Competitiveness of the Indian Auto Component Industry
 |
Authors
Authors: Sanjib Datta,
Faculty Member
ICMR (IBS Center for Management Research).
Links
Tools
Acquisitions by Major Indian Players
|
Indian Company |
Company/Plant acquired/Set-up abroad |
Located in |
Size of the deal ($ mn) |
|
Amtek Auto |
Smith Jones Inc. |
US |
20 |
|
Amtek Auto |
GWK Group |
UK |
37 |
|
Bharat Forge |
Carl Dan Peddinghaus GmBH* |
Germany |
116# (euro) |
|
Sundaram Fasteners |
Dana Spicer Europe* (Forging unit) |
UK |
2.6 |
|
Sundram Fasteners |
Sundram Fasteners (Zhejiang)** |
China |
5 |
|
G. G. Automotive Gears |
Name not disclosed. US company that manufactures high precision custom gears and planetary gears. |
US |
110 |
Source: Businessworld, 23rd February 2004 * Plant **Plant set-up #Approximate
According to Suresh Krishna, Chairman and Managing Director, Sundram Fasteners, there are three basic reasons that prompted Indian component companies to venture abroad. First, having established a reasonable domestic presence, big Indian component makers are now looking for an international presence. Second, having improved their productivity, quality and reliability, Indian companies feel more confident venturing abroad. Third, the Indian government's investment friendly policies and hassle-free environment for overseas acquisitions have encouraged Indian companies to take the acquisition route. With these overseas acquisitions, the Indian companies can tap the original equipment (OE) market abroad. The Indian companies can supply their own products to these customers.
R&D Capability
In recent years the world's leading automakers and Tier I suppliers have opened their R&D centers in different parts of the country. The cost of R&D in India is low compared to any developed country and skilled manpower is available. In the long run the entry of foreign companies would benefit the Indian industry as people working in foreign firms would acquire insights and skills which otherwise would be impossible to acquire.
In India there is not a single auto component manufacturer which does original R&D. Only a few companies have recently started design and development (D&D). D&D is the initial stage of R&D and it works as a support function for R&D in auto component industry. Every major auto component manufacture starts with D&D before venturing into full scale R&D. R&D in auto component industry involves developing a component as per the requirement of vehicle maker/OEMs/Tier I supplier. It involves developing the original design of the component, making prototypes and testing and then mass production of the component. R&D in auto component industry requires high technological capabilities and Indian companies are on a learning curve.