Confident machine tool makers eye overseas markets

Industry sets export target of 10% of production by 2015.

Indian machine tool manufacturers are looking at overseas markets to drive growth even though the demand-supply gap in the domestic market is yet to be bridged.

A large number of companies are gearing up to export high quality machine tools and related services. It is also setting up shop abroad. A few companies are also in talks with global majors in Europe and the US for contract manufacturing.

A huge domestic demand had made many Indian firms suspend their export plans a few years ago. However, a perceptible change in the image of the 'Made in India' label in the overseas markets have encouraged Indian companies to look at export markets.

Some companies eyeing the export market in a big way are Ace Micromatic Group, Bharat Fritz Werner (BFW), Electronica Machine Tools Limited, HMT International, Batliboi, Lokesh Machines, Jyothi Group, Parishudh, ISGEC, LMW, Hind Hydraulics and Kennametal India. While, the Ace Group and BFW are looking at setting up manufacturing units abroad, Electronica has taken the lead recently in setting up a unit in China.

Kennametal India, a subsidiary of US-based Kennametal Inc, is looking at exporting special purpose machines to Kennametal's subsidiaries in China and other countries in the Asia-Pacific region. "We have installed enough capacity to meet both domestic and global demand. From our Bangalore facility, we will supply components to our group firms in China, Korea, Japan and other ASEAN countries in the next couple of years," says Kumar Kanetkar, managing director, Kennamental India Limited.

Ace Micromatic Group, which recently opened a wholly-owned foreign enterprise in Shanghai, aims to set up a unit there in the next couple of years. It is also actively working with dealers in Thailand for a marketing network, managing director Shrinivas Shirgurkar said.

BFW, which has a partnership wth Starrag of Switzerland, last week announced plans to set up a facility in Bavaria in Germany. Many Indian companies are also looking at establishing tech centres in key overseas markets.

S N Mishra, president and CEO of BFW said, "We will make sub-assemblies and value-added assemblies in our German subsidiary to save costs of transport from India to the European markets."

A large number of Indian firms which have adopted business mantras like TPM, Six Sigma and lean manufacturing are eyeing Europe, United States and East-Asian countries for exports. They are hoping to leverage their strengths in making high quality machines, as opposed to their counterparts in China who produce low-cost machines, make export successfully in the next few years.

"The market for machine tools in China is over five times bigger than in India. The annual demand is 17,000-18,000, against India's 3,000. The manufacturing sector is growing at 16 per cent per annum in China and this creates a huge opportunity for us to export," Shirgurkar added.

The Indian Machine Tool Manufacturers Association has set a vision of exporting 10 per cent of the total production by 2015. But there is a long way to go. In 2004-05 exports at Rs 52 crore were just about 4 per cent of the Rs 1,342 crore output. During 2006-07 exports are likely to touch 3.5 per cent of Rs 2,000 crore output.

Says C P Rangachar, president, IMTMA, "There has to be a consistent focus on exports to establish our quality credentials. Exploratory visits to other markets should start now, to bear fruit in the years to come."

IMTMA is leading Indian delegations to EMO 2007 being held at Hannover in Germany in September 2007 and the China International Machine Tools Show (CMTS) in April 2007 in China.

Indian-made machine tools are presently exported to over 50 countries, mainly to the United States, Italy, Brazil, Germany and West Asia. Lathes and automats, presses, electro-discharge machines and machining centres made up bulk of the export orders for Indian manufacturers. The Indian machines are generally favoured overseas primarily due to their cost-competitiveness.

Machine tool industry in India comprises about 450 manufacturers with 150 units in the organised sector. Almost 70 per cent of production in India is contributed by 10 major companies of this industry.