Steering A Boom

Updated: May 19 2003, 05:30am hrs
Among the stocks that have hit 52-week or all-time highs of late include those of a clutch of auto component manufacturers like Bharat Forge, Motherson Sumi Systems, Sona Koyo Steering, Cummins India, Sundaram Fasteners, Exide, Ucal Fuel Systems, Rane Engines and so on as indicated in a story in this newspaper. The spotlight so far has largely been on the global exploits of Indian pharmaceutical and software companies, but auto component manufacturers are fast emerging from the shadows to grab a place in the sun. There are 13-odd global automakers who have set up shop in the country. With higher procurement budgets for their global operations, local component manufacturers are getting a bit of the outsourcing action. Domestic manufacturers especially in the two-wheeler segment are also expanding their capacities and plan to set up plants in overseas markets. Can their follow sources or auto ancillaries be far behind Not surprisingly, Indias exports of auto components are booming and the potential growth rates of 35-40 per cent per annum being talked about are beginning to approximate those of pharma and software. But there is some distance to be covered. Indias component exports of $800 million last fiscal amount to just 0.1 per cent of the global business. But with export prospects of $1-1.5 billion this fiscal, the outlook is rapidly a-changing.

Sensing boom conditions, Indias auto component manufacturers are scouting for fresh opportunities, besides diversifying away from relying on only one original equipment manufacturer (OEM). A delegation of 33 chief executive officers of auto component firms thus is currently visiting the United States (US) to explore outsourcing opportunities from Navistar, Caterpillar, Cummins, Delphi and Ford Motor Company. Sundaram Fasteners, which has been supplying radiator caps to General Motors, is now planning to set up a facility in China to supply other manufacturers as well. Bharat Forge, which declared a 600 per cent spurt in its exports, also plans to diversify its markets beyond the US and China. Such examples can be multiplied as local manufacturers gear up to meet the demanding quality requirements of global OEMs at highly competitive prices. Some of them are moving up the value chain in designing and supplying systems. Clearly, the component industry is coming of age and bids fair to emerge as Indias next major outsourcing opportunity alongside pharma and software.