1. 2. 3. 4. 5. 6. 7. 8. 9.



1. 2. 3. 4.


Introduction ......................... 4-6 Background ......................... 7-8 Current Status ......................... 8-9 Component-wise share of production ....... 9-10 Auto-component Production ..................... 10 Auto-component Export ......................... 11 Competition Overview ......................... 12-13 Major Players ......................... 13-17 Investment Policy and Initiatives .............. 17-18  Policy Initiatives ......................... 18-19 Challenges and Opportunities ................. 19  Investment opportunities ................. 19  Destination India ......................... 19-20  Domestic Investments ......................... 20  Foreign Investments ......................... 20-21 Key Challenges ......................... 21  Sustaining the growth rate ................ 21-22  Demand to Go Up ......................... 22-23  Budget Measures ......................... 24  Budget Impact ......................... 24 Key Points ......................... 25 Need for Innovation ......................... 26 Enhancement of share of auto component in global trade ......................... 26-27 National Automotive Testing and R&D Infrastructure Project (NATRIP) ......................... 27 Conclusions ......................... 28


thereafter. followed by Auto and Auto ancillary industries. In such a scenario.AUTO MOBILE ANCILLARIES Introduction In today’s competitive business environment. and benchmark them with the best practices within the industry to bring in improvements in the existing system. This study. automobile companies worldwide are shifting their attention towards understanding and implementing extended supply chain management that integrates the product. there is a pertinent need to understand and evaluate existing supply chain metrics followed by Auto and Auto Ancillary Industries in India. The automobile OEM companies have been grouped into the following categories: • Cars & utility vehicles • Tractors • Trucks • Two wheelers INSTITUTE OF PRODUCTIVITY & MANAGEMENT . identify the leader(s) under each set of parameters and ascertain the best SCM practices employed by the identified leader industries. process and information flows within and across organizational boundaries. “Benchmarking survey on Best Supply Chain Management (SCM) Practice of Auto and Auto Ancillary industries in India” seeks to assess the current supply chain metrics (SCM) across various parameters.

Having analysed and evaluated the current supply chain practices of the companies surveyed. both inbound and outbound supply chain. the relevant parameters were categorized under four broad heads. For the purpose of identification of leaders. namely.AUTO MOBILE ANCILLARIES The auto ancillary industry players have been grouped as per the following classification: • Engine parts • Transmission • Electrical • Ancillaries others The study covers all metrics in the extended supply chain of an organization. The various practices followed by the leader industries were identified and grouped under the following broad heads: • Strategy • Marketing INSTITUTE OF PRODUCTIVITY & MANAGEMENT . 11 players among the Auto OEMs and 14 among the Auto Ancillaries players were identified as leaders across different supply chain activities. • Cycle time metrics • Cost metrics • Service quality metrics and • Asset metrics A sample of 27 Auto OEMs and 51 Auto Ancillaries were met across the country for the identification of the leaders.

the best practices followed by the leaders within each of the categories above. were ascertained.AUTO MOBILE ANCILLARIES • Procurement • Manufacturing • Quality • Logistics • Information technology Based on detailed analysis of the data. Background Surge in automobile industry since the nineties has led to robust growth of the auto ancillaries sector in the country. INSTITUTE OF PRODUCTIVITY & MANAGEMENT .

It was during this period that auto components from India began to be exported. Bajaj. • Period after the entry of Maruti Udyog Ltd and • Period post Liberalization The period prior to the entry of Maruti Udyog Ltd was characterized by small number of auto majors like Hindustan Motors. The autoancillary industry in the country really showed a spurt in growth during this period. Ford. A close look at the evolution of the industry gives us a vivid picture of three different stages of development. Since than passing through various phases of ups and downs.AUTO MOBILE ANCILLARIES The auto Components Manufacturing in India took the shape of an industry in the early 1940s. The entry of foreign automobile manufacturers ranging from Mercedes Benz. Telco. the industry has emerged as one of the fastest growing manufacturing sectors that is globally competitive as well. INSTITUTE OF PRODUCTIVITY & MANAGEMENT . The good performance of Maruti resulted in a upswing for the domestic auto ancillary industry. Premier Automobiles. and General Motors to Daewoo following the government liberalizing the foreign investment limits saw the beginning of the third phase of the evolution of the industry. This period witnessed the emergence of a new generation of auto ancillary manufacturers who were required to meet the stringent quality standards of Maruti’s Korean collaborator Suzuki of Japan. Mahindra and Mahindra. low technology and assured business for most of the auto-component manufacturers. The entry of Maruti in the 1980s marked the beginning of the second phase of the industry. • Period prior to the entry of Maruti Udyog Ltd.

000 firms in small unorganised sector. which contribute more than 85 per cent of India's production. At present there are around 500 key players. and Toyota. Current Status Indian auto component industry is quite comprehensive with around 500 firms in the organised sector producing practically all parts and more than 10. Volkswagon. Fiat. Bajaj Pulsar. The industry. Mahindra Scorpio. developed the capability of manufacturing all components required to manufacture vehicles. The sector has been growing at 20 per cent per annum since 2000 and is projected to maintain the high-growth phase of 15-20 per cent till 2015. which is evident from the high levels of indigenization achieved in the vehicle industry as well as the components developed for the completely Indian made vehicles like the Tata Indica. over the years. India's competitive advantage does not come from costs alone. India enjoys cost advantage with regard to castings and forgings. TVS Victor and TVS star. the Indian component sector has shown great advances in recent years in terms of growth. spread. absorption of new technologies and flexibility. Daimler Chrysler. but from its full service supply capability. INSTITUTE OF PRODUCTIVITY & MANAGEMENT . The manufacturing costs in India are 25 to 30 per cent lower than its western counterparts. India has also emerged as an outsourcing hub for auto parts for international companies such as Ford. General Motors.AUTO MOBILE ANCILLARIES In tandem with the industry trends. Tata Indigo. in tierized format.

Suspension & Braking Parts. 4 are JIPM award winners and 1 is Japan Quality Medal winner. 9 are Deming Prize winners.AUTO MOBILE ANCILLARIES The industry has now holistic capability to manufacture the entire range of autocomponents e. INSTITUTE OF PRODUCTIVITY & MANAGEMENT . Component-wise share of production Over the last few years the Indian Auto Component Industry has created a robust capacity base and all of the world’s major manufacturers have set up their manufacturing units in the country. Drive. The quality of the components produced by the component industry in the country is certified by the fact that. Electricals.g. Auto-component Production Production of auto ancillaries was estimated at USD 10 billion in 2005-06 and has been growing at a robust 20 per cent per annum since 2000. out of the 498 ACMA members. Transmission Parts. Equipment etc. Body and Chassis Parts. Engine parts.

exports has emerged as a significant driver of growth. the auto component industry was solely dependent on the domestic automobile industry to drive the demand for ancillary products. At the same time. Exports of auto components have been strong growing at 24 per cent per annum since 2000.AUTO MOBILE ANCILLARIES Auto-component Export Till the 1990s. This growth in exports if sustained for another five years will see India’s auto components exports will touch USD 5 billion by 2011 from the USD 2 billion at present. a bright outlook for the domestic automobile industry also offers significant growth potential. There are around 400 major players in the auto component sector. south. This composition of the market however is undergoing radical changes with global outsourcing gaining momentum. and. In recent times. COMPETITION OVERVIEW The automotive component industry is an important sector of the Indian economy and a major foreign exchange earner for the country. These AVMs contributed INSTITUTE OF PRODUCTIVITY & MANAGEMENT . and the demand emanating from global OEMs and Tier I manufacturers has opened new opportunities for the auto component industry in India. Most of them are distributed in the north. western parts of India around major Automotive Vehicle Manufacturers (AVMs). given the fast rising income levels with a rapidly growing middle and high income consumers.

and subassemblies for all types of vehicles produced in India. However in the unorganized sector there are approximately 5000 SSIs. The organized component manufacturers supply components to at least one of the Original Equipment (OE) vehicle manufacturers. The 400 odd organized producers contribute around 80 percent to this market. semifinished components. finished. The geographical spread of medium and large companies as per records of Automotive Component Manufacturers Association of India (ACMA) is as under INSTITUTE OF PRODUCTIVITY & MANAGEMENT . This industry can be divided into the organized and the unorganized categories of manufacturers. They control about 65 percent of the aftermarket. the Indian automotive component industry is highly fragmented. No figures are available for unorganized sector. The unorganized sector predominantly caters to the The OE market is predominantly catered to by the organized sector. The automotive component industry manufactures a wide range of parts including castings. assemblies. They also have access to technology due to their tie-ups with some of the foreign collaborators or through associate AVM. Presently. these manufacturers have grown in size and numbers beyond the control of OE manufacturers. forgings.AUTO MOBILE ANCILLARIES largely towards the development of component suppliers through technical and or financial collaborations. There are 402 medium and large key players in auto components in the organized sector along with 6000 ancillary units.000. The direct employment generated by the medium and large firms in the organized sector is 2.50. Presently.

Bharat Forge Limited (BFL) is the flagship company of the USD 1. The company has manufacturing operations across nine locations INSTITUTE OF PRODUCTIVITY & MANAGEMENT .AUTO MOBILE ANCILLARIES North region Western region Southern region Eastern region 161 123 91 27 Major Players Bharat Forge Ltd Established in 1966.50 billion Kalyani Group.

770 alternators. wiper motor amoung others.5 per cent each. Volkswagen. Toyota. Iveco. alternators. The company manufactured 193. and Sumitomo corp. Ford. General Motors. Daimler Chrysler. Dana Corporation. Arvin Meritor. Asmo Co. Denso Denso India Limited (Formally Nippondenso India. Scotland UK..AUTO MOBILE ANCILLARIES and six countries – 2 in India.590 starter motors and various other automotive electrical components in FY 2002. Cummins. DIL was incurring losses because of the rising value of the yen and high custom duties. This includes. DIL). Japan) assumed effective control of the DIL from 26 per cent to 37. Japan. The company’s performance improved considerably after the collaborator. 196. Audi. Caterpillar Perkins. was incorporated in November 1984 and is into manufacture of automotive electrical equipments. Japan (Formerly Nippon-Denso. BMW. a joint Subsidiary of three Japan companies Denso Corp. Detroit Diesel. Honda. USA & China. and Maruti Udyog (Maruti) picked up 9. INSTITUTE OF PRODUCTIVITY & MANAGEMENT . magnetos. Its customer base includes virtually every global automotive OEM and Tier I supplier. Scania and several others source their complex forging requirements including machined crankshafts. while Sumitomo. Volvo. Renault. 3 in Germany and one each in Sweden. Ltd. front axle beams and steering knuckles from Bharat Forge. Denso Corporation.90 per cent. generators. Till FY 1993.

One of the top ten automotive component suppliers in the world. Lumax industries Established as a trading company in 1945.. is India’s largest auto-ancillary company. commercial vehicles. Motor Industries Company Ltd (MICO) MICO was incorporated in 1951 as a subsidiary of Robert Bosch AG. UK and T V Sundaram Iyengar & Sons (TVS). two-wheelers and off-highway vehicles as well as for stationary and marine applications.TVS was set up in 1961 as a joint venture of Lucas Industries plc.AUTO MOBILE ANCILLARIES Lucas – TVS Lucas . fueled in no small measure by its two decade old technical and financial collaboration with Stanley Electric Company INSTITUTE OF PRODUCTIVITY & MANAGEMENT . Lucas TVS reaches out to all segments of the automotive industry such as passenger cars. tractors. MICO Engineers are skilled in the design and application of brake systems and components. today a manufacturing company. jeeps. to manufacture Automotive Electrical Systems. Lumax accounts for over 60% market share in Indian Automobile Lighting Business. Germany. India. Lucas Varity was formed by the merger of the Lucas Industries of the UK and the Varity Corporation of the US in September 1996.

Sundaram-Clayton Limited (SCL) Sundaram-Clayton Limited (SCL) is part of the US $2. SCL has pioneered the manufacture of airassisted and air brake systems for commercial vehicles in India. Dharuhera in the state of Haryana. SCL established its Die casting division in 1968 for quality and high precision aluminium castings. INSTITUTE OF PRODUCTIVITY & MANAGEMENT . The division's two plants. Of these.5 billion American Standard Inc.6 billion TVS group of companies. near New Delhi and three plants in Pune. in collaboration with Clayton Dewandre Holdings Plc. (presently WABCO Vehicle Control Systems. UK) which is a part of the US $9. two are located in cities of Gurgaon. a world leader in Vehicle Lighting and illumination products for Automobiles. Japan. Lumax is listed on major stock exchanges in India and depicts a shareholding holding of 39% by Indian Promoters. 19% is held by Stanley Electric and 42% by Public and Corporate Bodies. SCL began its operations in Chennai in 1962. one at Chennai and the other at Hosur are equipped with the latest technology in Pressure Die Casting. the largest automotive component manufacturing and distributing group in India. near Mumbai in Maharashtra and one plant near Chennai. UK. Lumax has seven ultra modern manufacturing plants in India. Gravity Die Casting and Low Pressure Die Casting.AUTO MOBILE ANCILLARIES Limited.

the Finance Bill 2006 has given a further boost to the Automotive Industry by reduction of the excise duty on the small motor vehicles. In February 2007. The proposals include a tax holiday for investments over Rs 5 billion. thereby contributing 10 per cent to the GDP against 1 per cent now. Indian government announced the Automotive Mission Plan (AMP) for transforming the country into a global destination for design and manufacture of auto components. Also proposed are 100 per cent tax deduction on export profits and 50 per cent deduction on foreign exchange earnings. The plan envisions the sector’s turnover to swell to US$ 145 billion by 2019 from the current USD 9. the reduction in the duty for raw INSTITUTE OF PRODUCTIVITY & MANAGEMENT . the government of India in the year 2002 announced its Auto policy and Vision 2010.8 billion.AUTO MOBILE ANCILLARIES SCL established its state-of-the-art Software design centre in 2005. The Auto Policy allows automatic approval for foreign equity investment upto 100 per cent in the automotive sector and does not lay down any minimum investment criteria. removing all the quantitative restrictions that were in place till 2001. Earlier. an export oriented unit catering to the embedded and business application software needs of American Standard Companies INVESTMENT POLICY AND INITIATIVES With the idea of establishing a globally competitive automotive industry and to double its contribution to the economy by 2010.

some of the objectives like imposition of excise duty on body building activity of Commercial Vehicles.  Automatic approval for foreign equity investment up to 100 per cent of manufacture of automobiles and components is permitted.  The automobile industry has been delicensed.  There are no restraints on import of components. lower excise duty on the small cars. Policy Initiatives The government has taken many initiatives to promote foreign direct investment (FDI) in the industry. increased budgetary allocation for R&D activities in the sector and moving towards a lower duty regime have been achieved and steps are being taken to further strengthen the capability of the sector. extension of 150 per cent weighted deduction on R&D expenditure to the automotive sector.AUTO MOBILE ANCILLARIES material which is now between 5 to 7.5 per cent as compared to the previous level of 10 per cent. As a result of constant persuasion by the Department of Heavy Industry. and the thrust on infrastructure development. CHALLENGES AND OPPORTUNITIES Investment opportunities INSTITUTE OF PRODUCTIVITY & MANAGEMENT .

Destination India According to the Investment Commission of India. besides using more local components in cars for the Indian market. global automobile manufacturers see India as a manufacturing hub for auto components and are rapidly increasing the value of components they source from India due to:  Indiaʹs cost competitiveness in terms of labour and raw material. high-skill manpower with an abundance of engineering talent – the second largest in the world  Well developed. Skoda Auto India is looking at increasing localisation for its small car Fabia to over 50 per cent over the next two years. Mercedes Benz India expects growth in sourcing from India to continue at 10 per cent. BMW is likely to sign the first direct sourcing deal with local vendors by the end of this year. Makers of luxury cars are increasingly looking at making India a sourcing hub for components. The INSTITUTE OF PRODUCTIVITY & MANAGEMENT . globally competitive Auto Ancillary Industry  Established automobile testing and R&D centres.AUTO MOBILE ANCILLARIES India has several advantages making it an attractive destination for investment in the automobile sector  Low-cost.  Among the lowest-cost producers of steel in the world. Domestic Investments The market is so large and diverse that a large number of players can be absorbed to accommodate buyer needs.  Its established manufacturing base.

This is in addition to a US$ 245.9 per cent to 2. a wholly‐owned subsidiary of Germany‐based Continental Corporation. the Investment Commission has set a target of attracting foreign investment worth US$ 5 billion for the next seven years to increase Indiaʹs share in the global auto components market from the existing 0.30 million from around 34 automotive ancillary units.59 million Greenfield project being set up by MLR Motors near the park. Seeing the growing popularity of India in the automotive component sector.5 per cent by 2015.  Continental Automotive Components (India) Private Limited.AUTO MOBILE ANCILLARIES sector not only has global players looking to invest and expand but leading domestic component companies are also pumping in huge sums into expanding operations.2 million in its Indian operations during the next two years ending December 2010. INSTITUTE OF PRODUCTIVITY & MANAGEMENT .  Canadian auto component major Magna International Inc is mulling options to set up an integrated manufacturing facility in India for its nine business divisions. Foreign Investments India enjoys a cost advantage with respect to casting and forging as manufacturing costs in India are 25 to 30 per cent lower than their western counterparts. is planning to invest over US$ 79. An auto park is coming up near Hyderabad with investments worth over US$ 409.

AUTO MOBILE ANCILLARIES Key Challenges Sustaining the growth rate There is a potential for much higher growth in the domestic market due to the fact that the current car penetration level in India is just 7cars per thousand. This can lead to an increase in the size of the domestic auto-component market from the current level of USD 9. Demand to Go Up INSTITUTE OF PRODUCTIVITY & MANAGEMENT .8 billion (2005-06) to at least USD 15 billion by 2015. where the per capita income is over USD 1000. It is expected that the passenger car market which was 1million in 20032004 can easily cross the 3 million mark by 2015. implies that passenger car growth in the domestic market is on the verge of a major and sustained boom. The increase in purchasing power at the top echelon of about 300 million people in the country.

comprising cars and trucks. However. some respite was provided to players with strong positioning in the replacement market as demand in this market remained robust on account of strong auto sales in the previous fiscals.   Auto sales for the month of June grew by 14. Ford and Chrysler ‐‐ have witnessed a steady increase in demand for components from these car manufacturers.26 per cent over the same month a year earlier. with European car companies showing a demand revival. which remained in shambles. In fact. the auto ancillary industry also went through tough times in FY09. They either supply parts to car makers in Europe or to Indian manufacturers for exports there. Going forward. uncertainty continues to plague exports. with a significant part of the revenues for the industry also coming from exports to the developed markets.86 per cent. began to increase from March this year. according to a report released by the Society of Indian Automobile Manufacturers (Siam). and have recorded a steady rise of 10‐12 per cent in demand during the past two‐three months. suggesting an acceleration in sales INSTITUTE OF PRODUCTIVITY & MANAGEMENT . while domestic markets have begun to look up. The growth posted in May was 8.AUTO MOBILE ANCILLARIES In line with the subdued demand witnessed in the auto industry. Sales of light passenger vehicles. Indian auto parts suppliers to the `Big 3ʹ of Detroit ‐‐ General Motors (GM). it will not be wrong to say that the Indian auto ancillary industry suffered even more than the auto industry.  Indian automotive component makers are getting back into top gear.

941 29.AUTO MOBILE ANCILLARIES coming mainly from motorcycles.  Higher allocation towards defense and agricultural credit INSTITUTE OF PRODUCTIVITY & MANAGEMENT . Good auto sales numbers are also a thrust to the auto components manufacturers.536 601.29 17.804 40.937 33.727 36.100 % 8.605 Jun‐09 140. but with a provision of carrying forward the tax credit on MAT to ten years from the current seven years.51 14. light commercial vehicles (LCV) and passenger cars.  Rate of minimum alternate tax (MAT) on book profits has been increased from 10% to 15%.17 ‐12.193 917.44 13.324 801.243 706. Segment change Passenger vehicles Two‐wheelers Three‐wheelers Commercial vehicles Total Jun‐08 129.26 Budget Measures  Reduction in excise duties in select segment of automobiles  Fringe benefit tax (FBT) abolished.

customer service. distribution network to meet replacement demand. Key Points    Supply: Low for high technology products. Generally. weighted deduction on R&D will further incentivize players to spend more on R&D. excess supply persists. INSTITUTE OF PRODUCTIVITY & MANAGEMENT . Unorganized sector dominates the domestic component market due to excise benefits. This in turn will drive demand for auto components. OEM (original equipment manufacturers ) relationships.AUTO MOBILE ANCILLARIES  A weighted deduction of 150% for expenditure relating to in‐house research and development will be extended Budget Impact  Higher defence and agri credit allocation will encourage new vehicle buying which in turn will benefit the industry players. Demand: Linked to automobile demand. technology.  Increased thrust on road infrastructure is a positive for all the automobile manufacturers especially passenger vehicles and CVs. Barriers to entry: Capital.  As the Indian auto ancillary industry becomes more sophisticated. Export demand is linked to the increasing acceptance towards outsourcing.

The industry will also benefit if it has strong domestic competition. But productivity is the prime determinant of the competitiveness and also impacts the national per capita income. At the domestic level. Need for innovation The competitiveness in the sector will largely depend on the capacity of the industries to innovate and upgrade. Competition: Will intensify. market structure is fragmented for a large number of ancillary products. The globally successful OEMs and auto makers will ultimately make their INSTITUTE OF PRODUCTIVITY & MANAGEMENT . In some products (like batteries). as global players will enter the market leading to consolidation. Dereservation of SSI will result in access to capital and technology. duties. interest rate and economies of scale are the most important determinants of competitiveness. There is no denying the fact that the factors like labour cost. Relatively high in the replacement market Bargaining power of customers: Companies operating in the export market face competition at a global level. Most companies adopt low cost and differentiation strategies.AUTO MOBILE ANCILLARIES    Bargaining power of suppliers: Low with OEMs. only two or three companies control over 80% of the market. home based suppliers and demanding local customers.

9 percent in 2005-06 (Provisional) to 2. it is also expected to result in incremental revenue of USD 3.8 Billion in 2005-06). Enhancement of share of auto component in global trade The global auto component industry is estimated to be USD 1. This would increase India’s share of world auto component trade from 0. inclusive of domestic consumption. The OEMs also look for the policies of the state which stimulates innovations in new technologies. It would also involve core products and process technology creation apart from maintaining productive human resource and reward for advanced skills. it could leverage this off shoring trend and the quality of its supply base to build dominant top two position in auto component exports from low cost countries by 2015. Sourcing from low cost countries is likely to increase from USD 65 billion in 2002 to USD 375 billion by 2015.2 trillion in value and is likely to increase to USD 1.8 billion to the exchequer. INSTITUTE OF PRODUCTIVITY & MANAGEMENT .AUTO MOBILE ANCILLARIES base in places which are high on productivity factor and where essential competitive advantages of theenterprise can be created and sustained.000 direct jobs in its sector alongwith indirect employment of 1.1 billion. In addition to creating incremental employment of about 2. Such a high growth in the Auto component Sector is expected to lead to an additional 750. Although India’s exports are still small (USD 1.8 million people over the next 10 years.5 million people in direct and indirect jobs.7 trillion by 2015 as per ACMA.0-2. Investments in this sector would also grow by USD 15 billion from the current level of USD 3.5 percent by 2015. A position in the top two would enable India to achieve export of USD 20-25 billion by 2015.

As an overall strategy. i.AUTO MOBILE ANCILLARIES National Automotive Testing and R&D Infrastructure Project (NATRIP) The most critical intervention of the Government thus far in the automotive sector has come in the form of an ambitious project on setting up world-class automotive testing and R&D infrastructure in the country to deepen manufacturing. NATRIP aims at facilitating introduction of world-class automotive safety. boost exports. Conclusions The survey shows that there is a huge performance gap between the best supply chain practitioners and the rest. major shortfall of testing and pre-competitive common R&D infrastructure. The project aims at addressing one of the most critical handicaps in the overall growth of automotive industry today. emission and performance standards in India and also to ensure seamless integration of Indian automotive industry with the global industry. converge India’s unparalleled strengths in IT and electronics with automotive engineering sectors to firmly place India in US$ 6 trillion global automotive business.e. encourage localized R&D. they outsource their non-core requirements and have integrated their SCM processes  In marketing they do customer service measurement and demand planning  When it comes to procurement they do vendor rating and certify their vendors  As far as manufacturing is considered they have preventive maintenance and product layout INSTITUTE OF PRODUCTIVITY & MANAGEMENT .

AUTO MOBILE ANCILLARIES While In quality they have quality improvement tools and total quality management  Inventory control and outsourcing of logistics services are followed in Logistics In Information technology the best in class companies use ERP and CAD / CAM.  INSTITUTE OF PRODUCTIVITY & MANAGEMENT .