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Scope of Indian SME in Automobiles Components Manufacturing

Market Structure of Indian Auto Component Sector

Study of Scope of Indian SME in Automobiles Components Manufacturing


The below paper analyses the situation or condition of SME (Small and Medium Enterprise) that are engaged in the business of auto components manufacturing in India. The investigation provides detail description about past, present and future workings of this industrial sector as well as try to envisage the future prospects of industry. The objective of this study is to analyze the auto components SMEs performance and to evaluate present opportunities plus challenges for them in India.
The literature part of this dissertation provides explanation regarding background of automotive industry along with several investments it has made in recent years. The researcher has given details about auto parts clusters presented in the country, in order to show readers that how such clusters work in cooperation and share their information for increasing competitiveness of industry. Moreover, the secondary material provides knowledge regarding governmental support available for the automotive SMEs and factors affecting its success whether negatively or positively.
The qualitative research method has chosen for data collection in this investigation. The investigator has taken the interviews of SMEs owners, for the reason to understand as well as satisfy the aims plus objectives of the study. Furthermore, in order to analyze the results of collected data, the method of thematic analysis is being used. The conclusion part of this research describes that there is a vast scope available in the sector of automotive business. The clusters are helpful for the sector in breaking down investments into small riskable steps. Moreover, the summary details that there is an effective and adequate support offered by Indian government for the development of automotive SMEs and due to this reason the industry in gaining competitiveness in the local as well as overseas market.

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Indian Auto Component Industry

In recent time, one of the most important ancillaries to the Indian automobile industry is Auto Component Industry. In last few decades, it has been noticed that the major automobile markets like Europe, North America, and Japan are facing a significant downfall in their sales. On the other hand, countries like China and India are growing at a very fast rate. This has been possible because of the leading surge of Auto Component industry in these countries. It has been seen that many Auto Component Manufacturing ventures has merged in the Indian Market, leading to a great economic growth (Bharat Book Bureau, 2012).

The Capacity of the Auto Component Industry to produce a full variety and range of quality standard products has caught the eye of the entire foreign as well as the Indian market. According to a survey, this industry has been experiencing a high growth rate of 27 percent in last few years, and is expected to grow more by 13 percent in the coming few years.
As per a survey done in October 2012, the Indian Auto Component industry has been valued at US$ 30 billion, and expected to be valued as US$ 100 billion by the year 2020. This industry is growing at a fast speed of about 14 to 18 percent every year. The retail market of this industry has been valued at Rs 600 cores and will ever son witness a high jump in the domestic market (IBEF, 2012).

1.2. Goal of the Research Paper

The main goal of this research paper is to analyze the SMEs in the auto Component manufacturing sector for past, present and future. The performance of all the small and medium enterprises in the Auto Component sectors in the terms of opportunities, scope, and challenges has been evaluated in this paper. For a strong respond for the study paper, four research questions have been identified:

  • Evaluation of all the opportunities in SMEs Auto Component sector.
  • Identification of the challenges in the Auto Component sector.
  • Determination of the reasons for negative exposure of the SMEs.
  • Evaluation of the future Auto Component Manufacturing SMEs.

1.3. India as a Global Auto Hub

A positive organizational and business environment, government policies, availability of quality workforce, proper resources, and a constant and a stable outlook towards the industries, had made India a global hub for all the international manufactures and set their industries in India (IBEF, 2012). There are many benefits reaped by the Auto Component Manufactures. These benefits are as follow:

  • An Automotive component subsidiary of Piolax of Japan, Piolax India, Andhra Pradesh, has inaugurated its first Indian facility at Sri City multi-product Special Economic Zone.
  • 100 service centers have been launched by Bosch Automotive Aftermarkets in North India. Among the entire segment of Vehicular repair and unit repair, these centers provide service to all the multi brands.
  • A joint venture of David Brown and Bharat Forge, David Brown has opened its first assembly facility and gearbox service in Tamil Nadu.
  • For automotive sector, Panasonic Carbon India Co Ltd have entered in the leading acid battery sector this 13,000 cores battery sector is growing at just the double the rate in the automobile sector.

1.4. Market Structure of Auto Component Industry

The Auto Component Industry had grown at a compound annual growth rate of 14.6 percent during the year 2007-2011. As per the Automotive Component Manufactures Association., it is expected that this will further grow to US$ 113 billion by 2020.
The Involvement of Small and Medium Enterprises (SME), has made Indian Auto Component had one of the India’s largest Sector. In terms of number of buyers, Small and Medium Enterprise sector is the top 3rd leading sector, attracting online traffic on Among all the Indian suppliers registered on, auto component sector is the top five categorized sector and contributes about 11.8 percent to the entire pie. Products such as pumping accessories and equipment, and pumps take about 8.1percent buy lead in the slot, followed by products such as, bolts and nuts as the second slot in the list (Indian, n.d).

1.5. SMEs and Indian Auto Component Sector

According to the Executive Director of Automotive Component Manufactures Association, Vinnie Mehta, the automobile sector is growing at a very rapid speed and the margin of the Small manufacture Sector in this pace is getting very thin. Despite of facing a lot many challenges in the auto component sector, the SMEs by the year 2020 will reach $ 110 million (IndiaMART SME news., 2012).
In the financial year 2009-2010, the auto component sector sixe was 14 percent and the export was at $5.25 million. This industry is continuously growing fast at a speed of 14 percent. The auto component sector is vertically growing; however, the margin of the auto component is very fast becoming thin. There are few factors which are impacting SMEs in this these sectors. Factor such as cost of capital, easy access to the capital, availability f the skilled resources, and proper infrastructural facilities are greatly impacting the SMEs in this field. What needs to be done is understands and increasing the scale of operation, which in return will strengthen the level of production.

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1.6. Challenges witnessed by the SMEs in the auto component sector

There are few key challenges impacting the growth of the Auto Component SMEs. The foremost factor that is impacting the growth is the access to capital coupled with the cost. The leading rates in the markets such as Japan, US, Europe etc vary between 0-3 percent as compared to Indian SMEs, which is to 17-18 percent. For SMEs there is a strong gripping problem being faced like absorption of technology, availability of manpower and infrastructural challenges. Most of the SMEs in India are a one-man-army and therefore, involvement of the management is a big issue (IndiaMART SMEnews., 2012).
Again if we see, in China all the big manufacture fake products. A lot many challenges are being faced by the Indian Auto component sector because of China. Also, the investment in the quality and the investment most of the SME does not want to invest much. This is just because of the assumption that by investing more there may not be much return. They first want a better pricing and then want to sell. Until and unless they do not produce goods and service well and have good quality machinery they’ll not have good prices. It is a type of cycle in which most of the companies get in (SME Times, 2012).

1.7. Scope of SMEs in Auto Component Sector

From the post 1990 era these are emerging at a very rapid SPEED. Now, the Indian Auto component manufactures are supplying auto part at national as well as international level, including General Motors, Ford, Honda, Feat, Daimler Chrysler, and Audi. Also, the auto Component Manufactures such as Visteon, Delphi, Caterpillar and Cummins has started outsourcing products from the Indian SMEs, which provides a very good competitor prices as well as high quality products (Aggarwal, 2008).In future, India is expected to become one of the world’s third largest Auto components Market. A considerable change has been notices in the past few years and a very clear jump can be observe in the overall sector, especially in the investor sentiment.
According to IndiaMART, the Inside marketer are in the opinion that the changing attitude of the investor in one of the biggest reason why there is a very positive growth of the SMEs Auto Component Market. A 63.6 Percent SMEs Auto component companies hiked a jump in the sales and a hike of 64.2 percent was there in the output capacity in year 2011. Today in a big way, a global downfall is taking place in the productivity of various sectors. In this face of Global meltdown, Auto Component sector is putting forward a lot many attempts to robust the performance. The Sector has proved to be a big witness for demand and is expanding in every possible way (IDC, 2008). The manger of Conveyor Koncepts, Mohit Mehta, said, “More is the demand going up in the auto Component sector, the more is the investment pouring. Economies has faces a meltdown the industry, but is out of the crises now. In future the industry is expected to grow at a very good rate. The Auto Component sector has planned to output passenger vehicle in India in year 2020-2021 at a projected cost of 9.7 million units, and the compounded annual rate is 13 percent. As the demand of cars in India is rising at a very fast rate, Auto Component SMEs has a very positive attitude for the coming days as they will receive a huge investment from venture capital and equity funds. The Growth for the SMEs in Auto component sector is very good, and in the coming future this sector will report a very positive a good result.

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