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Auto parts makers eye China firms

BS Corporate Bureau

At least fifty Indian auto component manufacturers are looking at acquiring Chinese firms after the government there assured them of management control even if a five per cent stake is acquired.

Auto Component Manufacturers Association vice-president Deep Kapuria said that, during a recent visit of an ACMA delegation to China, the Indian businessmen were told that the Chinese government was offering management control in several component manufacturers to foreign firms at a consideration of 5 per cent equity investment in these companies.

Several auto component manufacturers who made brisk business at the cost of the growth of an "assembly-line" automobile business in China are now faced with the threat of closure as China moves gradually towards a regulated WTO regime and foreign companies operating in that country are demanding quality components.

"The Chinese industry has immense potential. It is worth investing in it," Kapuria said.

"The importance of the Chinese market can be gauged from the fact that the country makes more than 10-times the total commercial vehicles produced in India, and 10 times more two-wheelers.

But the Indian industry was not getting carried away, he said. We will be cautious and may take a year or a little more to concretise our plans, Kapuria said.

The target companies in most cases would be those manufacturing components for the local motorcycle industry, with a special focus on accessories.

He pointed out that several auto component manufacturers in China have reduced the size of the business or have frozen salaries and diversified into other non-related businesses to keep themselves afloat. Indian companies, on the other hand, enjoy employee cost benefits apart from having an edge over these companies in terms of quality and technology.

The 15-member ACMA delegation also went to Japan, where, Kapuria said, ACMA was conferred the `Outstanding Partner' award 2002 by the Japan External Trade Organisation.

The award had been given for ACMA's contributions to Jetro's activities in India, especially for the development of auto component suppliers. Jetro is the official trade and investment promotion organisation under the Japanese ministry of economy.

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