Interview

India: More than Just a Ride

| Author / Editor: Kruti Bharadva, Vogel Business Media India / Rosemarie Stahl

Arvind Balaji, President of Automotive Component Manufacturers Association (ACMA).
Arvind Balaji, President of Automotive Component Manufacturers Association (ACMA). (Bild: ACMA)

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. The president of Automotive Component Manufacturers Association and Joint Managing Director, Lucas- TVS Ltd, Arvind Balaji, on how the automotive industry is scaling new heights.

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.

What are the initiatives that ACMA is undertaking in order to help continue the auto component industry growth and development, which clocked its highest growth of 11 per cent in four years?

A key focus area for ACMA is export development. The component industry has done reasonably well with exports scaling $11.2 billion in FY15 growing at a CAGR of 29 per cent over the last six years. ACMA has played a critical role in supporting its members in export development and in discovering new market opportunities; currently it exports to more than 160 countries, which has been growing at 15 per cent per annum. ACMA’s recognition as an export promotion council has been in promoting Indian exports by organizing participation of the Indian component industry in several leading global trade fairs and focused buyer-seller meets.

Do you see the online platform for buying of goods from the auto component industry contributing to the growth of this sector?

Certainly it is a wind of change. The online retail market for the automotive aftermarket parts industry and accessories continues to emerge as a tremendous growth opportunity for the Indian aftermarket industry. However, the concept of e-tailing is new and in nascent stages; therefore, it is early to comment on its performance.

ACMA, together with SIAM has also developed the AutoDx, a platform that allows diverse ERP systems of the suppliers and the OEMs to talk to each other. Already around 10 OEMs and 100 suppliers are successfully working on this platform. This will be help streamline the manufacturing value chain in the country.

According to you, how will the auto ancillary expand in the coming years?

In the coming decade, driven by needs of safety, fuel efficiency, sustainability and end customer needs, the Indian automotive industry will undergo a significant transformation. The New Motor Vehicles Act and legislations such as Vehicle Recall will also impact the industry dynamics.

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.

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