Speed breaker to force auto parts makers to drive abroad

A slowdown in the Indian automobiles sector and faster growth rate overseas, especially in the US, Europe, Japan, China and Korea, will force auto components manufacturers to look overseas, according to industry players.

Deep Kapooria, president of the Auto Components Manufacturers Association (ACMA) and also chairman and managing director of Delhi-based Hi-tech Gears Ltd, said though the domestic automobile industry is expected to grow in the next few years, the pace would be much lesser than in the export markets.

"The auto components industry in India has to find a stronger position globally," he says.

A recent survey by consultant McKinsey & Co, which led to preparation of a document called, 'Vision-2015 for the Indian auto components industry,' also says growth rate in the domestic automobile industry would slow down.

But it said auto components exports would rise to more than Rs 80,000 crore from the current Rs 4,500 crore in next 11 years.

The McKinsey report says that the Indian domestic market would grow at 10 percent per annum but would lag that of China.

It says that the domestic market size would restrict India's ability to address the entire export opportunity.

Baba N Kalyani, chairman and managing director of Bharat Forge Ltd (BFL), India's biggest player in the auto components sector, said the slowdown in the Indian auto sector would be reflected by the end of this year.

"There is a limit... this market will grow by just 10-12 percent in next few years, while the estimated growth overseas would be growing around 40 percent."

Bharat Forge is readying its exports plan and plans a presence in the US and Europe in the near future. The company's export revenues topped the Rs 100 crore mark for the first time in the September quarter, touching Rs 111.2 crore, against Rs 83.36 crore earlier.

In the first half, exports revenue rose 30 per cent to Rs 206.62 crore from Rs 163.01 crore.

The McKinsey report also says that the auto components industry would attain a whopping Rs 1,80,000 crore size by year 2015 compared with the current size of Rs 30,000 crore.

In Chennai, the hub of auto components manufacturing in India, a source close to one of the key players said, "The growth of the car market has slowed. Auto components companies around Chennai have started exports in a big way already such as Sundram Fasteners, which has set up a facility in China."

Suresh Krishnan, chairman and managing director of Sundram Fasteners, had earlier said at a CII conference that auto component companies cannot afford to not look looking at exports.

One reason touted for the deceleration is that segment shift in India will soon reach saturation "" two-wheeler owners shifting to four-wheelers, four-wheeler owners shifting to premium segments etc.

"You can't expect the cycle owner to go for a four-wheeler anytime soon," quipped the head of a components maker, tongue firmly in cheek.