S Korea next stop for auto parts cos

Mumbai, Jan 5 | Updated: Jan 6 2006, 07:06am hrs
After Tatas acquisition of Daewoo, it is now the turn of Indian auto component companies to drive into South Korea the second largest car market in Asia housing Hyundai, Kia Motors and GM Daewoo.

A good number of companies in South Korea are up for grabs and consultants are currently presenting these opportunities to Indian auto manufacturers.

Mahindra Systems & Tools, a division of Mahindra & Mahindra, president Hemant Luthra confirmed the offers from the Korean companies. We were offered a few Korean companies owned by private equity firms. However they did not fit into our requirements.

On the South Korean auto ancillary companies up for sale, KPMG regional executive partner (global markets) Pratap Nambiar states, We have mandates from South Korean companies. But we are not at liberty to disclose names publicly at this stage. Mr Nambiar however refused to name any of the Indian auto companies interested in South Korea. The Korean auto sector is more mature, has more experienced labour, wide base of vendors with enough economies of scale coupled with better infrastructure, Mr Nambiar added.

However, Sona Koyo Steering Systems chairman and managing director Surinder Kapur differs. Korea is a big and excellent market for the automotive companies, but the labour force is not co-operative. Without disclosing reasons, Bharat Forge executive director Amit Kalyani too confirmed that his company was not looking at Korea, though it could be the next big market for Indian auto components companies to enter.

Indian companies have so far, looked only at West for acquisition, but the taxation structure in South Korea can lure Indian companies in, according to Mr Nambiar. The tax component on vehicle in South Korea has a value added tax of 10%, registration tax of 5%, and excise of 5%, much competitive when compared with India, sources said.