Indian auto ancillary industry-charting growth strategies

Abstract

In 2005, Indian Auto component industry increased its output from a level of US$ 6.7 billion to US $ 8.7 billion, a 30% jump, led by exports which shot up from US$ 1 billion in 2003-04 to US $ 1.4 billion in 2004-05, a 40% growth. This growth was assisted by a strong growth in vehicle sales, which grew by 17% over the last one year with four wheeler sales growing at 23% and two wheeler sales increasing by 16% resulting in a turnover of Indian automobile industry of US $22.74bn. India produced 8.46mn vehicles and was the second largest producer of motorcycles in the world. The Indian auto ancillary industry has also grown at a fast pace, where in the output increased by 13% and exports by 23% CAGR over the last few yearsThis growth has been achieved inspite of the slowdown in 2001. According to a recent study conducted by Automobile Component Manufacturers Association (ACMA) & McKinsey there is potential to grow the industry from the current level of $7-8 billion (Rs. 26,700-32,000 crore) to about $40 billion (Rs 1,78,700 crore) by 2015. The rising clout of Indian industry can be seen in the recent bankruptcy of Delphi where the Indian companies are planning to buy selected assets of the firm. One of the leading Indian firms, 40% of Bharat Forge’s revenue now comes from international acquisitions it did in the last two years. Other industry heavyweights have followed this model of inorganic growth.Recent Acquisitions by Indian Auto Ancillary firms Acquirer Takeover/Acquiree Period Price (Rs m) Country Bharat Forge Carl Dan Peddinghaus GmbH (CDP) 2003 1635 Germany Bharat Forge Federal Forge 2005 395 US Bharat Forge CDP Aluminum technik 2004 355 Germany Sundram Fasteners Dana Spicer Europe 2003 119 UK Amtek Group Western Halver – India 2001 50 India Amtek Auto Assets of Chamundi Moped 2001 300 - Amtek Auto Smith Jones 2002 120 US Amtek Auto Ahmednagar Forgings 2003 180 India Amtek Auto GWK 2004 1210 UK Amtek Auto Zelter GmbH 2005 1650 Germany Ucal Fuel Amtec Precision products 2005 1218 US Motherson Sumi G&S Kunststoff Technik 2005 - Germany Sona Koya Fuji Autotech 2005 271 France MSAT Sars Auto Parts 2005 100 India MSAT Amforge 2005 1,285 India Source: SSKI research