INDIA: World beats a new path to local automotive parts makers - paper
The scramble by a recession-wounded global automotive industry to find a source for low-cost, high-quality components has been a big boon to India's automotive parts makers, according to the New York Times (NYT).
The newspaper said that, among the rash of announcements just this month was one by Delphi Corporation, the world's largest automotive parts maker, saying that it would have $US140 million worth of auto parts — forged engine parts, intricate plastic mouldings and other products — made by Indian concerns, and that such orders were expected to exceed $US250 million a year by 2007.
According to the NYT, Ford said that it expected to get more than $100 million worth of components from Indian parts makers in the next two years and Volvo said that it planned to increase its manufacturing in India to 100 million euros ($117 million) worth of parts in one year instead of three.
The New York Times noted that demand has come even from China, a rival to India in low-cost manufacturing, and the orders are flowing throughout India's automotive parts industry, to subsidiaries of Ford, General Motors, Toyota Motor and other major carmakers; to global auto parts leaders like Delphi and Visteon; and to homegrown auto parts makers, including Bhart Forge and Hi-Tech Gears.
The newspaper said that exports of auto parts are projected to reach $25 billion in 20 years, according to the Automotive Component Manufacturers Association of India, and that, already, the exports, nearly two-thirds of which go to the United States and Europe, have risen to an estimated $800 million for the year ended March 31 from $578 million a year earlier — a 38% boost.
The New York Times said that, while the current figure is less than a tenth of the amount India's software exports bring in, investors in India's stock markets are bidding up the prices of automotive parts concerns in the belief that the industry holds as much promise.
The newspaper said the parts makers' success thus far has come in large part from two factors that have already helped make India's software and support services industry successful: low labour costs and one of the world's largest technologically adept work forces. Additionally, the NYT noted, locally produced raw materials like rubber and steel are inexpensive.
The New York Times also noted that, though India's auto parts exports are growing robustly, they account for just a minuscule portion — less than 0.1% — of the $1 trillion world auto parts industry and are small even compared with those of other low-cost manufacturing centres like Mexico and Brazil.
But, the newspaper said, India's capabilities in a variety of manufacturing processes give it a competitive edge. "The level of manufacturing industry here rivals that in most of the developed countries," Kiyomichi Ito, managing director of Toyota's new Bangalore-based unit, Toyota Kirloskar Auto Parts, told the New York Times.
P. Balendran, a vice president for General Motors India, told the newspaper that quality was central to India's appeal. "Qualitywise, India is better than Mexico, China, Taiwan or for that matter, Korea," he told the New York Times, referring to South Korea. "In terms of price, India is 15% cheaper than Mexico, 10% cheaper than Korea and at par with China and Taiwan."