India Manufacturing Talk

News and Views on Manufacturing in India

Rising Prices of Inputs Hamper Auto Component Manufacturing

The India manufacturing slump story has been in the news over the past few months as rising interest rates and fuel prices hit the auto industry making life difficult for auto majors and their suppliers. The auto component industry has been hit with rising steel costs, along with the deprecating dollar. Industry news reported negative growth in December 2007 with component manufacturers unable to pass on the burden to their customers who typically were willing to take on only a partial burden.

ACMA was among the more vocal players on asking for intervention by the government to curb rising prices. According to ACMA President Sanjay Labroo, the component industry risked losing share both in domestic and international markets unless the government intervenes to control rising steel prices.

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Interest Rates Torpedo Two Wheeler Mfg

India’s two wheeler industry consisting of the motor cycle, scooter and “scooterette” segments has been hit by the rise in interest rates as sales have plummeted in the last few months. Sales figures of Bajaj Auto and TVS slid against market leader Hero Honda which as a result of this downturn widened it’s gap with Bajaj Auto - its nearest competitor - by little over one lakh units per month. (One Lakh = 100,000)

Bucking the trend Hero Honda sales went up 4.31% for September 2007 with sales of 314,537 units against 301,577 units sold last year. In contrast Bajaj Auto’s sales slid by 23% in September - selling 232,496 units against 300,141 last year. TVS sales fell 29% against last year - selling 115,091 units.

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Micro, Small & Medium Enterprises Development Act, 2006

It’s a good idea to bring a good thing back on to the front burner. Specially when it involves the little guys. Private sector manufacturing is one of the vital elements to the turn around in the manufacturing economy in India. The Indian government plans to encourage small and medium scale enterprises to form clusters to power economic growth.

In a recent press release from the PIB, the Small and Medium Enterprises Development Bill 2005 which was enacted in June 2006 was renamed “Micro, Small & Medium Enterprises Development Act, 2006”. The Act aims at facilitating the promotion and development of small and medium enterprises. One of its primary objectives, according to the press release, is to make provisions for ensuring timely and smooth flow of credit to small and medium enterprises. The earlier concept of ‘Industries’ has been changed to ‘Enterprises’ which have been classified as:

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When State Govts boost Manufacturing Support

When it comes to support for manufacturing in the auto sector few governments in the past could upstage Maharashtra and Tamil Nadu in attracting the cream of manufacturing. The areas around Pune and Chennai have been preferred over the years for their infrastructure and support for the manufacturing industry. Gurgaon on the outskirts of New Delhi is another prime example of this magnetic attraction that established manufacturing locales have for investment. Credit should then be given to enterprising politicians and bureaucrats who have managed to rock the boat just enough to spread wealth into their regions.

The Rajasthan State Industrial Development & Industrial Corporation (RIICO) has plans to establish Bhiwadi in Alwar district on the auto sector manufacturing map. RIICO has already succeeded in attracting significant number of auto component manufacturers. Companies like Caparo Fasteners, Federal Mogul, Hi-Tech Gear, Amtek and Continental Engines have established facilities in Bhiwadi over the past few years. The Rajasthan auto cluster near Alwar is the third of its kind after Pune and Chennai and will produce about 60% of passenger car vehicles, 55% of motorcycles and 25% of tractors manufactured in the country.

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IAF Tender for 126 Fighters - The Offset Clause & Ramifications for India Mfg

In news all over the media today, India floated its largest tender for its much awaited Multi Combat Role Aircraft (MRCA) fighter. Requests for Proposals (RFP) were issued to six suppliers for 126 fighter aircraft in a project that is likely to be worth $10 bilion (Rs 42,000 crores) . The six suppliers / fighter aircraft shortlisted were the Boeing F/A-18E/F Super Hornet, the Dassault Rafale, the Eurofighter Typhoon, the Lockheed Martin F-16, RSK MiG-35 and the Saab Gripen.

The 211 page long RFP details the IAF requirements of technology transfer, licenced manufacturing and life time support arrangements. The RFP is the culmination of a process that began in 2001 when the IAF sent out its Request for Information (RFI) for 126 jets. The RFP mentions that 18 fighters will be bought ready to fly while the remaining 108 will be manufactured under technology transfer in India. India holds an option of purchasing another 64 fighters under the same terms and conditions. The first batch of 18 is to be supplied and incorporated to the IAF by 2012. The remaining 108 are to be manufactured in partnership with Hindustan Aeronautics Ltd (HAL) as part of a 50-per cent offset deal linked to the purchase.

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Nokia: Big Plans for India

I was browsing through the Economic Times today and was surprised to see two very interesting articles on Nokia. The first article to get my attention was that India is now the second largest market for Nokia and the second was that India is second to none as a location for hardware manufacturing for Nokia. Tall praise from arguably the best in the business.

According to the articles, Nokia said on Thursday that India has passed the USA as its second largest market after China. The Finnish giant sold about 100 million phones in April June 2007 alone and has a market share that is close 40% of the global mobile phone business. For more see the Business Week’s slide presentation on Nokia’s successful India product strategy.

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Robert Bosch GmbH - Low Cost Car Supplier?

The low cost car has generated a lot of talk in India with Tata Motors planning to launch their “One Lakh Car” by June 2008 from their Singur Plant in West Bengal. Most of the noise recently has been from political agitators against “farmland acquisitions” for the Tata Motors venture. Once completed however the Rs 1,000 crore small car plant is slated to have a capacity to produce 2.5 lakh cars annually.

Such numbers have prompted suppliers to believe that the small car project offers an opportunity. One of them is electronics supplier Robert Bosch GmbH who are placing their bets on the low price factor with offerings like multiple fuel concepts and better fuel economy. According to this article Robert Bosch has decided to take on the low cost challenge.

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Auto Component Mfrs hit by Interest Rates & Rising Rupee

The auto component industry has had to take a few on the chin these past few months. First it was the rising interest rates which cooled off domestic demand as both two wheeler and car manufacturers eased back on supplies. With the rise in Rupee exchange rate vis a vis the dollar, auto component manufactures have had to endure a setback in exports - a very lucrative area of the business.

Almost all major Indian OEM manufacturers - Tata Motors, Bajaj Auto, Hyundai Motors, Ford India etc - have cut down on orders to the component industry. According to auto component sources orders have been reduced by 15%, however orders from OEMs are down by upto 35%. Significant numbers for the industry which has been investing heavily in increasing manufacturing capabilities given the promising outlook projected in late 2006 and early 2007. Component manufacturers tied to the two wheeler industry and commercial vehicles are affected the most.

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Automotive by the Numbers

Putting a finger on the potential market for automotive is a heady mix of numbers. The overall demand for auto components is estimated to be in the $1.7 trillion range by the end of 2016. However looking for what part of that will eventually come to India is key for Indian manufacturing. The AMP has targeted $25 billion and even that is several orders of magnitude above what India is doing today which appears to be somewhere near $3 billion to $6 billion depending on sources and segment of industry.

Carlos Ghosn, CEO Nissan Motor Co.

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Nissan to Expand India Parts Sourcing

In surely what appears to be a huge opportunity for Indian manufacturing, Nissan Motor Co., Japan’s third largest auto major will be considering more parts from China and India. Nissan plans to increase parts from global sources from 14% to as much as 24% of total parts purchased.

“Frankly, we have no choice,” Ghosn said yesterday. “If you don’t transfer part of your supply to extremely competitive countries, then there is no way you are going to be competitive in the market.”

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