The Automotive Component Manufacturers Association (ACMA) today organised its national conference on Changing Trends in Automotive Supply Chain. It highlighted the need for greater technology adoption across Tier II and Tier III component suppliers, and the need to scale up production to meet increasing demand by OEMs across product categories.
ACMA emphasised the need for seamless integration of technology by component suppliers, and creating an eco-system for faster adoption of this advancement across the value chain. Rattan Kapur, Chairman and Vice-President- SC Committee, ACMA, said that currently, Tier I suppliers are showing a positive growth, but must handhold smaller players across India to ensure better integration and product quality.
The global auto component industry is currently valued at $ 1.75 tn, of which, India’s share is $ 40 bn (about Rs 2.68 lakh crore). India’s auto component exports stands at $ 11 billion. RC Bhargava, Chairman, Maruti Suzuki India Ltd, said that this share of exports from India must go up. With the global markets opening up, barriers for finished products and components are falling, with better opportunities for global technology integration.
India enjoys 31 % share of the global small car market and is the sixth largest car manufacturer in the world. Bhargava pointed out that this scenario placed India in a favourable position as a key auto component manufacturer with high degrees of capacity development backed by a strong R&D set up. Component manufactures import technology from global markets, but do not improve upon them with time. This renders many techniques redundant, he added.
Over the years, the auto component industry has been witnessing stagnation in terms of technology upgradation. While OEMs have gone ahead and introduced international standards in every aspect of development, its enthusiasm has echoed among the component fraternity. Bhargava said that currently, there are very few Indian component manufacturers who boast of global expertise in terms of technology. This needs to improve in order to achieve economies of large scale production.
An important factor governing the investment prospects of component manufacturers is said to be the incentive to invest and improve existing technology. Pankaj Aggarwal, Associate Vice President, Vendor Development and LEAP, Hero MotoCorp Ltd, said that it is important to ascertain the Return on Capital Employed (ROCE) by the component makers. Older the technology, lower would be the ROCE, and this is more evident with Tier II companies, which lack an incentive to consolidate and averse to taking risks.
Rajeev Wasan, Senior Vice President (Production), Honda Cars India Ltd, said that reducing inventory at the dealers’ end is an important factor, which reduces cost burden on car makers. He also highlighted the importance to create a conducive shop floor environment for employees to contribute more and thus improve overall efficiency. Sharing a similar outlook was R Sridhar, Vice President-Strategic Sourcing, Mahindra & Mahindra Ltd. Sridhar said that while shop floor experience across Tier I suppliers have improved, it needs to percolate to Tier II and III suppliers as well. He added that this would add value to the automotive supply chain and the entire automotive eco-system would stand to benefit.