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“New challenges emerge as an industry evolves”
Vinnie Mehta, Executive Director, ACMA, believes that the components industry has a bright future
Issue Date - 30/04/2012
 
B&E: Last year passengers car segment in India witnessed a major slump in sales. As growth of the auto components industry largely depends on automobile sales, how do you expect industry players to tackle the situation?
Vinnie Mehta (VM): The automotive industry in India continues to be a growth driver for the economy. In the recent past, sales of passenger vehicles have come under some pressure, however, small commercial vehicles, LCVs, tractors and two-wheelers have done well and are witnessing on-track growth. Therefore, the effect of performance of the vehicle industry on the auto components industry varies. We expect overall growth of the auto components industry to vary between 8%-10% in the current fiscal.

B&E: What are the major challenges this sector usually encounters?
VM: Although, current business sentiment in the domestic market is moderating, the long-term growth prospects of the Indian automotive industry remain intact. Primary demand drivers like aspiration for owning vehicles, growth of the economy, et al are the main reasons for this. It is this huge potential that has attracted several global companies to set up their manufacturing base in the country and has led many Indian companies to invest in capacity expansion, R&D, and product innovation. However, inflation, interest rate and fuel price hike, are major deterrents to the growth path and need intervention. Infrastructure inefficiencies and procedural delays are also few key issues that are eroding the competitive advantage of this sector. We have been urging the government to take measures to ensure availability of capital at internationally competitive rates to upgrade and innovate.

B&E: What about the structural deficiencies? What would be the best approach to deal with them?
VM: While the growth prospects of the Indian auto components industry remain promising, there are new challenges as we evolve into a critical part of the global auto ecosystem. For Indian suppliers, on one hand there is the need to maintain competitiveness in an inflationary environment and on the other they need to compete with the best in an increasingly uncertain global market. OEMs internationally are reducing the number of suppliers that they wish to work with, leading smaller Tier-Is to become supplier to the larger Tier-Is with the T1s assuming the role of ‘Systems Integrators’; this trend may well be visible in India in the near future as the industry evolves. Currently in India, Tier-IIs and Tier-IIIs are the weakest link in the supply chain. Thus, it calls for Tier-1 suppliers to facilitate upgradation and scaling up capacity, quality, technology, people and even hand hold the Tier-II and Tier-III suppliers, without which it will be really difficult to sustain the industry competitiveness in the long term.

 

          

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