Future outlook

Future is always elusive, bright and illuminating. It is a hope for something big and
audacious. Auto Ancillary industry is being touted as the next success story after
Software, BPO and Textiles. Riding on its growth, the Indian auto ancillary industry
has touched the $15 billion-mark, growing at the CAGR of about 30%. Projections by
ACMA indicated that if the market continued to grow at a modest CAGR of 13%, the
industry could touch $40 billion by 2015-16. Exports of auto components had
touched $2.9 billion, growing at a CAGR of 40%. The target is to reach $20 billion by
2015-16.

Almost 80% of India’s exports go to developed, Quality conscious markets such as

Europe, Japan, US. With Maruti and Hyundai, India has already built in a level of
competence to develop Quality components at low cost. India was all set to become
a sourcing hub for cars and auto components which was set to touch $20 billion by
2014. The growth of this industry could be illustrated by the development and the
future plans of various OEM’s. The growth in auto sales volumes has resulted in a
significant improvement in capacity utilisation and operating cash flow for the auto
suppliers.

Investments in the auto ancillary industry were growing at a CAGR of 22%

and the sector had attracted $18 billion in cumulative investments during
the preceding seven years. Motherson Sumi Systems Ltd (MSSL) would
invest US$ 86.38 million-US$ 108 million this fiscal on capacity expansion
and new plants. Out of the total, US$ 64.78 million will be invested in India.
JK Tyre & Industries Ltd has signed a memorandum of understanding (MoU)
with the Government of Tamil Nadu for setting up $325.74 million greenfield
facility at Sriperumbudur. Toyota Kirloskar Auto Parts (TKAP), would set up
the plant with an annual capacity to produce 52,000 engines and 170,000
gearboxes, which would also be exported to Thailand and Argentina. Auto
components manufacturer Steel Strips and Wheels Limited (SSWL) has
bagged export orders worth US$ 41.66 million from French car-maker
Renault. As per the agreement, SSWL will supply 20,000 wheels per month to
Renault. German auto component major and industry technology provider
Bosch India said the group had decided to increase its investment quantum
to US$ 517.5 million from the proposed US$ 450 million.

The Ministry of Heavy Industries and Public Enterprises has envisaged the
Automotive Mission Plan 2006-2016 to promote growth in the sector. It
targets to:

• Increase turnover to US$ 122 billion–US$ 159 billion by 2016 from US$
34 billion in 2006
• Increase export revenue to US$ 35 billion by 2016
• Provide employment to additional 25 million people by 2016.

China continues to be the main competitor in the global auto ancillary

outsourcing market. India’s share of the global auto components trade in
2007 stood at a low 0.4% as against 1.2% in case of china. This is a dynamic
sector of Indian Economy, the first quarter witnessed growth of over 30%
and this quantum seems to suggest that the growth in auto component
industry this fiscal will surpass 20%.