 Car manufacturing is basically assembly of components procured from ancillaries or auto component manufacturers. Nearly 80% of auto components are Sourced by the car manufacturers. This helps in reducing the capital cost needed to setup a car manufacturing plant.
Therefore, auto ancillaries play a key role in maintaining the quality and price of the product. But till the entry of MUL in the Indian car industry, vendor development was hardly seen as a part of automobile manufacturing in the country. With the setting up of auto component manufacturing facilities by Indian promoters, in collaboration with Japanese players for supply to MUL, the country was first introduced to the concept of out sourcing.
With the new entrants planning to start manufacturing facilities with a small capacity base in the country, the role of auto component players will substantially become important over the years.
Presently, some of the luxury car manufacturers import CKD/ SKD kits and just carryout assembly operations in the country. But with strict policy guidelines of the GOI in force, all manufacturers have to opt for 70% indigenisation within five years of starting manufacturing operations in the country. This will further boost the operations of auto component manufacturers in the country.
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