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The
significant growth in the In-dian auto component industry
has transformed the industry into a new hot business opportunity
for domestic and foreign auto majors in both two- and four-wheelers
segments. As the auto components industry is having high profit
margins and industry outlook is lucrative for the next five
years, the auto majors are betting big on entering the components
business to leverage on current manufacturing boom. This may
not be a strategy related to vehicle manufacturing or trying
to buy out component manufacturers to ensure a secure supply
base. Perhaps, the motives for their entry vary from company
to company. While global majors like Suzuki, Hyundai, Daimler
Chrysler, General Motors and Toyota are increasingly sourcing
components through their international purchase offices or
joint ventures with domestic players, domestic companies such
as Hindustan Motors (HM), Kinetic engineering, Tata motors,
and Mahindra and Mahindra (M&M) have already been leading
the components business in a big way as an added revenue stream.
With
the revival in Indian manufacturing, auto components industry
has been booming with outsourcing orders from global Original
Equipment Manufacturers (OEMs) and rising domestic demand.
The components exports were increased at an average of 35%
in the last five years. Component exports are crossing $1.4
bn and expected to $1.8 to $2 bn at the end of 2006. Nearly
70% of the exports are catering to OEMs and the remaining
to aftermarkets. Moreover, India has become a preferred destination
for Global OEMs to establish local ventures for sourcing.
Global majors like the Suzuki, Hyundai and Honda are entering
components manufacturing through their ancillary arms and
joint ventures with domestic firms. |
