The Japanese crisis, which has forced global auto bigwigs such as Honda and Toyota to announce drastic production cuts, could prompt domestic OEMs to reduce dependence on single sourcing markets and explore newer geographical locations. President of Siam Pawan Goenka told FE that the apex auto body has been discussing with Automotive Component Manufacturers Association (ACMA) the feasibility of coordinating with their Japanese counterparts to manufacture components that are in short supply in India.
?It?s a long-term approach that is being adopted,? he said. Goenka said that while having a single sourcing market is not only efficient but highly cost-effective, it could pose serious challenges if a natural calamity of the nature witnessed in Japan were to strike.
?What the natural disaster could do is it could put little bit into question the general philosophy followed in the industry of a single sourcing market. Putting all eggs in one basket could create problems such as this,? he added.
In fact, another senior executive of an Indian two-wheeler company said that since Japanese markets have been home to several big component makers, it has been the most logical option for OEMs to source a chunk of its components from these markets. ?The Japanese fallout and the appreciating Yen are the two factors that would prompt companies to look elsewhere,? he said. According to the executive, Thailand and Philippines could gain because of these factors.
The country?s largest car maker Maruti Suzuki is now consciously working on a sourcing model that would reduce dependence on Japanese markets. While the company?s senior management ruled out any immediate impact on production due to earthquakes in Japan, it said the company was closely monitoring the developments. The company?s managing executive director (supply chain) had earlier told FE that Maruti was slowly moving away from Japan and concentrating on other markets including European ones. Last month the Indian subsidiary of Toyota Motors announced that the company would be cutting production in India by a whopping 70%. This was going to result in the production loss of 7,000 units monthly apart from reducing the company’s revenues by up to R490 crore. The company will operate on a 30% capacity during April 25- June 4 period. Even Honda Siel Cars announced a production cut by half. The company has moved to a single shift from this month.