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NASSCOM: IT to boost Indian auto component industry

Posted: 21 Dec 2007     Print Version  Bookmark and Share

Keywords:auto component industry  SME segment  IT adoption 

NASSCOM, the premier trade body of the IT software and service industry in India, has released a report on 'IT Adoption in the Indian Auto Component Industry.' The report aims to understand the IT adoption challenges faced by manufacturing industry firms, especially in the SME segment and bring in an understanding of IT adoption thresholds, challenges and processes in different segments of the Indian auto component sector.

These findings are being utilised to develop IT adoption strategies based upon the manufacturing capabilities of different segments of the auto component Industry with an objective of enabling the auto component firms to align their IT investments with business objectives, while simultaneously enabling IT firms to develop solutions specific to the needs of the different segments of the industry. The report also recommends the action agenda for various stakeholders to help the auto component industry achieve its growth target of Rs.157,839.88 crore ($40 billion) by 2015.

Speaking at the release of the report, Kiran Karnik, president, NASSCOM, said, "NASSCOM is deeply committed to the development of a vibrant domestic IT market and our Cluster Development Program is a strategic part of NASSCOM's Domestic IT Market initiative. The main objective of the Cluster Development Program is to increase IT adoption in the SME segment across vertical industries including auto components, steel, textiles, general manufacturing etc . Increased IT adoption in the SME segment not only enables increased competitiveness for the user industry, but it also creates new markets for the Indian IT industry."

Given the huge heterogeneity of this segment, it is important that the right clusters are identified so that early successes can provide a 'lighthouse' effect. The strong performance of the Indian auto-component sector in the past few years has led to rightfully considering it as a sunrise sector of the Indian economy. We see IT playing a critical role in helping this sector achieve its global aspirations by enhancing their productivity and enabling these firms to seamlessly integrate with their global and domestic customers and suppliers.

"While this report intends to set an agenda for auto component firms, IT companies and other stakeholders such as the government, industry bodies and academia to work together to accelerate the adoption of IT in the auto component sector, following reports will aim to achieve the same results in other sectors, therefore furthering the growth and development of the domestic market", he added.

Dr. Krishnamurthy, chairman, National Manufacturing Competitive Council, said, "The manufacturing sector in India is critical to sustaining the growth of the Indian economy. After agriculture, it perhaps provides the largest direct and indirect employment in the country. The global manufacturing industry is on the threshold of important transformation and the trend to source products from low-cost countries is gaining momentum. India with its past experience, large pool of skilled manpower, established raw material and supply base and ever-growing domestic volumes has the potential to emerge as a major manufacturing hub for the global market.

Over the last few years, some sectors of the Indian manufacturing industry have shown a stronger growth trajectory than others and are comparable to their global peers. One of these sectors is the Indian auto component sector and for the Indian auto-component industry to achieve its ambitious targets of becoming a Rs.157,839.88 crore ($40 billion) industry by 2015, it is imperative that it transform its competitive advantages from cost to value. IT has the potential to act as a force multiplier for the Indian auto-component industry. However to realise the full benefits of IT investments, the focus has to shift from spending to smart spending by ensuring that business processes critical to a firm's competitiveness are IT enabled. I greatly appreciate NASSCOM's initiative to prepare this report and believe that the report will result in collaborations between the IT industry and the auto-component industry for the mutual benefits of firms in both industries", he added.

Deep Kapuria, chairman and managing director, Hi-Tech Gears Limited said, "Since the Mid 80's the Auto and Auto Component Industry has evolved itself to be at forefront of manufacturing sector. The cost pressures in developed markets, lead to outsourcing of manufacturing auto components. This, as a result, has created immense opportunities, which the sector has managed to capture in a small way, however, larger opportunities lie ahead. The opportunity of growth in domestic area is still to fructify, thus the industry put together for itself a 'vision' along with the Government as it realises that the auto industry is a locomotive for the growth of the country."

"The Auto Component Industry has the potential not only to transform manufacturing but to provide employment for large set of trained manpower which will be available because of our demographics. Further the Globalisation of the Auto industry has enabled the Industry to import world class methods of Supply Chain Management. The transformation has seen the sector coping up with global quality and cost. Some players in the sector are now confident to step out and establish global foot prints," he further added.

The global auto component industry is expected to touch Rs.7,497,390 crore ($1.9 trillion) by 2015, of which around 40 per cent Rs.2,762,197.90 crore ($700 billion) is potentially expected to be sourced from low cost countries like India. While India?s share of the global auto components trade of Rs.730,009.45 crore ($185 billion) is only 0.4 per cent currently, India is estimated to have the potential to become one of the top five auto component economies by 2025.

According to the Auto Component Manufacturers' Association (ACMA), the Indian auto component sector generated sales of about Rs.59,189.96 crore ($15 billion) in fiscal year 2006-07, including Rs.11,048.79 crore ($2.8 billion) worth of exports. The industry has been experiencing a high growth rate of 20 per cent over the period 2000-05 and is expected to grow at a CAGR of 17 per cent over the period 2006-14. Similarly, while growth rate of exports has been 25 per cent during 2000-05, the growth rate is expected to grow by a CAGR of 34 per cent during 2006-14.

The report is based on a comprehensive national level primary research of the Indian automobile component manufacturing industry which covered a sample size of 158 (10 qualitative and 148 quantitative) interviews including small, medium and large automobile component manufactures across the key automobile manufacturing clusters in Delhi, Mumbai, Chennai, Pune and Bangalore.

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