Association Interview India: Driving to New Horizons
The steady growth in the auto component sector stands to be bolstered by various Government of India initiatives around infrastructure development, skilling initiatives and ease of doing business.
Associations such as the Automotive Component Manufacturers Association (ACMA) are undertaking initiatives to support the current scenario and encourage further growth through expanding avenues. President, ACMA and Joint Managing Director, Lucas-TVS Ltd, Arvind Balaji shares his views on the potential of this industry in the coming years and what this segment does to emphasize India’s position globally.
The automotive and auto ancillary industries are the primary drivers of the Indian machine tool industry. What is the growth of the machine tool industry in India?
Arvind Balaji: The automotive industry in India accounts for 60 per cent of the machine tools consumed in the country. The domestic machine tool manufacturers provide significant capital cost advantages over imported tools. Over the years, the Indian machine tool industry has improved in technology and is well positioned for medium accuracy requirements; however, to be globally competitive, areas such as reliability, solution engineering, new/improved technology & products and delivery commitment/CRM need to be focused upon.
According to the recent ACMA–IMTMA joint study conducted by Roland Berger Strategy Consultants, it is observed that the machine tool industry in India is facing strong competition from foreign players who have advantages in terms of technology, workmanship, quality, robustness, delivery commitment, etc. However, Indian machine tool players have an edge over the overseas counterparts in terms of cost, flexibility, availability of spares, service network presence, etc. The domestic machine tool manufacturers also provide cost advantage over imported tools. Furthermore, some large domestic machine tool players are developing new products and adopting new technologies in their offerings.
In the next five years, the entire Indian automotive industry across vehicle and component segments is expected to witness robust growth that will propel the machine tool consumption in India from $1.3 billion in FY14 to $3 billion by FY20 growing at a CAGR of 14 per cent per annum.
How are SMEs contributing to this growth?
Balaji: The auto component industry in India is largely dominated by SMEs; in fact, 70 percent of ACMA members consist of SMEs. ACMA has taken several initiatives to ensure that the auto components stays competitive, some of these are illustrated below:
ACMA signed an MoU with SIDBI to support its MSME members to avail credit at reduced rate of interests. To ensure timely technological advancements within the SMEs the ACMA Centre for Technology (ACT), a technical wing of ACMA, has helped upgrade process technology within the membership in over 500 plants across the country, making them world-class. Today, ACT runs several cluster programs such as the Foundation, Basic, Advanced, Engineering Cluster programs and the New Product Development Cluster. ACT also runs a special cluster program for SMEs like ACT MSME Lean Cluster and ACT MSME Advance Cluster. Each cluster program has a distinct road map where the best practices are imparted right from the shop-floor to the top management.
Furthermore, to help upgrade the capabilities of the SMEs in Tier 2 and Tier 3 cities, ACMA has launched the ACMA–UNIDO cluster program with support from the Department of Heavy Industry, Government of India.
According to you, how will the auto ancillary expand in the coming years?
Balaji: The component industry, over the years has adapted well to the changes in the policy and regulatory environment and the needs of our customers. I would also like to point out the need for the industry to develop its own IP and build scale through significant export growth and domestic consolidation. The industry needs to graduate from being a build to print to one that is art to part and support from the government would be critical.
I am confident that by 2026, the component industry will meet the targets defined in the Automotive Mission Plan 2026—turnover of $200 billion, with exports and domestic market each reaching $100 billion in size. This calls for an additional capital investment to the tune of $80 billion, which demands the industry to focus on better returns on capital.