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Annual Report 2011-12
:: PRESS RELEASES
Automotive Industry Needs to Focus on
Skill Upgradation, Market Research, Product Development and Customer Interactions: Exim Bank Study
Indian automotive industry, both automobile and component sectors, need to identify opportunities to cut cost, undertake value engineering, and enhance disciplines in production process, particularly during recessionary conditions, says an Exim Bank study. The industry may also use the interim period to upgrade the skills of employees, and enhance the focus on market research, product development and customer interactions. The study proposes an institutional mechanism, under public-private-partnership model, to address various challenges faced by the industry in the years of downturn, with the industry having a lead role to play.
The study was released in the presence of His Excellency Shri S C Jamir, Governor of Maharashtra, at the inaugural function of Second ITM Expo 2009, organised by World Trade Centre, Mumbai on March 5, 2008, at Mumbai. Speaking in the seminar, Shri T C Venkat Subramanian, Chairman and Managing Director, Export-Import Bank of India pointed out that firms face an increasingly competitive trade and production environment that requires cutting down costs to compete in international market. Many firms, especially in the SME sector believe that innovation and R&D are the prime areas for cutting down their expenses, during cyclical slowdown. However, this is not a smart move; rather firms should use innovation to enhance their competitive strengths, Mr. Venkat Subramanian said.
The global economic crisis has created a challenging environment across various sectors, which has forced countries and industries to take a fresh look at their future strategies. Automotive sector has not remained unaffected from such turmoil. The operations of several auto-majors are affected, and cost associated pressures are making them focus vigorously on emerging markets, not only for sourcing components, but also for sourcing vehicle design and vehicle manufacturing. It is expected that the recessionary trends and the resultant growing pressures on margins would further enhance the need for locational shift in manufacturing of automobiles.
The study is of the view that the Indian automotive industry holds significant scope for expansion, both in the domestic market, where the vehicle penetration level is on the lower side, and in the international market, where India could position itself as a manufacturing hub. India's current market share, with less than 5% in global production and less than 1% in global trade also corroborates the potential for expansion in this industry. The export orientation of the Indian automobile industry has grown from a level of 3.5% in 2001-02 to over 11% in 2007-08, and the export orientation of the Indian auto-component industry has increased from 11% in 1997-98 to over 20% in 2007-08.
The study has made an attempt to make a detailed analysis of the competitiveness of India in the automotive space in select markets and regions across the globe. It may be recognised that while India exports automobiles to developed countries such as USA and EU, the automobile exports have been largely confined to few countries in Asia and Africa, and to a limited extent in Latin America. Indian automobile firms are required to accelerate their momentum and increase their penetration in other countries. With the global meltdown and consequent pressure on prices and margins, the US and European OEMs would increasingly look forward to India for relocation of their vehicle manufacturing activity and R&D, in addition to component sourcing across various segments. Indian automotive industry should enhance their quality and augment the emerging business opportunities from USA and EU.
For further information, please contact
Mr. S. Prahalathan,
Export-Import Bank of India,
Centre One Building, Floor 21,
World Trade Centre Complex, Cuffe Parade,
Mumbai 400 005.
Telephone: (022) : 2217 2301,