Sona Koyo plans to make cars

The country?s largest auto component company Sona Koyo Steerings, which supplies to major OEMs including Maruti Suzuki and Tata Motors, has charted a new growth strategy for the coming few years.

Written by Ronojoy Banerjee

April 8, 2011 01:48 IST

The country?s largest auto component company Sona Koyo Steerings, which supplies to major OEMs including Maruti Suzuki and Tata Motors, has charted a new growth strategy for the coming few years. As per the plan, the company is mulling entering into contract manufacturing for OEMs. Contract manufacturing refers to building a car from scratch for other carmakers which is bound by a contract. Unlike the carmaker, the contract manufacturer is only responsible for the production of the car, issues relating to sales and marketing is taken care by the OEM. ?We are exploring the possibility of entering into contract manufacturing or module manufacturing. There are several examples in the West of auto component companies entering into arrangements with OEMs to manufacture cars,? managing director of Sona Koyo Steerings Sunjay Kapur told FE. He said that the move formed a part of the company?s attempt to scale up the value chain. He, however, added that the company board is yet to take a final call on the matter.

While there are several examples in Europe and the US of notable auto component makers manufacturing cars for global OEMs, the trend is yet to catch up in India. For instance, global component manufacturer Magna International assembles the 3-series range of cars in Europe for BMW. Even Fiat has given contracts to component makers to assemble some of their marquee brands. ?We can’t put a definite structure to our plans (of contract manufacturing) but various ideas are being discussed,? Kapur added.

An auto analyst with a global consultancy firm said that owing to the intense competition among auto vendors, several component makers are looking at diversifying into newer verticals to reduce dependency on just one segment. ?Vendors are looking at several options. While some may opt for contract manufacturing, the others are striving to become end-to-end component players,? the analyst said.

Last year, Pune-based Force Motors, part of the Firodia promoted group, announced that it would roll out SUVs in 2011. The company is banking on its expertise in the automotive space as the makers of the Matador and Tempo. Delhi-based Anand Group has also zeroed down upon defence as the major growth area for the group in the future.