The global auto component industry is worth approximately $1 tn. The leading auto component manufacturers in the world are Ford Motors, General Motors (GM), Delphi Corporation, Caterpillar, International Truck and Engine Corporation and Cummins and the US is the world's biggest auto component market. In 2002 it imported auto components worth $69 bn.
In India, Chennai, Pune and Gurgaon are the three big centers for the auto component manufacturers. The Indian auto component industry is worth around Rs. 25,000 cr (approx. $5 bn). It is still very smalljust one-sixth of the world's largest auto component maker, the $28 bn Delphi Corporation.1
For the year ended March 2004, the domestic auto component industry registered revenues of $1.1 bn (Rs. 4,800 cr) from exports. This was 38.8% higher compared to export revenues during the FY 2002-03. According to Automotive Component Manufacturers' Association of India (ACMA), the projected compounded annual growth rate (CAGR) for the domestic industry is 18% and the export projection for 2010 is $2.7 bn. India falls way behind other developing countries when it comes to auto component exports. Indian auto component manufacturers don't have the scale of production required to beat the global majors. For example, Kayaba, the world's biggest shock absorber maker, produces 240 million units per year whereas, Gabriel India, the country's largest shock absorber maker, manufacturers only 9 million units a year. Low scale of production acts as a hindrance for Indian auto component manufacturers from getting large export orders. Most of the export orders they receive are worth below $100 mn. As per global standards any export which is less than $100 mn is considered insignificant.
The auto component industry in India has seen high growth in recent years. There are three major reasons behind this. First, the domestic automobile industry (two-wheelers, commercial vehicles and passenger cars) has registered good growth. High demand for automobiles has subsequently fuelled the demand for auto components from automakers. Second, the replacement market is growing rapidly as more and more new vehicles hit the road. Moreover, the product life cycle of automobiles is becoming shorter. As more new models hit the road the demand for auto components keeps rising. The increasing number of vehicles mean an expanding market for replacement components. Third, the global automobile industry is going through its worst phase ever. To cut production cost, leading companies are sourcing cheaper components from countries like India and China. To become globally competitive, the Indian industry has to learn the best manufacturing practices, be quality consciousness and adhere to strict delivery schedules. |
