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“Maintaining Last Year’s Growth is A Challenge”
Vinnie Mehta, Executive Director, ACMA
Issue Date - 17/03/2011
 
India’s automotive industry clocked heady growth of 30% in 2010, surprising both car makers and component manufacturers. Vinnie Mehta, Executive Director, Automotive Component Manufacturers Association of India, shares his views on the outlook and prospects for the auto component industry with Pawan Chabra.

B&E: The automobile industry grew by leaps and bounds in 2010 despite component manufacturers facing capacity constraints in the initial months. Do you expect automakers to ride out the problem this year?
Vinnie Mehta (VM): The growth of the auto components industry is directly linked to the unit sales of automobiles in India. Sales of automobiles have so far been great and the good showing is sure to rub off on the auto components industry as well. If vehicle sales keep growing, the auto components industry’s dream run is sure to continue as well. On the issue of shortages, substantial investments have already been made over the past 12 months and a large chunk of the money has gone into ramping up the production cycle, which has taken care of most of the problems. However, certain issues (cost structure, order size et al) between component makers and original equipment manufacturers (OEMs) need to be ironed out. Though these largely concern individual relationships, they remain mostly beyond our control. While some customers have been able to manage the problems well, others have not been as capable. But by and large, we have been able to manage the whole thing pretty well. Last year was a year of unprecedented growth, so the challenge this year is to be able to maintain that growth trajectory and keep moving ahead.

B&E: For India, Chinese component makers offer both competition and counterfeits. What is your take on the challenges that the industry is facing from China?
VM: Though I have not studied the Chinese market extensively, it is for sure that the intellectual property (IP) regime in China is not as strong as it is in India. The Indian market has very strong copyright laws in place. Given the fact that the Indian consumer is very price conscious, but hardly aware of the perils of counterfeits and its related issues of safety and efficiency, it is our responsibility to work closely with the government and make the consumer more aware. This needs to be done both at the business and consumer levels.

B&E: Now that the excise duty has been left untouched in the Budget, do you think it will help provide support for maintaining the growth momentum?
VM: It will help the sector to continue on the growth path. In fact, in all the past discussions that we have had with the government, there were hardly any signs of making changes to the excise and customs duty structure. Moreover, as there is now a definitive deadline for the implementation of the goods and services tax (GST), it will help in solving various taxation issues as well. Our major recommendation to the government was implementation of GST. Now that it is happening, it is a good sign for the industry.

B&E: The industry is also facing a big challenge in terms of rising cost of raw materials. Is there a solution in sight?
VM: The cost of raw materials alone has gone up by 40-50% over the past year. Then there is rising inflation, and the high cost of power and its poor availability. These are the major challenges before the industry. Our focus currently is on solving the taxation problem and a lot of it, as promised by the government, will be taken care of by the GST. But as it kept being postponed for a very long time, we were in a tight spot to go anywhere.

 

          

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