Indian auto parts drive global cars

Indian auto components are helping drive many of the new cars being launched in US and Europe, the largest auto markets in the world.

In 2006, components worth $2 billion, around Rs 90,000 crore were exported by Indian companies, 75 percent of which were bought directly by car companies (also known as original equipment manufacturers or OEMs).

The OEMs include firms like General Motors, Ford Motor Company, Cummins International, Bosch, Volkswagen, BMW, MAN (trucks) and JCB (earthmoving equipment) amongst others.

But just five years ago, only 50 percent of the components were bought by OEMs while the rest was sold in the after-market (repair shops, spare parts etc). A decade ago, the figure was 35 percent.

Such has been the improvement in Indian components, both in terms of quality and scale of production that it has forced the global companies to establish their international purchase offices in India to source the components. Currently, 20 such IPOs function from India and the number is expected to double by the year 2010.

"The real transformation occurred, when international car makers like Suzuki, Hyundai, Daewoo came to India with their global cars. Their emphasis on localisation led the Indian industry to meet their component requirements. The liaison led us to adopt their practices and improve our quality and productivity. Now the components consumed locally also meet the requirements of overseas markets of many companies," said Vishnu Mathur, executive director, Automotive Component Manufacturers Association of India.

Besides the advantage of low-priced components - 30 percent cheaper than developed markets - the global companies also benefit from uninterrupted supplies. With the race to produce low cost vehicles spreading across the globe and all companies planning to roll out vehicles with a lower price tag, Indian companies are cashing in on the boom.

A K Taneja, president, Shriram, Pistons & Rings Ltd, said: "We are now in position to aggressively meet the requirements of these global companies. After changing the Indian brand image, which has resulted in acceptance of our product's 'quality' we are on target to achieve the targeted annual growth of 30 per cent."

According to ACMA, major purchasers like Ford Motor Corporation has set an target of sourcing components worth $500 million from the Indian market, while General Motors has set an ambitious target of $1 billion worth of components from the Indian market.

Both the companies, however refused to comment on their component sourcing plans from India.