Component industry heads for shake-out
Girish Chadha
A shake-out in the Indian component industry is imminent with the entry of international car majors. Predicting a tough time ahead for the sheltered domestic component industry, Otto Hirschbach, partner in international management consultancy firm Roland Berger & Partner GmbH, told The Financial Express that Indian companies should immediately go in for upgradation of technology.Hirschbach, an expert in the automotive and automotive supply industry, is of the view that there would be a great pressure on the Indian auto component suppliers to be in a position to supply quality products of standards demanded by the multinationals. "Only those employing the latest technology will succeed. The preferred strategy for these manufacturers should be to have a joint venture with a foreign company for the Indian as well as the export markets", said Hirschbach, adding, "Striving to achieve world standards and quality will ensure a high level of indigenisation too". "Unless the size of the car market grows,the players which have a small share in the market today will not find it viable. Among the competitors, only those companies which can create economies of scale will survive", he added. For those foreign car majors desiring to come to India, the German management consultant said, "it will be worthwhile to carefully analyse the scenario vis a vis the available partners and the advantages they enjoy, in terms of their existing sales and marketing network. In the passenger car segment, companies like Volkswagen and Ford can go it alone because of their experience in similar markets" "Right now, except for Maruti, other car manufacturers only have a minority share of the market. In the years to come, only those who manufacture a car like the Maruti 800, with the latest design and technology, will succeed"Hirschbach said that India had all the potential to be world player in the automobile market. "Why should it be satisfied with a minor role. In any case, in the future, India can't play a separate role in
the world market", he said "But India has a chance to play a major role only if the players here are willing to play with global rules. Not only should Indian companies ensure high quality standards, they should also join forces and have internal and external alliances to compete with global players", he said. Hirschbach said India needed to further reduce import duties and the time constraints in this process should also be addressed to. There is a need for infrastructure development, particularly the road network and transport system, he added. Commenting on the general perception that many foreign car majors were not bringing in latest technology, Hirschbach said "It is not true that the foreign partner is imposing the technology on its Indian partner. Indian companies know what they are going in for and just don't want to pay for the latest technology". "It is also a question of what the country can afford. The ongoing ventures can't stop but our advice to those going in for new ventures is that
they should not invest in outdated technology". "Worldwide, majority of car manufacturers are using the petrol-injection technology for their cars but it is not the case in India. India needs to take steps in introducing the petrol-injection technology too", he added.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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