India Wants to Be a Parts Power, Too
For a place better known for its software than for grimy stuff like axles and steering columns, India sure is selling a lot of auto parts these days. The country's auto sector is expected to export some $800 million worth of parts this year, and has grown by 20% annually over the past half-decade as Toyota, Delphi, Visteon and others have set up operations. Those companies like India's skilled but inexpensive labor force, as well as the low cost of raw materials such as steel and rubber.
The big players arrived in India almost by accident. In the mid-'90s, multinational auto makers started building cars in an India newly open to foreign investment. But with crippling tariffs of up to 50% on imported parts, the only way they could make vehicles cheap enough for the Indian market was by buying parts domestically. Locals didn't have the quality they wanted, so the foreigners brought in their suppliers from overseas. Delphi Corp. came in after General Motors Corp. opened its plant in Gujarat in 1995, and Visteon Corp. followed Ford Motor Co. in 1998.
Along the way, local vehicle makers started to buy from the multinationals, too. In 1996, Delphi began supplying carmaker Maruti with shock absorbers and other components, and by 1998 it was making axles and compressors for Tata's new passenger car, the Indica. Similarly, Visteon sells electrical parts such as ignition systems to Hindustan Motors. And France's Saint-Gobain Sekurit supplies safety glass for windshields to Tata.
The competition served as a wake-up call for India's sleepy domestic parts makers. Air-brake producer Sundaram Clayton Ltd. has focused on boosting quality and last year sold $48 million worth of brakes to both locals and multinationals, up from $15 million in 2000. "It was do or die for us," says Venu Srinivasan, Sundaram Clayton's CEO. Bharat Forge Ltd., India's largest auto components exporter, added computerized pressing machines to make higher-precision crankshafts and axle beams, and last year exported $55 million in components, vs. $15 million in 2000.
India's parts business remains a fraction of the $1 trillion global industry. But the subcontinent's parts makers "are now focused on quality, delivery schedules, and price," says auto analyst Sachin Kasera of Bombay brokerage Pioneer Intermediaries Pvt. That mind-set is putting India's auto parts exports in the fast lane.
By Manjeet Kripalani in Pune, India