Make In India – Will Make It Happen

 By Vinnie Mehta

The automotive sector has emerged as a bellwether of the Indian economy. The coming of Suzuki Motor and Honda Motor to India in the mid-eighties saw the dawn of a new era in the Indian automotive industry. The auto component sector has come a long way in terms of size, scale and quality. Today many component players have crossed the $1 billion mark in turnover and many more are close to the mark.

India has become an attractive destination for component manufacturing and has absorbed world leaders like Bosch, Magnetti Mareli, ZF, Delphi, Honeywell, Denso and many others. With high skill levels and a competitive environment, many of the global leaders are considering India not only as a manufacturing destination but also as an engineering and R&D hub.

The well-developed Indian auto component sector produces a diverse portfolio of products which include engine parts, drive transmission and steering parts, body and chassis, suspension and braking parts, equipment and electrical parts, besides others which are best in class.

‘Make in India’

The ‘Make in India’ campaign of Prime Minister Narendra Modi, that encompasses a gamut of initiatives to promote investments and growth in Indian manufacturing, has invigorated the domestic and the global industry. This has certainly brought in much needed focus and impetus for reforms related to the manufacturing sector. Several of the leading Indian auto component players have announced expansion plans which include:

Company Investment Amount in INR Crore (approx. value) Towards
JBM 200 Expansion of facilities and focus on new projects
Wheels India

 

70 automation, process changing, new product development and capacity expansion in aluminium and non-wheels business

 

Rane Group

 

220 Capacity expansion in Haryana plant and expansion of its hydraulic business in Chennai. Will also expand the air bag

business unit at Singaperumal kovil near Chennai

Lumax Industries

 

300 to augment capacity over next five years
Motherson Sumi Systems 932 capacity expansion and building new office facilities
Minda industries

 

450 New products, and betting on future demand growth. Earmarked 150 crores for four plants to expand lighting business
Uno Minda 700-800 Investment planned over next 3 years. Rs 200 crore set aside for acquisition in Europe. Doing a feasibility study for an alloy wheels plant in Bawal in Haryana
RSB Group 60 Set up state of the art facility in Sri City

(Source: PWC)

This will lead to the further strengthening of the automotive supply chain in India. The auto-component sector is one of the 25 sectors that the Government of India has identified to push through its Make in India campaign.

First, the Government has taken several radical measures towards ease of doing business in India. It has initiated the process of use of technology, convergence and integration of departments across sectors. Such measures will make India a much better place to invest, create jobs and wealth, and enhance production and productivity.

Second, the government has invited a wide range of sectors for foreign direct investment (FDI). Already, it has allowed 100 percent FDI in Railways; deregulated the defence sector to the extent that 60 percent of the items now do not require licensing. It has enhanced FDI in defence manufacturing and has liberalised the construction sector in a major way. Railways, Defence and Construction equipment hold attractive prospects for the auto component industry. Significant investment has already been announced by several global OEMs to expand the manufacturing base in India.

Third, the Government is marketing the identified 25 sectors, including the automotive and auto components, across the world. Fourth, the central government is working in partnership with the States to become change agents. Fifth, there is a focus on improving and enhancing infrastructure. Industrial corridors, manufacturing cities and industrial clusters are proposed to be developed. All these measures augur well for the automotive industry.

Healthy Growth

Propelled by the positivity of ‘Make in India’ campaign, the auto component industry witnessed 11 percent growth, its highest in last four years, and registered a turnover of Rs 2.34 lakh crore ($38.5 billion) compared to Rs 2.11 lakh crores ($ 35.13 billion) in 2013-14 with a healthy CAGR of 11 percent over a period of six years. The growth was led by rising consumption by the domestic OEMS, and exports, especially to Europe, the US and to other Asian countries.

It is interesting to note that when the overall exports of India declined by 1.2 percent, export by the auto component industry grew 11.4 percent to Rs 68,500 crore in 2014-15 from Rs 61,400 crore during 2013-14, registering a CAGR of 29 percent over a period of six years.

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