The Indian automobile components industry has witnessed a great deal of transformation in the past decade owing to globalization and the country’s economic liberalization. The Indian auto-component sector which once catered only to the domestic needs has now become a major focal point for many of the global auto makers to build their facilities. By the year 2015, the Indian auto components outsourcing market is expected to be worth US$700 billion with automobile leaders such as, Toyota, GM, Ford, Volkswagen, etc. already sourcing components worth millions. The major driving factor in India has always been its low cost labor and raw materials. However, the advent of twentieth century has seen foreign investors moving their manufacturing bases to India due to the country’s improved quality level and highly skilled manpower.
The early nineties saw the liberalization of the Indian economy which encouraged foreign investors from around the world to tap into India’s unexploited potential. Consequently, companies such as Hyundai, Toyota, General Motors and Ford have not only set up manufacturing facilities in India, but have also encouraged the Indian component manufacturers to adopt global best practices such as Six sigma, TQM, Lean manufacturing, etc. In return, the Indian companies were prepared to invest substantially to modernize and inculcate dynamism in the industry. While many companies borrowed equipment and technology in an attempt to make a global footprint, key manufacturers such as Bharat Forge, Sundram Fasteners, Amtek Auto, etc. were determined to evolve. And evolve they did, by forging alliances with some of the major players in Europe, which not only gave them access to newer technology but also new found credibility. This led the apprehensions of the foreign world about quality of Indian products to gradually fade away. Further, the sourcing of components by foreign manufacturing giants like Volkswagen and Renault–who did not have any offices in India–removed the remaining doubts regarding the quality of the components. Gradually, an increase in the number of components sourced from India was witnessed, with global auto-component makers such as Delphi and Visteon opening up offices in India.
India has now the potential to manufacture a wide array of automotive components from fasteners to engine parts (about 20,000 in number). The country, at present, is considered as the global hub for compact cars with companies such as, Renault, Ford and Hyundai investing millions. Currently, Automotive Component Manufacturers Association of India (ACMA) has over 600 members with over 250 members having an annual turnover of more than a million US dollars, and over 50 companies earning more than a US$100 million. Car manufacturing giant, BMW has already setup a plant in Chennai to produce its 3 series and 5 series cars. According to the company, “the market potential in India is huge and that the focus is firmly on India”. Volvo and Harley Davidson are recent additions to the likes of car manufacturers such as GM and DaimlerChrysler AG which consider sourcing auto-component parts from India as their counter to global competition.
Since the year 2000, India’s auto-component industry has witnessed a growth of about 20% per annum, with over 15% of the total revenue derived from exports. With high-quality products, abundant skilled manpower, on-time delivery and favorable government policies, in addition to the already available cheap labor and raw materials, India’s position as the global hub for automotive components looks steady. There are still obstacles along the way to the final destination, but for now it looks like India is on the right tracks.