Competitiveness of the Indian Auto Component Industry
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Authors
Authors: Sanjib Datta,
Faculty Member
ICMR (IBS Center for Management Research).
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Comparison of Labor Costs
|
|
Indian Companies |
Developed Country |
Global Companies |
|
Skilled labor cost/hour |
$8 |
$20 |
|
|
Labor cost forging industry |
9.4% of Sales |
|
Dana-38.8% of sales and UEF-37.9% of sales |
|
Total Labor Cost |
3-15% of sales |
|
20-40 % of sales |
Source: Compiled from different sources
Indian Auto Component Industry in 2002
* 337 Companies with ISO 9000 Certification
* 41 Companies with ISO 14001 Certification
* 193 Companies with QS-9000 Certification
* 25 Companies with TS 16949
* 2 Deming Prize winning companies
* 1 Japan Quality Medal winning company
Source: Automotive Component Manufacturers Association of India
Export of auto components from India as % of Production (in Rs Crore)
|
FY Year |
Production |
Exports |
% |
|
2000-01 |
17,246 |
2,706 |
15.7 |
|
2001-02 |
21,602 |
2,802 |
13 |
|
2002-03 |
25,535 |
3,496 |
13.7 |
|
2003-04 |
30,640 |
4,500 |
14.7 |
Source: Business Line, May 1st 2004
Moving Up the Value Chain
The Indian auto component manufactures are moving up the value chain to integrate themselves with the global auto component industry. In recent times, the industry has adopted three-pronged strategy to go global. First, giving thrust to exports. Exports are growing at a compounded annual rate of 20-25%. Second, Indian companies have started acquiring plants abroad. Third, many Indian manufacturers have started collaborating with foreign players. By collaborating with foreign companies, the Indian companies are learning the high-end designing and development skills of the major auto component manufacturers in the world.
Reverse engineering is one area where the Indian auto component manufacturers have proved successful. Recently, the Pune-based Commercial Vehicles Systems Research Centre of Anand Group3 added two new products - a self-steer axle and an air suspension for its partner Dana Corporation of US. These products were developed within seven and nine months respectively, against the 22 months it takes to manufacture these products in the US. Ten more products are under development in the research labs of Anand Group for its partner Dana Corporation.
Many Indian companies are trying to become Tier I suppliers to the global automakers. Bharat Forge, India's largest auto component exporter is trying to exploit its available resources and expertise to become a Tier I supplier. The company has indigenous design and development capability; it has the world's largest single location plant. Bharat Forge has some inherent strengths like it takes 3-4 weeks to market a product against the global standard of 6-12 months and it has the experience of working with the world's leading clients like Toyota, Ford, Honda and Volvo. Bharat Forge has 50% of the US market for front axle beams for trucks. Recently the company has made some overseas acquisitions to expand its customer base in original equipment market. In the auto component industry original R&D is a highly capital intensive. The global tier I players invest 5-7% of their turnover in R&D whereas, Indian companies spend less than 1% of their turnover on R&D.
3] Anand Group is a manufacturer of automotive systems and component in India. The company has a collaboration with Dana Corporation of US.