Introduction The Indian automobile components industry has emerged as one of Indias fastest growing manufacturing sectors, and

a globally competitive one. The worlds top auto makers turn to India for the nuts and bolts of their vehicles.

According to the Auto Component Manufacturers Association (ACMA), the apex body of components makers in India, global sourcing of components from the country will double from US$ 2.95 billion to US $ 5.9 billion in 2009-10, and is slated to hit US$ 20 billion in seven years.

Worlds automotive manufacturing sector consists primarily of about 20 very large multinational corporations. The automotive supply sector, however, comprises of thousands of firms ranging in size from a few employees to more than 100,000. According to industry estimates, the size of the global auto component industry in the year 2010 was approximately US$1.4 trillion and is likely to grow to about US$1.9 trillion by 2015. Out of this total auto component demand by 2015, about 40% (i.e. US$ 750 billion) is likely to be sourced from low cost countries (LCCs) such as China, ASEAN countries and India. The major auto component companies are as follows:

Major Auto Component Companies Companies Robert Bosch Corporation Delphi Automotive Systems Denso Corporation Magna International Johnson Controls Inc. Lear Corporation Visteon Automotive Systems TRW International Eaton Corporation

1.b The India Advantage

The Indian auto component industry expects to grow by over four-fold to US$ 113 billion by 2020, said Automotive Component Manufacturers' Association (ACMA).As per a report by ACMA, the turnover of the auto component industry is being estimated at around US$ 26 billion in 2010-11, up 18 per cent from US$ 22 billion in 2009-10. The report states that 40 per cent of the auto component industry was dominated by body and structural products in 2009, 20 per cent by engines and exhaust, and 10 per cent each by suspension and braking parts, transmission and steering parts, electronics a d electrical and interiors. By 2015, body and structural will account for 35 per cent of the auto component industry, engines and exhaust 20 per cent, suspension and braking parts, transmission and steering parts and electronics and electrical will account for 13 per cent each and interiors 9 per cent. The potential compounded annual growth rate (CAGR) of the auto component industry is likely to be around 18 per cent in the period 2010-11. Exports from the auto component industry are estimated to be worth US$ 5 billion in 2010-11, according to the ACMA report. Europe is likely to account for 36.9 per cent of India's auto components exports in 201011, followed by Asia with 28.1 per cent and North America with 24 per cent. The industry has witnessed a shift in the composition of exports over the years. Investments in the auto component industry are estimated at US$ 12 billion in 2010-11, according to ACMA.

Government Initiatives The Government of India allows automatic approval for foreign equity investment up to 100 percent for the manufacture of auto components. Manufacturing and imports in this sector is free from licensing and approvals. There is no local content regulation in the auto industry. The engineering export promotion council under the aegis of Ministry of Commerce and Industry, Government of India, over the years has been engaged in promoting exports of engineering goods including auto parts. Among other initiatives that have been affected in 2006-07 are: Setting up of the National Automotive Testing and R&D Infrastructure Project (NATRIP) at a total cost of US$ 388.5 million for enabling the industry to usher in global standards of vehicular safety, emission and performance standards. Finalization of the Automotive Mission Plan (AMP) 2006-2016 for making India a preferred destination for design and manufacture of automobile and automotive components. The reduction in customs duty maximum level of 7.5 per cent on key metallic raw materials and inputs for the auto-components industry. Reduced excise duty on small cars to 16 per cent, a step which would propel India as a global manufacturing hub for small cars and directly enable the auto component supplier industry to attain volumes. Reduction of peak rates of duty from 15 to 12.5 per cent. The government has notified setting up an automobile testing and homologation centre, International Centre for Automotive Technology (ICAT), at an investment of US$ 15.23 million which would act as an accredited agency to approve homologation standards for automobiles.

Potentialities of the industry: The growth expected in the domestic automobile industry will give a fillip to the auto component sector. The Indian automobile industry offers great potential considering the low penetration along with rising income levels and a rapidly growing middle class. These factors will see a boost in demand for vehicles, especially passenger cars and two

wheelers. These two segments are estimated to grow at between 10-12% for at least the next five years. The entry of global OEMs, making India as their manufacturing base, has given a big boost to the industry. For instance, Skoda plans to source parts for its European operations from its Indian base and raise indigenization level for Indian models to 70%. This trend has also enabled Indian companies to gain a competitive edge in the global market. Further, the model of clusterbased development prominent in this sector will provide economies of scale.

Export of automobiles has also emerged as a key component of growth. Rising exports of Indian-made vehicles like M&Ms Scorpio model, Bajaj Autos Bikes, Tata Motors City Rover are indirectly increasing the demand for Indian auto components. Also, the export of India-made models of global OEMs like Hyundais Santro Xing and Suzukis Alto has given a boost to the industry.

De-regulation and the Governments policy initiatives have facilitated growth and focus has now shifted towards attracting foreign direct investments. Also, the Governments initiative towards road development will give a boost to demand for vehicles and indirectly auto components.

The Governments initiatives towards opening up channels of finance. Investments coming in for research and development will keep the industry abreast of the latest technology.