Engineering Services & Manufacturing Prospects
The long term prospects of manufacturing in India look bright in spite of the recent setbacks suffered due to the increase in oil and steel prices. Manufacturing industries have taken a hit in the recent months with thinning margins thanks to the rising cost of inputs. Interest rates tapered demand in the price sensitive domestic automobile and two wheeler industries. Relief seems to be in sight for those flexible enough to exploit the potential of overseas markets.
According to a Frost & Sullivan report in the Financial Express, global original equipment manufacturers (OEMs) are looking at India as a low cost source for their manufacturing;
With some part of each vehicle of the world having some touch of India, the ‘India as a brand in engineering’ is making headway, thanks to global original equipment manufactures (OEMs), who in a catch 22 situation are looking at low cost destinations like India as outsourcing hubs.
The Indian automotive engineering services outsourcing industry is expected to grow at a compounded annual growth rate of 32% (CAGR) by 2012-13. “The industry has generated revenues to the tune of $500-600 million last year and there is $2.2 billion potential outsourcing opportunity in the next two years,” said VG Ramakrishnan, director, automotive & transportation practice, Frost & Sullivan talking at the “Opportunities in the Automotive Engineering Services Market” seminar here.
To be sure the report is talking abou the engineering services industry which is a separate entity from the manufacturing sector. Engineering services are fast becoming the domain of software heavyweights like Satyam who are looking at manufacturing for new growth areas whose Satyam Ventures caters to the automotive engineering services market. In their sights is a piece of the approximately $130 – $140 billion global automotive R&D pie. Potential for smaller players to get involved in this market is an area to be looked at.
The interest for local manufacturing is the opportunity for business once these outsourcing initiatives convert to local manufacture some time in the future. At the moment the large players are in some way already in on the action. Local players are at this stage poised to benefit once global OEMs begin exploring sourcing of parts and assemblies from the Indian market. The SME segment in particular has taken a beating in the recent downturn and it is hoped that the new opportunities will offer some potential for business.
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