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| Bet big on buying parts locally |
| Sohini Das / Kolkata Apr 07, 2009, 00:03 IST |
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Software skills are a big attraction.
Makers of luxury cars are increasingly looking at making India a sourcing hub for components, besides using more local components in cars for the Indian market.
“India is emerging as a major hub for auto components due to competitive pricing, high product quality and high degree of competitiveness in software and engineering”, said a Mumbai-based automobile analyst.
German luxury car maker BMW is likely to sign the first direct sourcing deal with local vendors by the end of this year. Currently, it is evaluating vendors on quality. “We plan to work with Indian vendors in design and tooling, and not mere component sourcing. BMW is looking at the bigger picture,” said a company spokesperson who did not want to give further details at this stage.
BMW currently sources horns for its 3- and 5-Series sedans from India through tier-II suppliers, while components such as handle bars and die casts for its motorbikes are sourced directly. BMW India President Peter Kronschnabl was unavailable for comment.
The company now plans to source engineering services and components that involve casting and forging from India for its worldwide ancillaries requirement. There are also plans to source electrical components, as well as software, for in-car applications. Kronschnabl had earlier indicated to Business Standard that a high-ranking delegation from Germany had talks with Infosys in this regard.
BMW set up an international purchase office in New Delhi last year that is independent of its India operations and reports directly to the company’s headquarters in Munich.
The company also sources directly from local vendors for its Chennai plant, where it assembles around 3,000 units of three- and five-series sedans. Currently, the local content in BMW cars for the Indian market is around 10 per cent.
Among the luxury segment players, Skoda Auto India, a part of the Volkswagen group, is betting big on increasing localisation for its small car, the Fabia, to offset cost pressures. “We now source components like wheels and horns for Fabia from local vendors and are looking at taking this up to over 50 per cent in the next two years. That will give us a definite cost advantage,” said Homas Kuehl, member, board of directors (sales and marketing), Skoda India. Currently, the local content in Fabia was around 5 per cent, he said.
Another German luxury car maker, Mercedes Benz India, is servicing its operations in Japan, Germany and the US with products sourced from India. “We have been sourcing services and components out of India since 1998. On an average, we have grown the sourcing volume by about 10 per cent per year,” said Wilfried Aulbur, managing director and chief executive officer, Mercedes Benz India.
The company sources components like crankshafts and grab handles from India. “We expect growth in sourcing to continue, at least at the historic rate of 10 per cent,” Aulbur said.
Mercedes recently decided to increase the headcount at its Bangalore R&D centre by up to four-fold in the coming years. The centre employs around 200 engineers. Sources in the company indicated Mercedes would increasingly look at sourcing software for its global operations from the India R&D centre. “Certain global projects have been identified and the research centre here works on developing innovative products and technology for Mercedes’ worldwide operations,” said a company spokesperson.
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