnover of over US$ 6.7 billion.
The evolution of the Indian auto ancillary industry can be
traced through three distinct phases, each marked by
substantive developments.
Phase I (1980s): Prior to the 1980s, the auto ancillary industry
had been primarily dominated by the unorganised, low
technology small-scale sector. The setting up of Maruti Suzuki
in 1983, generated a need for high quality, reliable auto
components that met the stringent emission standards set
for Maruti cars. This led to the entry of several Japanese
auto component majors like Sumitomo, Koyo and Denso.
Phase II (1990s): The auto component industry in India
witnessed a transformation in the 1990s to a high technology,
quality conscious industry catering to the requirements of
the growing domestic automobile industry. Large players like
Delphi, Robert Bosch, Visteon Corporation etc entered the
market to tap the huge potential created by the strong
domestic and export demand.
Phase III (2000 onwards): This period has seen the
emergence of three trends in the industry, namely:
Globalisation of Indian companies: Several leading Indian
companies have acquired international auto component
companies as part of their strategy to expand their markets
globally and acquire new technology. For example, Bharat
Forge, the second largest forging manufacturer in the world
has acquired German forging company, Carl Dan
Peddinghaus; Amtek Auto acquired two UK-based auto
component companies; Sundaram Fastners acquired
a precision forging unit of Dana Spicer, Europe.
A U T O M O T I V E PAGE 17
Global Quality Benchmarking: Today the Indian automotive
industry has six Deming Award winners which include Rane
Brake Linings Limited; Brakes India Limited, Foundry Division;
Sona Koyo Steering Systems Limited; TVS Motor Company
Limited; Sundaram Brake Linings Limited and Sundaram-
Clayton Limited, Brakes Division. By investing in quality,
local component manufacturers are becoming the hub for
global sourcing of international automotive companies.
Outsourcing: Global auto component companies like Delphi,
Visteon, Cummins etc consider India their manufacturing as
well as research base and are sourcing components from
India for their global requirements.
OPPORTUNITIES
India is a market that offers new avenues for growth in the
automotive sector and also provides opportunities to global
companies to compete more effectively in their home markets.
Given the present downturn in developed markets, OEMs
and suppliers alike are under pressure to optimise their cost
levels and simultaneously drive growth. In this context, India
represents a substantial cost advantage, which global OEMs
and component manufacturers are leveraging to drive down
costs and build growth options.
On the cost front, OEMs are eyeing India in a big way to
source products and components at significant discounts to
home markets. On the revenue side, OEMs are active in the
booming passenger car market in India.
Exports from India
The Indian automotive exports industry has covered significant
ground to reach international standards in quality, reliability
and technology. This is borne out by the phenomenal auto
export growth witnessed by the country over the last 3-4
years.
Passenger vehicle exports have grown over five times in
the last four years, touching 129,316 cars in 2003-04.
A testimony to Indias emergence as a future auto export
base of the world, is UK-based MG Rover Groups recent
alliance with an Indian automobile major, Tata Motors, to
export an estimated 100,000 cars over the next five years
from India.
India offers twin
advantages
scaling costs and
optimising revenues
India becoming an export
hub
PAGE 19
Korean car manufacturer, Hyundai has made India the global
sourcing base for its small cars and targets exports volumes
of 70,000 cars for 2005.
Suzuki, Japan is using India as the sourcing base for its small
cars.
Export of passenger cars
Hyundai Motor India Limited (HMIL)
HMIL was set up in late 1996 as a wholly owned subsidiary
of Hyundai Motors, Korea. The companys small and
compact model, Santro has been a runaway success
in India. The company currently is the second largest player
in the passenger car market in the country with a present
market share of 20 per cent and a turnover of
approximately US$ 1 billion. The company recently rolled
out its 500,000th vehicle from its Chennai plant, and plans
to roll out its millionth vehicle by 2006.
The company caters to all segments (small and compact,
mid-size, premium) of the car market in India, and has a
current manufacturing capacity of 250,000 units.
Source: CRIS INFAC, SIAM
A U T O M O T I V E
Hyundai Motor India Limited
Auto ancillary exports have multiplied over the last five years,
growing at a CAGR of 26 per cent between 1999-2000 to
2003-04. As per the latest McKinsey & Co. report on auto The
HMILs strategy has been to penetrate the Indian passenger
car market with low price offering (Santro priced between
US$ 6000-8000) targeting the burgeoning middle class
market segment. The company has been able to keep
costs down by outsourcing most of its parts to its vendors.
Due to a low fixed cost structure, its breakeven level is
low. The company has replicated the Santro success story
with its Accent model, which is priced at over US$ 10,000
and targets the upper middle class and upper class market
segments. The Hyundai plant has a capacity to make
250, 000 cars and 350,000 engine transmission units per
annum. It also exports engines and transmission parts to
its operations in Korea and Turkey.
Source: CMIE
components, Indian auto ancillary exports currently pegged
at US$ 1 billion, could potentially scale up to US$ 25 billion
in the coming decade.
Explore the cost-competitive advantage
Indias auto component industry with its high product quality,
superior design and engineering capabilities, backed by a large
domestic market and government regulations has emerged as
a preferred outsourcing destination. According to Automotive
Component Manufacturers Association of India (ACMA), all
these factors are expected to contribute towards an export
growth of over 30 per cent per annum until 2010.
India offers a low-cost manufacturing base for auto
components, which may be utilised to fulfil global demands.
The average fully loaded cost of a component (for example,
oil filters) sourced from India is typically 20-30 per cent lower
than a US manufactured one, which compares favourably with
even markets like Mexico and is almost at par with China.
Examples of world-class players fulfilling such demand today
are companies like Sundaram Fastners, Sundaram Clayton,
Bharat Forge and Rico Auto, which supply to DaimlerChrysler,
Germany; RVI, France: General Motors, USA; Ford, UK;
Cummins, USA & UK; Land Rover, UK; Volvo, Sweden; Ford,
Brazil; PT DaimlerChrysler, Indonesia; Proton, Malaysia.
Experience of several e-procurement platforms indicates that,
on an average, global buyers save between 10-20 per cent by
sourcing components from India.
Global automobile companies are aggressive in the Indian
market to find sourcing partners in India to meet their
ambitious cost-cutting plans. Both OEMs and their Tier I
vendors (Delphi, Ford, Volvo, Robert Bosch, Cummins etc)
have set-up teams in India to explore such opportunities,
attracted by the countrys availability of low-cost, skilled
engineering manpower.
Tier-I vendors scouting for
sources in India
PAGE 21
Outsourcing opportunity
A U T O M O T I V E
recent trend of OEMs setting up IPOs (international purchasing
offices) in the country is an indication of the huge opportunity
for Indian auto component manufacturers.
OEMs can also reduce the cost of engineering services, design,
IT and other back-office related operations by remote sourcing
to India on account of its low cost yet highly skilled labour
market.
TRW has a strategic alliance with Satyam for outsourcing
enterprise resource management, supply chain management,
information systems, e-business applications, and engineering
services.
Ford Information Technology Services India (FITSI) is delivering
high-quality solutions in business software, computer-aided
engineering and call centre/e-mail processing. Ford expects
to have annual labour cost savings of US$ 30-60 million.
Large OEMs setting up
purchase offices
Minimising costs
of operations
Bharat Forge Ltd
Bharat Forge Ltd, the flagship company of the Kalyani Group,
was set up in 1961. It is the largest forging company in Asia
and one of the largest and most technologically advanced
commercial forge shops in the world. Catering primarily to
the commercial vehicle segment, its client list includes Tata
Motors, Ashok Leyland, Mahindra & Mahindra and Maruti in
India and DaimlerChrysler, Arvin Meritor, Dana, Renault &
Volvo, overseas. The company has recently acquired Carl
Dan Peddinghaus AT, a German aluminium forging company,
for a consideration of Euro 6.3 million.
PAGE 23
Bharat Forge Limited
Bharat Forge has an annual forging capacity of 102,966 MT,
front-axle capacity of 500,000 units and front-axle beams
capacity of 413,000 units. With revenues of approximately
US$ 150 millon, the company has a major focus on exports,
deriving 39 per cent of its revenues from overseas clients.
Bharat Forges strength lies in its long-standing relationships
with its clients; it being a one-stop shop for all forging
requirements (including several critical products, where
it enjoys a near monopoly). Its manufacturing facilities
are rated very highly and its flexibility to scale operations
helps it in structuring its deliveries in a cost-effective manner.
The company is also looking at de-risking its revenues by
increasing its presence in new and existing overseas markets
and expanding its product lines to cater to other segments
of the automotive market, where it has a small presence
till date.
Source: CMIE
A U T O M O T I V E
Sundaram Fastners Limited
Sundaram Fastners, a member of the TVS group (the
largest automotive component group in India) since 1965,
is one of the pioneers and most respected names in
the auto component industry in India. The company
manufactures about 7000 different types of bolts and nuts.
Its product range includes high-tensile (premium quality)
fasteners, powder metal parts and radiator caps. The
company has won the coveted Best of the Best Suppliers
of the Year award for five consecutive years from General
Motors. Looking at the vast scope of the Chinese market
the company has set up a 100 per cent subsidiary,
Sundaram Fastners (Zhejiang) Ltd with an initial investment
of US$ 5 million and plans to invest US$ 12.5 million
more over the next two-three years. DaimlerChrysler,
Cummins and General Motors are its major customers.
Sundaram Fastners Limited
SFLs strength lies in its premium quality products. It has a
keen focus on R&D, which includes not only expansion of
product lines but also improving quality of existing products.
It also has a technical collaboration with Dura Automotive,
USA for gear shifter assemblies. SFL would be looking at
strategic acquisitions to fuel growth in the future.
Source: CMIE
PAGE 25
Bosch Group
Motor Industries Company (MICO) founded in 1951 is
a 61 per cent subsidiary of the German auto components
maker, Robert Bosch GmbH. MICO pioneered the
manufacture of automotive spark plugs and diesel fuel
injection equipment in India. Currently, the company is
the largest manufacturer of diesel fuel injection equipment
in the country and one of the largest in the world.
In recent years the company has widened its product range
by introducing a large number of automotive accessories
as well as special purpose machines, electric power tools,
car audio systems and packaging machines. The company
derives 45 per cent of its revenues from domestic sales
mainly to OEMs and the replacement market. Exports
comprise the remaining 55 per cent of its revenue.
Motor Industr ies Company Limited
MICO has seen sales grow by nearly three times and profits
by over five times in the last 10 years. The companys
strategy has been to introduce, manufacture and sell high-
technology products in the country. This backed with its
strong distribution network has been key to its success in
India.
Source: CMIE
A U T O M O T I V E
Contract manufacturing
OEMs are also leveraging the capabilities of the local
manufacturers for contract manufacturing. The global OEMs
in this case allow the local player to assemble a globally
developed, and in some cases, locally modified vehicle in one
of the existing local plants.
Mitsubishi has been successful in using Hindustan Motors to
manufacture its Lancer.
Ford has recently entered into a strategic tie-up with
Hindustan Motors to manufacture 20,000 petrol engines and
transmissions for its Ford Ikon cars.
Kawasaki has announced plans to outsource parts for sub 200 cc
motorcycles from Bajaj, with which it has a technical tie-up.
Global Tier 1 suppliers like Delphi and Visteon have also set
up greenfield projects in India. Such projects tend to have
longer gestation periods but allow the manufacturer to set-up
and manage the entity in line with its global policies and
standards.
Product penetrations
Indias current car penetration is one of the lowest in the
world at five cars per thousand persons, compared with ninety
cars per thousand people for other developing countries like
South Africa and Brazil in 2001 (Source: Wards Automotive
Data book). This represents a huge latent demand for a large
economy like India, which is projected to grow at a
phenomenal rate over the next five years. Car penetration
ratio is projected to double by 2007-08.
Greenfield projects
are a viable option
Large latent demand for
passenger cars
Innovating for the domestic market
Indias domestic passenger car market is poised to grow at
an impressive rate in the near future. Despite a market still
smaller than several other global markets, establishing
a beachhead could prove useful for the long-term.
The market has its own unique characteristics and one-size
fits all approach may not work. Indian consumers are not only
cost-conscious but also look for good vehicle performance.
A value for money proposition is usually a good starting
point. Hyundai has capitalised on this strategy by positioning
all its cars, from the Santro to the Sonata, on this platform.
Moving into the local market by leveraging some of the
existing global platforms and styling them to suit local tastes,
as most OEMs are doing now, could also lead to success
in the domestic market. Building the appropriate relationships
and transferring best practices into this market can yield
significant benefits in the long run.
Offering value for money
and adapting to local
conditions spells success
PAGE 27A U T O M O T I V E
Explore, invest and partner
with India to profit and
advantage
CONTACT FOR INFORMATION
Two premier associations in India represent the automobile
and auto components industry respectively, creating a
symbiotic interface between industry, government, domestic
and international investors. These associations can be
contacted directly for information on market and opportunities
for investment/collaboration in the automobile and auto
components sectors.
Automotive Component Manufacturers Association
of India (ACMA)
6th Floor
The Capital Court
Olof Palme Marg, Munirka
New Delhi - 110 067
India
Tel: + 91 11 2616 0315, 2617 5873, 2618 4479
Fax: + 91 11 2616 0317
E-mail: acma@vsnl.com
Website: www.acmainfo.com
Society of Indian Automobile Manufacturers (SIAM)
Core 4B, 5th Floor
India Habitat Centre
Lodi Road
New Delhi - 110 003
India
Tel: + 91 11 2464 7810-12, 2464 8555
Fax: + 91 11 2464 8222
Email: siam@vsnl.com
Website: www.siamindia.com
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