Auto component manufactures bet big on R&D facilities

With the Indian auto-component industry posting strong double-digit growth numbers, component manufacturers are increasingly focusing on developing their own research and development (R&D) capability to achieve competitiveness on a global scale.

“The Indian market has grown in volumes and technology will be the key driver for growth in the coming years. Automobile companies are investing in technological innovations to cut cost and increase efficiency,” said Anandi V Iyer, India representative and senior advisor at Fraunhofer, an application-oriented research organisation.

The technological advancements are taking place in areas of joining of dissimilar materials to make the body of vehicles lighter, 3D systems for detecting faults in assembly, improving resource efficiency, implementing new welding techniques and putting in place lean production management processes.

Expenditure on R&D in India is just 0.8 per cent of the gross domestic product (GDP), compared to seven per cent in leading economies. The government plans to increase it to two per cent by 2012.

“We will open an R&D centre with 50 people in India and supplement it with a centre in Singapore. This will give us an edge,” said Vishal Lalani, managing director, Indication Instruments Ltd that provides electronic equipment for automotives, the only Indian company in the segment.

He said they recently bought a company in the US to acquire technological capabilities.

Another major component supplier Rico Auto Industries Ltd, too, plans to expand its technological capabilities. “Typically, a company should invest around two per cent of the total sales on R&D. We have an investment of less than one per cent,” said Vivek Hazari, vice-president (global strategy & business development).

Developing R&D facilities has its own problems. Industry executives feel the talent in India is cheap, but lack exposure. “The talent in India is not at par with the global quality, which needs to be exposed so they can think on those lines,” Lalani said.

Goes for expansion
Despite the auto industry reels under the effects of a slowdown, various auto component manufacturers are planning to add capacity.

According to industry insiders, JBM Group, Sona Koyo Steering Systems and Lumax Industries, among others, have firmed up their expansion plans.

Most companies feel the time is ripe to invest in expansion plans so that they have enough capacity when demand rises.

“This is the right time to invest in expansion plans and improve technology so that one has enough at the time growth comes back,” said Rahul Gupta, director, Tech Auto Pvt Ltd, that supplies equipment to two-wheeler and four-wheeler companies.

Jay Bharat Maruti too is investing Rs 500 crore this fiscal on capacity expansion across its existing units in Pune, Gurgaon and Faridabad and setting up new facilities in Chennai, Sanand and Pantnagar.

Nishant Arya, executive director, JBM said: “Post-expansion, the company's production capacity will increase to 1.2 million units per day by next fiscal from the existing one million parts per day.”

Sona Koyo Steering Systems Vice Chairman and Managing Director Sunjay Kapur said the company is investing Rs 100 crore as capex (capital expenditure) this year to expand their existing units.

Lumax Industries is investing Rs 150 crore to set up three greenfield facilities and expanding an existing unit by next year. The new plants will be set up in Haryana, Karnataka and Gujarat.