Auto major race to India for component sourcing

By siliconindia   |   Friday, 05 October 2007, 19:30 IST
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Mumbai: With global car majors drawing up plans to source from Indian suppliers, The domestic auto component industry is expected to witness a boom reports Business Standard. The list includes big players like DaimlerChrysler AG, Chrysler (owned by Cerberus), Volkswagen, General Motors, Renault-Nissan, Volvo, JCB, and Caterpillar amongst others. 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 according to the Auto Component Manufacturers Association (ACMA), the apex body of component makers in India. Sourcing components like axle assembly, propeller shaft, crank shaft, cylinder heads, bearings and cylinder blocks from India offers companies a 25-30 per cent cost advantage. "Until now, China was a growing market, but all the international players are looking at India as the new sourcing hub," said J C Chopra, vice-president, ACMA. Chrysler, which does not manufacture cars in India, is setting up a local sourcing unit in Chennai and is expected to start sourcing for its global plant by next year. German manufacturer Volkswagen AG, which recently entered India, recently held a suppliers' meeting to identify potential sourcing partners. General Motors, another leading car manufacturer, is also in the process of appointing component suppliers from India. The company will make an annual purchase of about $1 billion in the next four years. The Renault-Nissan combine aims to initially buy components worth $140 million in the next few years to understand the Indian market, after which it aims at gradually raising component sourcing from the country. Its alliances with Mahindra, Ashok Leyland and Bajaj Auto can provide both companies with a ready vendor base. Apart from the car industry, JCB, the country's largest construction equipment manufacturer, will set up a component unit for almost $50 million, especially for sourcing components. JCB is planning to put up a sourcing plant in Pune to cater to their international operations