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Auto component

  1. 1. Indian auto-component industryPresenting by: Sangam Lalsivaraju-138 Dheeraj singh-169 Swati mathur-146 Manu pawar-147 Parmod singh-133 Surin gandhi-189
  2. 2. Introduction• The auto component companies in India are contributing to the growth of this sector by providing genuine , cheap and reasonably priced automotive parts.• The industry growth was particularly visible in the exports of auto components.• The CAGR of the auto component exports in the five years clocked 27.5% during 1998-2003.• According to Forst & Sullivan, Indian auto component exports were to touch US$1.11 billion in 2004-a 38.8% surge from the previous year as against $578 million in 2002.• The Indian auto component sector has been growing at 20 per cent ayear since 2000 and is projected to maintain the high-growth phaseof 15-20 per cent till 2015
  3. 3. The Growth Journey
  4. 4. MUL indigenization• The onset of Indias liberalization policy and the subsequent arrival of foreign auto majors came as a shot-in-the-arm for the Indian auto component industry.• This forced MUL to indigenize its component suppliers rather than importing them , Maruti’s decision to localize its content was not only because of government’s policy but also due to the cost effectiveness of local content.• New entrants found it difficult to compete with maruti’s pricing, as it had already achieved 90% indigenization and had written off its initial capital investment.• The entry of foreign auto component markers, force the domestic manufacturers to improve the quality.• The domestic auto component industry contributed 87% of the needs of the automobile sector, while the rest was imported.
  5. 5. Composition of production Segment % % Electrical part 7 Electrical part 7 Equipments 8 8 Equipments36 11 Suspension & braking parts Suspension & 11 braking parts Drive & transmission steering parts Drive & transmission 23 23 Engine parts steering parts 23 others Engine parts 23 others 36
  6. 6. Class segregation• Three divisions are:1.MNC’s that operate with wholly owned subsidiaries or through units where they held the controlling stake. E.g.: Delphi & Visteon, Denso India & MICO.2.Owned by Indian promoters/public with a minority stake of foreign collaborators.3.Wholly owned by Indian promoters/public. Sundaram Brake Linings(SBL) & Sundaram Fasteners Limited(SFL)
  7. 7. SWOTStrengths: Weaknesses1. Large domestic market 1.Low labour productivity2. Sustainable labour cost advantage 2.High interest costs and highoverheads3. Competitive auto component vendor base make the production uncompetitive4. Government incentives for manufacturing 3.Various forms of taxes push up the cost of plants production5. Strong engineering skills in design etc 4.Low investment in Research and development 5.Infrastructure bottleneckOpportunities: Threats:1. Commercial vehicles: SC ban on overloading 1.Rising input costs2. Heavy thrust on mining and construction activity 2.Rising interest rates3. Increase in the income level 3.Cut throat competition4. Cut in excise duties5. Rising rural demand
  8. 8. PESTPolitical: Economical:1. Environmental regulationand protection 1. Economic growth2. Taxation 2. Monetary policy3. International trade regulation 3. Government spending on research4. Consumer protection 4. Policy towards unemployment5. Employment law 5.Taxation6. Government organization /attitude 6.Exchange rates7. Competition regulation 7.Inflation 8.Stage of business cycleSocial: Technological:1. Income distribution 1. Government spending on research2. Demographics 2.Government and industry focus on tech’ effort3. Labour/social mobility 3. New discoveries and development4. Life style changes 4. Speed of technology transfer5. Attitudes to work and leisure 5. Changes in material sciences6. Education 6. Impact of changes in Information technology7. Fashions and fads 7.Internet8. Health & welfare9. Living conditions
  9. 9. Porter’s modelThreat of new entry: Competitive rivalry:1. Time and cost of entry 1.Number of competitors2. Specialist knowledge 2.Quality difference3. Economics of scale 3.Customer loyalty4. Barriers to entry 4.Cost of leaving market5. Technology protectionThreat of substitute: Buyer’s power:1. Substitute performance 1.Number of customers2. Cost of change 2.Price sensitivity 3.size of each order Supplier’s power: 1. Number of suppliers 2. Size of supplies 3. Uniqueness of service
  10. 10. Proven product developmentalStable economic policies capabilities • Export potential India as an automotive High quality hub standards Large and growing domestic demand Competitive manufacturing costs Availability of Proximity to markets manpower
  11. 11. Strategies to compete1. One obvious way for the Indian manufacturers to compete in the global export markets is to focus on their current areas of strength . As the industry continues to grow with new export orders from automakers some strategies that Indian manufacturers can adopt to gain success in these markets.2. Manufacture and export of small cars, Multi Utility Vehicles (MUV), two &three wheelers, tractors, components should be further promoted in lieu of the current export trends.3. Appropriate Tariff Policy should be followed to attract further investments in the Automobile Sector.4. Measures should be taken to expand the domestic market.5. Exports should be more encouraged.6. Policy initiatives for competitiveness and development of technology should be taken.7. Infrastructure development around identified automotive clusters should be undertaken.8. Emphasis should be on more product innovation and Value added services as the current customer demands better products and services aggressively
  12. 12. THANK YOU