In the backdrop of mounting investment costs accentuated by rising land prices and raw material costs, auto component companies have urged original equipment manufacturers (OEMs) to devise ways to lessen the infrastructure costs on vendors as part of increasing synergies between the two sides.
According to one of the proposals, the suppliers have said that once OEMs come into possession of land they should sub-lease a part of it to vendors at equivalent rates. In short, follow the Tata Motors policy of vendor integration as witnessed during the setting up of the Nano plant in Singur and subsequently in Sanand.
At a recent meeting between the vendors and auto companies that was jointly organised by Society of Indian Automobile Manufacturers (SIAM) and Automotive Component Manufacturers Association (ACMA) last month, noted auto component manufacturers argued OEMs should acquire land on behalf of the vendors or sub-lease land doled out to them by the respective State government to help suppliers manage costs.
Since the OEMs requirement of land is much higher, they usually get land at far more attractive rates, occasionally the difference being as high as 40-50% besides other benefits. ?The model was executed by Tata Motors at Singur. Though it did not work out then for political reasons, they tried to replicate the same at Sanand in Gujarat as well,? a vendor who was a part of the meeting told FE. He said that though in the last couple of years other auto makers have tried to follow suit, the auto component industry was hoping that it could be formalised.
When contacted, president of ACMA Srivats Ram said, ?Auto component companies and OEMs can work together across many fields to increase synergies. This could involve areas of technical know-how, skill development and research.?
Director-general of SIAM Vishnu Mathur however said that OEMs could explore various options to reduce investment costs for vendors including acquiring land on their behalf. ?This is an option. The concept is known and in some parts it has worked as well,? he said.