Srivatsa Ram, MD, Wheels India Limited | Photo Credit: Special Arrangement
Global auto giants are looking at markets that offer scale and are eyeing India as a source of components, said Shreevatsa Ram, managing director, Wheels India Ltd, in an interview. “Recently, some of them have also set targets for sourcing from India and so clearly there is an opportunity for Indian manufacturers,” he added.
Cost difference was no longer the sole criterion in valuation, he said, adding that it was the difference between now and earlier instances when India was considered as a sourcing location. “For long, global players looked at India from the price discovery process and whether India was price competitive. The cost difference is not huge now (due to normal commodity prices globally), except where a high proportion of labor is involved, there is a large arbitrage,” he explained.
He said global auto companies are now looking at India “much more seriously as a strategic sourcing destination”. “The negotiation rate is currently high. The confidence in Indian companies and their credibility in delivering is very high and the reality of buyers wanting to do business with Indian manufacturers is now very high. Didn’t give an estimate, he said, “These could be in the billions of dollars.”
Existing suppliers to original equipment manufacturers and customers were firms that grew the size of their business operations based on track record. Without naming the companies, he said such suppliers “have received new orders as a reward for their past performance. This is a big boost for Indian manufacturers as they earned additional business through high-quality performance in the past”. Is.
‘risk appetite’
The challenge was no longer the opportunity but the risk-taking ability that Indian companies would need to take advantage of the trend. “Global auto companies are throwing big numbers at Indian firms and the orders could be huge. To fulfill these orders arising out of the India sourcing strategy, Indian firms would have to make huge investments of ₹200 crore or ₹400 crore for just one customer. While the opportunity is huge, the question is on whether a customer has to make a huge capital investment and whether Indian firms have the risk appetite to make the big investment – as the Chinese did years ago – and give themselves the opportunity to grow their businesses. , especially in a scenario where interest rates are high and there is talk of a global recession.
The second challenge is talking about a global recession or even a recession in some parts of the world. “There is pent-up demand and back orders in the auto space. But the risk in the environment is high due to recession and high interest costs, and they need to be considered before making large investments. Things are relatively good for India. The Indian economy is in better shape, even if growth is likely to be lower next year.
On the rise in commercial vehicle (CV) sales after a prolonged lull, he said, “The CV sector has not recovered the way it usually does after a recession. Higher interest rates and higher fuel costs have put pressure on transport operators in terms of their margins.
He proposed a separate fuel rate for vehicles transporting cargo. “Though it may be difficult to implement, I am of the view that there should be subsidized fuel rate for goods transporters as it is an essential commodity.”
He also said that the pace of road development projects of the government has been slow this year. “Other elements such as inflation, rising commodity prices and project overruns may have led to this low investment. This reflects on the recovery of the CV sector. Generally, higher infra spending is seen in the year before elections. Basic With the government’s stated mission of making significant investment on infrastructure, hopefully we will see this next year.If it does, CV should do well next year.