The auto components industry in India is expected to grow from $30 billion to $59 billion by 2015. However, the indsutry will have to wait and see that issues such as levying of entry tax, alternative to the Duty Entitlement Pass Book (DEPB) scheme, maintaining productiviy gains and problems in raising capital for expansion be resolved at the earliest so that the growth can be achieved, says Srivats Ram, managing director, Wheels India Limited, the R1,700-crore TVS group company and largest steel wheel producer in India at more than 10 million wheels per annum, in an exclusive interview with FE?s R Ravichanran.

An overall auto component industry perspective and its growth projections if any?

The auto component industry has grown at a CAGR of 24% over the past seven years with a sales value of $30 billion in 2010-11. The industry is likely to grow to $59 billion by 2015 and it is likely to grow at 14% over the next 10 years based on the E&Y ACMA vision 2020 document. The key driving factors including that of expansion plans of all major OEMs, new entrants across all segments, invasion of multinational players into India apart from surging demand on the export front.

What are the issues/problems being faced by the industry?

Some of the key issues are maintaining productivity gains and viability given the high inflation, the infrastructure deficit and cost especially in energy. The challenge before the industry is of raising capital to meet the growth and scaling of capacities ahead of demand.

On policy distortios.

The government is considering introduction of GST from April 2012. While the introduction of GST will enable central sales tax to be VATable, there continues to be an issue with entry tax, which is levied in some states such as UP, which is not VATable even after GST introduction. As a matter of fact, the appeal made by state governments to the Supreme Court on the dismissal of entry tax by high courts is still pending and needs to be resolved quickly.

On another subject, the government has extended the DEPB scheme till September 2011. There is a need for the government to come up with an alternative scheme with appropriate rates at the earliest. This is required to ensure a level playing field vis-a-vis other countries given the high costs of energy, infrastructure and high interest rates in our country. It would be useful if the government comes up with an alternative scheme at the earliest such that discussions with industry bodies can be held to ensure a smooth transition.

Do you see consolidation will take place in the Indian auto components industry?

There is scope for consolidation in the auto component industry especially amongst the tier-II and tier-III suppliers, as a certain scale is now required to invest for the growth ahead of us. There has, however, been only a limited amount of consolidation so far.

Can you throw light on Wheels India?s growth, projections, investments, exports, if any?

The turnover of Wheels India has grown sharply from Rs 1,166 crore in 2008-09 to Rs 1,703 crore in 2010-11 due to buoyancy in the domestic auto industry as well a resurgence of export markets. We expect to grow at 15%, mirroring the industry’s growth projections over the next few years. We have not decided on the exact investments at this point of time. However, a few hundred crore will be invested based on the growing requirements of the customers. We have exports components worth Rs 240 crore in 2010-11 and would look at more markets on the same.

Are you planning to enter any new area or components?

In the previous year, the company started operations at its Deolli plant in Maharashtra. This is a diversification into making structural components for the energy sector. The relatively new areas that the company has been growing over the past few years have been air suspension systems for buses in the domestic market and mining truck wheels in the domestic and export markets.