The Indian Auto Industry - poised for further growth.

The Automotive Mission Plan 2006-2016 calls for automotive sales to increase from $35 billion to $145 billion by 2016. This means that the current turnover will be multiplied by five times, and the industry's contribution to the GDP would increase from 5 per cent e to 10 per cent. Employment would increase three times, and exports should go up nine times.

According to KPMG's India Automotive Study 2007, if India has to meet the official targets set by the Automotive Mission Plan, leading Indian auto companies feel that the government will have to provide more support and Indian companies themselves would have to raise the bar.

The Indian auto industry has been growing at a frenetic pace. During 2006-07, it produced a wide variety of vehicles including over 2.06 million four wheelers (passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps), and over 9 million two and three wheelers (scooters, motor-cycles, mopeds, and three wheelers) in 2006-07. Growth continued apace in 2007 and cumulative growth of the Passenger Vehicles segment during April-August 2007 was 13.60 percent. Passenger Cars grew by 13.50 percent, Utility Vehicles by 10.10 percent and Multi Purpose Vehicles by 24.40 percent in April-August 2007 compared to the same period last year. Simultaneously, automobile Exports continued to grow at 18.96 percent during April-August 2007 over the same period last year.

Companies interviewed by KPMG expressed the view that this rate of growth would be difficult to achieve while infrastructure investment remains relatively low and senior auto executives are also concerned about India's eroding cost advantage, the increasing challenges of rewarding and retaining talent, the pace of consolidation in some parts of the industry, and about the challenge companies face in building Indian auto brands.

Labor costs are becoming a big concern in an economy that historically was reliant on low wage rates. Companies now report that a shortage of talent is driving up rates and increasing staff turnover. Many companies believe that Indian manufacturers will have to work hard to increase productivity as labour costs rise.

Companies say that government needs to move faster in building domestic and export infrastructure, and in encouraging research and development investments. And one concern voiced by many companies was the fear that India may slip behind competitors in creating an alternative fuels sector.

Despite these concerns,many executives interviewed by KPMG professionals were optimistic about India's potential as a high quality manufacturing nation, and some believed that India should be able to build a range of world-class auto businesses in the next decade.
Source:-Machinist.in