Car spares firms can drive direct to EU

The export of automobile parts will now have access to the $7 billion EU market.

In a move that will benefit the Indian automobile components industry, the European Union is set to relax import norms so that companies can sell directly in the after-sales (or replacement) market.

So far, Indian manufacturers have been exporting components directly to automobile companies and are not allowed to sell in the after-sales market.

Senior government officials said that the EU had earlier this month taken the decision to relax the requirement of allowing exports only from original equipment manufacturers (OEMs).

The relaxation would become effective from January next year. "With the relaxation in the norms our auto component exports which are pegged at a mere $1.25 billion would now have access to the $7 billion EU auto component market. Auto companies there would be able to tap our component manufacturers," an official said.

Sona Group chairman Surinder Kapur said that the relaxation of the rules would open up tremendous opportunities for Indian auto component manufacturers. "There was a regulation that only OEM suppliers in India can access the replacement market."

The relaxation of restrictions in EU comes at a time when the Indian auto component industry is projected to have the potential to address 40 per cent or $650-700 billion of the global auto component market, according to the Vision 2015 study for the Indian auto component industry, prepared by McKinsey & Co.

The Indian automotive component manufacturing has the potential to grow from $6.7 billion in 2004 to $33-40 billion by 2015. This will include $20-25 billion in exports and $13-15 billion in domestic consumption and indirect exports. Exports by Indian component manufacturers in 2003-04 was $1 billion, a mission accomplished one year ahead of the target year.

This potential growth could create 2.5-3 million additional direct and indirect jobs and provide a significant employment opportunity for the rural and small town population.