Spares export to meet target a year ahead

Encouraged by the buoyancy in the automobile sector, the Automobile Components Manufacturers' Association (ACMA) has advanced the $1 billion export target to end of March 2004, against an earlier estimate of March 2005.

ACMA has also revised the export target for 2010 to $5 billion from an earlier estimate of $2.5 billion.

Speaking to Business Standard on the future of auto-components industry in India, ACMA's president, K V Shetty said, "The $2.5 billion export target set for 2010 will be achieved much earlier."

Shetty was unwilling to put a time frame as to when $2.5 billion exports of auto-components will be achieved.

Capital investment in 2003-04, in the auto-component industry in India is estimated at Rs 2,000 crore, taking the total investment in the industry, so far, to Rs 14,400 crore.

An additional investment of Rs 12,000 crore is expected to be made in the component sector in the next six years.

"This would lead to a domestic market size bulging to Rs.40,000 crore from the present Rs 20,000 crore," Shetty said.

Despite ambitious targets on the export front, ACMA's president said the domestic market will continue drive the industry and components for the passenger car segment would lead pack.

"On a total production of Rs.24,500 crore, exports will be around Rs 3,800 crore, which is around 15 per cent of the total production. In the next three years, exports could reach 20 per cent of total production and domestic market would continue to take a lions share of the total production," he added.

In comparable economies such as Thailand, exports of auto component constitute 80 per cent of the total producion.

Shetty said around 60 per cent of exports of auto components from India are headed for Europe and US. "This is a very encouraging trend," he said.

Shetty, however, said the automobile component exports from India still constitute less than half per cent of the worldwide demand.

"Thailand's $1.2 billion auto component industry, of which 80 per cent is exports is still bigger than India," he said.

Discussing strengths of the Indian auto component industry, Shetty said, "In terms of design capabilities, India is second only to Germany and in terms of availability of engineering manpower, India is number one in the world."

He said the government should rationalise import duty for inputs such as steel, if India was to compete against countries such as Thailand.

"Thailand can import steel at 5 per cent, while import duty on steel in India is 25 per cent. Without a level playing filed India cannot compete under the new free trade agreement regime," he said.

Shetty also pointed out the high interest cost continues to be a roadblock for further capital investments in the industry.

"The average borrowing rate is still 12 per cent and only bluechip companies manage to get rates below 8 per cent, making investments an uphill task for SMEs," he said.