Indian auto firms are collaborating with foreign firms which will not only help the former to innovate new products but also assist them to upgrade the existing ones

After combating recessionary pressures that took a toll on profit margins of major automotive firms and vendors operating in the country, the Indian auto sector is raring to scale new heights. With healthy growth anticipated in the coming years, big and small players in the auto sector are developing business strategies to tap the potential of the domestic auto market further. As a part of the business strategy, most of the auto firms, including auto manufacturers and auto ancillary companies, are forming strategic alliance with foreign companies to bolster their business.

In this context, Rajeev Kumar, managing director of Reliable Auto Expo, a small-sized auto ancillary manufacturing unit in New Delhi, says, “Even foreign firms are eager to join hands with Indian companies knowing the immense business opportunities which are there for the taking. Forging alliances will also lead to innovation of new products which is extremely crucial to retain clients. Moreover, the tie-ups will help Indian firms to carry out extensive R&D activities and upgrade their existing products.”

 JVs with foreign firms

Domestic pressure die casting firm CRP India has collaborated with North American die casting firm Twin City Die Castings Company (TCDC) in order to expand its capacity and set up new production facilities at its existing plant near Chennai. The total investment for the same is Rs 100 crore and CRP will have 51% stake in the joint venture (JV) while TCDC will hold the rest. Of this amount, Rs 40 crore has already been spent with the equity raised from the JV partners. According to sources monitoring the progress of the JV, the alliance will help CRP to expand its market while the same will assist TCDC to acquaint its consumers in Asia, Europe and China with die castings manufactured in India.

“JVs will not only help Indian firms to scale up production and get the requisite funds for expansion or setting up of new facilities, but also enable foreign firms to understand the distribution network in India and the working of the local business environment,” comments Peter Chettiar, managing director of Sharon Narrow Fabrics, a mid-sized auto ancillary manufacturer in Mumbai.

There have been a number of other JVs that have been formed in recent years. Wabco-TVS, after severing ties with the TVS group has joined hands with Belgium-based Wabco Holdings to manufacture advanced braking, sophisticated air suspension and electronic vehicle control systems. The move is seen as part of the company’s initiative to go beyond the manufacturing of conventional braking system. Apart from truck manufacturers, the company is also shifting its focus on supplying its components to makers of luxury cars like BMW and Mercedes Benz.

Similarly, Amtek Auto has tied up with Sumitomo Metals, a subsidiary of Sumitomo Corporation of Japan to manufacture forged crankshafts which move pistons in car engine whereas Hero Motors has collaborated with BRP-Powertrain (Austria) for manufacturing automotive power transmission in India. In view of the recent trend, analysts are of the opinion that more Indian firms may join hands with foreign counterparts in the near future.

Arup Choudhury