Auto parts exports touch $1 bn

Industry body sets target of $2.5 bn exports by 2010.

The Indian auto sector is on an overdrive. After achieving one million passenger vehicle sales annually, the export of auto components touched $1 billion during 2003-04. This marks a 32 per cent growth over the last year's figure at $760 million.

The Auto Components Manufacturers' Association (ACMA) has set an ambitious export target of $2.5 billion by 2010.

As per the latest ACMA estimates, the exports in rupee terms went up 29 per cent to Rs 4,500 crore. The production of auto components jumped 20 per cent to a staggering Rs 30,640 crore 2003-04.

The target of $1 billion exports has been achieved before 2005 -- the deadline set by ACMA. Majority of the exports were to countries in West Asia, Africa, Europe and the US.

The export of auto components has grown sharply from $625 million in 2000-01, while production has almost doubled from $3.89 billion in 1999-2000 to $6.73 billion in 2003-04.

The number of manufacturers in the auto components sector, billed as the next big thing in India after the IT sector, was estimated at 416 in 2002-03, employing around 250,000 people.

According to auto analysts, the growth in the auto components sector is likely to continue in the coming years since international auto majors are cutting costs to improve their profitability. This has driven them to cheaper destinations like India, China, Mexico and Brazil.

Also, input costs for component makers, which had increased significantly in 2003-04, is now likely to fall following a cut in peak customs duty rate from 25 per cent to 20 per cent and a reduction in the special additional duty of 4 per cent on customs duty.

This is likely to act as an enabling factor for the margins of such companies in the medium-term. The appreciation of the rupee against the dollar and the hike in steel and rubber prices was, however, likely to affect their earnings, analysts said.

The manufacturing costs for Indian component manufacturers is on average 20-30 per cent lower than that of their American counterparts, despite the fact that the productivity in India is 50-75 per cent below international standards.

At present, at least 7 international auto companies, including Ford, General Motors, DaimlerChrysler, Fiat, Volkswagen and Toyota, have set up procurement offices in India.