Cummins eyes $2 bn auto sourcing deals

Engine manufacturer and designer Cummins India, the Indian arm of the US-based Cummins, will source $2 billion worth of automotive components from domestic vendors by 2009-10. The figure is double the company's target for this year.

Cummins is following in the footsteps of foreign auto majors who have recently initiated efforts to increase sourcing from India due to the availability of strong quality back-up and low cost manufacturing expertise.

Headquartered in Indiana, Cummins has a presence in India through 12 units which come under the aegis of a single brand name, the BSE-listed Rs 8,000 crore Cummins India.

The company has chosen a select few vendors from the country who will supply components to Cummins India, which in turn will send them to the parent company.

The growing interest in the components is driven by the inexpensive raw material costs and large capacities built by manufacturers.

According to findings by the Auto Component Manufacturers Association (ACMA), the apex auto component body, global sourcing of components from the country will double from $2.95 billion to $5.9 billion in 2008-09 and is slated to hit $20 billion in seven years.

Many global companies are sourcing a number of fully-built or semi-built components, including axle assembly, propeller shaft, crank shaft, cylinder heads, bearings and cylinder blocks. Sourcing such components from India offers a 25-30 per cent cost advantage to the original equipment manufacturers (OEM).

OEMs, including the US-based General Motors, German giant Daimler, Volkswagen, Chrysler, construction equipment maker JCB, Renault, Nissan and Ford have collectively committed deals in excess of $5 billion in the next few years.

Cummins India supplies diesel engines in the range of 60 HP to 2700 HP for applications in power generation, construction and mining, locomotives, marine, oilfields, fire pumps and cranes, automotive and special applications.

It is targeting a turnover of $2.5 billion by the end of 2010 from the current $1.4 billion.