The Indian automobile industry after a couple of years of slump is now witnessing an unprecedented growth, all in a span of two years. In 2008, amid recession, the automobile manufacturers had to cut down production, adopt cost-cutting measures, lower costs and do lay-offs in order to cope with the decline in automobile sales. Post recession, around mid-2009, the industry started witnessing growth and this year it is back on track and is growing with a huge demand for automobiles from the domestic as well as international markets.
The automobile sector in India accounts for 4 per cent of the GDP and is growing four times as fast as the economy. This growth has also led to the flourishing of ancillary industries like steel. Several countries are also making inroads into the country and be a part of the growth opportunities that this sector currently offers. Media reports suggest that Chinese companies like Shanghai Automotive Industry Corporation has already entered the Indian market with its part acquisition and stake holding in General Motors Indian concern. Another Chinese automobile manufacturer "Foton" is also studying the feasibility of entering the Indian market.
Media reports also suggest that the growing automobile sector in India is now faced with a new hurdle - that is of shortage of automobile parts. More demand and less supply, which has put the automobile companies in for another challenge. How to meet the existing demand? The companies are in a dilemma on whether to use the current supply of automobile parts to deliver existing demand of vehicles or use these parts to manufacture new models. The product life that has reduced over the years has also made the task difficult for automobile companies and they now have to focus on new launches to beat the competition in the market.
Any how, the wait for any new vehicle is getting longer due to the shortage of automobile parts manufactured by Indian suppliers. Companies are unable to cope with the rise in demand and the vehicle delivery has been a long wait to the customer ranging from one month to six months and even to one year in some cases.
The reason automobile companies put for this is that they are not getting enough supply from Indian automobile parts manufacturers and hence the production has to be slowed down. According to experts from the industry, the parts manufacturers have invested half of what they should invest to meet the demand from Original Equipment Manufacturers (OEMs) and they are not ready to invest more in technology and increase the existing capacity of parts production.
On the other hand, the automobile parts manufacturers have a different story to tell. They are apprehensive in investing after being caught off guard in the aftermath of global meltdown in 2008 during which they suffered losses due to decline in sales. They are also vocal of not getting any intimation from automobile companies to decrease the production of automobile parts due to decline in sales.
The current situation has led to an increase in import of automobile parts from Chinese companies, which is now growing at a much faster rate than the exports of automobile components from the India, which is again is not a very good news for the domestic industry.
Possible solution to the current problem is that the parts manufacturers in India need to build their inventory and meet the rise in demand of the OEMs, they need to invest more in technology and infrastructure but at the same time the automobile companies need to ensure that they apprise the parts manufacturers of any decline in sales in advance so that parts manufacturers can reduce the production and sell the existing stock. These companies also need to ensure that earlier payment for parts is made so that the money can be used as investment in new technology and meeting the rise in demand.