India Incorporated

The last two decades have seen many changes, mostly for the better, across the world in practically every sector, be it politics, governance, geographies, markets or business practices. The strong worldwide recession during 2008-2010 saw many countries realign their strategies for survival. As a result, global markets got integrated at a relatively faster pace and materials, products and services started flowing from low-cost destinations to other parts of the world and major demand centres like the USA and Europe to make manufacturing and products cost effective.

The early 1990s saw ‘Global Sourcing’ first become a phenomenon, along with continuous technological improvements, shortening of product lifecycles/obsolescence, and more stringent emission norms. These changes saw manufacturers / OEMs begin scouting for cost-effective suppliers who could offer quick changes in products and were armed with the necessary technical skills.

India, by virtue of its existing market dynamics and potential, has become one of the major players in global sourcing. The manufacturing sector has taken rapid strides, thanks to many companies upgrading their manufacturing capabilities in terms of processes, product design, technology, re-engineering product quality and HR skills. All of this has helped them remain competitive in global markets.

Along with software, automotive components have a major share among the list of products being outsourced from India. What helps the component industry achieve higher growth is the availability of very intelligent and quality manpower , low-cost skilled and semi-skilled labour, good manufacturing practices keeping pace with international standards, a growing R& D base, stable investment climate, a vast pool of ancilliaries supporting the mainstream manufacturers and, of course, governmental support on policies and regulations. Proactive support from industry bodies like ACMA, SIAM, CII, EEPC and FICCI has also given a fillip.

But industry faces challenges too in the form of high inflation, increasing interest rates, fluctuating commodity, fuel and foreign exchange prices, creation and retention of skilled manpower, and poor or inadequate infrastructure, among many.

If the Indian auto industry has to overcome these challenges, companies, both big and small, need to look long-term and adroitly manage costs and assets. Complacency breeds non-competitiveness. Credibility, consistency and reliability will be the cornerstones of the future, for the industry and the nation as a whole. The future is India’s if only we understand it and make a genuine and honest effort towards it.

The past decade has seen a host of global automakers including Mercedes-Benz, Hyundai, Ford, Volkswagen, GM and Honda recognise the huge potential of Indian Tier-1 suppliers in manufacturing and the substantial indigenous demand. Not only have they either set up new plants or expanded existing ones, but they are increasingly sourcing parts from India for their global operations. Likewise, component majors like Continental, BorgWarner, FAG, GKN, Knorr- Bremse, Kolbenschmidt, Magneti Marelli, ZF, Bosch and Valeo, among others, have set up bases in India to cater to OEM requirements.

Recognising the high growth potential of sourcing cost-effective components from India, many automakers set up their own International Purchase Offices (IPOs) in India. These IPOs help source and export parts to their parent companies for distribution within their global network. This has opened huge market growth opportunities for Tier-1 suppliers from India.

The auto components sourced from India are mainly fully machined castings and forgings , engine parts and transmission parts, electrical and electronic parts, stamped / pressed parts, chassis parts, high-tensile fasteners, plastic and rubber parts. Additionally, Indian companies that provide design and engineering services for quick re-engineering, development and validation of products have a huge opportunity.

To make the most of this global opportunity, Indian suppliers will do well to master the tricks of global sourcing, know in advance what buyers want. They constantly need to look at cost efficiencies, employ the latest technology and processes, maintain top-notch quality control, offer flexibility on batch sizes, and brush up their techno-commercial knowledge and communication skills. Importantly, they must engage in manpower training and on offering the right infrastructure to drive their growth, both domestic and global.