USA: Automakers' Faith in India Is Good News for Parts Vendors, Says Frost & Sullivan
Additionally, the government's commitment to the World Trade Organization (WTO) and strict action on emissions is bringing in a flood of new-generation vehicles. India's confident, prosperous middle class -- helped by easy vehicle finance -- is absorbing that flood. This is projected to create significant revenue-generating opportunities for automotive component manufacturers.
"The recent rush of global automotive companies to India has ensured that domestic year-on-year growth rates for components touch the mid-twenties," says Frost & Sullivan's industry expert Ganesh Relekar.
In its first of seven studies on the Asian automotive market, "A Strategic Insight of the Indian Automotive Market," Frost & Sullivan (www.frost.com) forecasts that this steady pace will continue through the early years of the new decade, with the aftermarket segment growing faster than the original equipment (OE) market. The study predicts this dynamic market to generate $4.82 billion in 2002, with a compound annual growth rate of 13.5 percent.
"Even as new choices available to consumers increase, vehicles that were bought in the early 1990s need to be fitted with newer components and devices to meet stricter emission norms," says Relekar.
The same norms -- Euro II and above -- will force automakers to include world-class technology in all new vehicles. This should benefit global automotive component manufacturers who are often OE suppliers for automakers. Their strong brand names will help them penetrate the aftermarket as consumers are made aware of the rising need for genuine spares.
However, the scenario might not be beneficial for most local component manufacturers. Particularly in high-tech products such as engine and transmission parts, quality standards need to be very high. The gap between needed capabilities and those that local firms possess could influence the future competitive structure. This Frost & Sullivan study predicts that a shakeout is inevitable.