India Transitioning! Receiver to Creator of IPR in Auto Components – Frost & Sullivan
GOA, India--In order for any auto component company to be globally competitive, the size of the company is of utmost importance. The Indian auto components industry is at its nascent stage wherein 90-95 percent of the companies according to the Government of India classification are small-medium enterprises. To be of any significance, Indian players need to ramp up their capacities. Taking into account the existing capacities available in the global market, Mergers and Acquisitions (M&A) could be an active option companies may like to consider for their respective growths.
Commoditized products offer low value creation opportunities and building of sustainable competitive advantage through cost or volume leadership over a long term, hence not a feasible option for Indian companies to consider. According to Frost & Sullivan, in 7-12 years, electrical/electronics content would account for over 40 percent of vehicle systems compared to it being less than 10 percent (negligible in some markets) at present.
India’s contribution is currently insignificant in the exports market. Moreover, most of the Indian companies do not have a clear export policy and nor are they aggressive in their globalization plans. Experts believe that the future production capacity additions for vehicles would be in Asia, where China would be the prima facie beneficiary followed by India.
Speaking on the highly debated India Vs China comparison, V.G Ramakrishnan, Director, Automotive and Transportation Practice, Frost & Sullivan – South Asia and Middle East, feels, “From an Automotive perspective, comparing India and China, is far fetched, as we can never compete with its prices due to its inherent advantages and larger manufacturing capacity for vehicles. For example, China’s production of motorcycles and scooters is 17 million compared to approximately 7 million in India (2006 figures). Overall, the Chinese market is over 2-3 times the size of the Indian market as capacities in India are highly fragmented.”
Having said the above, Ramakrishnan emphasizes that, “Ecospace of vehicle manufacturing and vehicle technologies are taking into account environmental concerns. Design and Development of technology will play a crucial role in the future and India would need to focus quickly on knowledge creation than just solely on the manufacturing space. It has to be combination of both. Given India’s inherent strength such as quality manpower, strong engineering and lately research amongst others, India should position itself, as a solution provider of design and development to create a competitive advantage in order to satisfy the customers. That’s where the potential lies.”
Globally, customer preference is shifting towards smaller cars and many manufacturers across the globe are actively working towards creating low cost vehicles. Indian Component manufacturers with their extensive experience in working on low cost platforms stand to gain from this scenario. Of late, Indian companies are transitioning from being a receiver to a creator of Intellectual Property Rights (IPRs), a move that could have major global potential.
The above opportunities come with specific challenges in the global scenario. Frost & Sullivan believes that sustaining/managing a global supply chain and derisking the business from product recall and liabilities that are common in developed markets could impact the components industry in India.
Frost & Sullivan, in its two-day International conference titled “Partnership Opportunities in the Global Automotive Industry”, which was held from 10th to 11th September, 2007, at The Leela, Goa, brought together great thinkers, strategic decision makers from the Indian and International automotive arena to discuss the above issues, challenges and opportunities that the global automotive industry presents.
The key partners for this event were Feintool Fineblanking Technology, Schuler, TATA AIG Insurance and TCIL Supply Chain Solutions. Auto Focus Asia, Auto Monitor, Autocar Professional, Commercial Vehicle, MotorIndia were the official national media partners and Just Auto, Automotive Logistics and AutoMotive were the official international media partners for this event.
About Frost & Sullivan:
Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective, and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit http://www.frost.com.