International consultant McKinsey believes that the Indian auto component industry must reinvent itself to meet the challenges during this decade.
Through a series of presentations at the ACMA (Automotive Component Manufacturers’ Association) convention here on Wednesday, a McKinsey team said ancillary suppliers should look at mergers and acquisitions as the way forward.
In addition, they would have to look beyond vehicle manufacturers at segments such as Defence, construction, farm implements and aerospace.
The R&D spend (as a percentage of turnover) by Indian component makers is at barely 0.5 per cent pales in comparison to South Korea, Brazil, China, the US and Germany.
McKinsey is also of the view that that there should be closer collaboration with vehicle manufacturers in product development.
These suggestions come at a time when Europe is in the midst of a severe slowdown and the US is just about getting back on its feet. Indian auto component makers are up against challenges such as a sluggish domestic market, high costs and increasing imports from China and other parts of Asia.
According to McKinsey, the present global crisis was also an opportunity for companies here to hire top brains from the West.
Even while India’s auto ancillary suppliers have constantly been praised for their cost-competitiveness and quality, they still have not made a strong impact in the global arena.
These recommendations formed the basis for a panel discussion chaired by A.K. Taneja, Managing Director, Shriram Pistons.
The participants included Bernd Bohr, Chairman of Bosch’s Automotive Group; V. Sumantran, Executive Vice-Chairman, Hinduja Automotive; Michael Boneham, Managing Director of Ford India; and S. Sandilya, Chairman of the Eicher group.
Handy lessons
Not everyone subscribed to the view that it was doldrums for the component industry given that companies like Ford plan to use the base here for its global vehicle programmes.
In a nutshell, this means that Made-in-India parts are shipped across Ford’s worldwide operations.
Bohr said cost innovation was a key part of Bosch’s India strategy.
The company had worked on the Tata Nano where the lessons have come in handy for a host of low-cost vehicle plans in other parts of the world.
Sumantran cautioned that it was a little too early to celebrate India’s arrival as the new Detroit of Asia as there was still someway to go.