The growing confidence of the Indian auto industry is expected to result in an acceleration of the ‘internationalisation’ of the Indian auto industry in 2006.
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Supplier executives surveyed by SupplierBusiness and Roland Berger at the end of 2005 identified India as a sourcing location that they expected to grow in 2006 at almost the pace of the Chinese industry.
Purchasing executives at OEMS and first tier suppliers see India as a more transparent and accessible source than many other potential Asian sources because of language advantages and long standing corporate links.
Companies like Eaton, Textron, Magna and Deutz have looked at Indian suppliers for outsourcing components. Ferrous and non-ferrous castings and forgings at the lower end, fully and semi-machined components at the middle level and high end software and design development are some of the areas where Indian companies have a strong advantage.
This strong flow of outsourcing business has helped Indian upper and middle-tier suppliers grow at a much faster rate than the industry average.
International suppliers in India are growing fast too. Bosch alone plans to invest over US$400m in India through its subsidiary MICO by 2007-8.
Indian suppliers are expected to continue to play a growing role in automotive supplier M&A in 2006. Clutch Auto, for example, completed the acquisition of US-based Pioneer at the beginning of January 2006. Bharat Forge is currently considering the acquisition of ThyssenKrupp forging units in the US and Europe.
Further acquisitions are likely during 2006. Corporate financiers specialising in the automotive sector expect Indian companies to be interested in deals with an enterprise value of up to a few hundred million euros, which makes them potential buyers for many of the divisional sell-offs being contemplated by larger suppliers as well as troubled or generational-change medium sized companies that are for sale in the sector.
Indian automakers may also be interested in making moves internationally.
SupplierBusiness.com
