R&D carrot fails to lure auto parts firms

This carrot has not found any takers yet. Despite the 150 per cent tax reduction on R&D for automobile and ancillary companies announced in the Union Budget for fiscal 2004-05 by finance minister P Chidambaram, none of the domestic component makers is jumping at the chance and investing in research & development.

According to Automotive Component Manufacturers Association (ACMA) president Deepak Kapuria, this is because R&D requires huge investments which Indian companies are not in a position to make.

To remedy the situation, ACMA has gone knocking on the government's doors again and asked it to set up a fund which will make soft loans to component makers for R&D investment.

"Though local companies have been very proactive as far as R&D and innovation in processes and the shopfloor are concerned, we lag way behind in product R&D. Our proposal to the commerce minister to set up a special fund for component makers and make long-term loans to us is now with the finance ministry," said Kapuria.

Investment in R&D will play a crucial role in the future of the Indian component industry in the short as well as the long run.

Emission norms across the country will be stepped up in 2007 with the 11 metros moving on to Euro III and the rest of the country adopting Euro II. In this context, it is very important that component makers stay at the helm of technology.

By 2013-14 electronics and other features worth $ 4000 will be added to all new cars in the developed world but due to intense competition and a strict regulatory environment in the western world prices of cars cannot be increased by that much.

This, according to Kapuria, presents a huge opportunity for India. "By combining our low cost base and inherent skills in embedded software, India can emerge as the chief sourcing hub for these electronics and other add-ons," he pointed out.

MNC component manufacturers like Delphi, Visteon and American Axle have embarked on some amount of design and development work in India which is expected to grow into a full-fledged R&D operation in future.

On the domestic front, only the TVS group companies like Sundraram Clayton and TVS Lucas and Sona Kayo Steerings have undertaken some basic product R&D in the country so far.