India-based auto parts manufacturers have done very well in the past decade but a comparatively low productivity is holding India back, according to a World Bank report.
"India has done very well in the past decade but has a distance to travel before it can fully contend with other major global exporters in the auto sector. "...Holding India and South Asia back is its comparatively low productivity in the automotive sector," the multilateral lending agency said in a report titled 'South Asia's Turn Policies to Boost Competitiveness and Create the Next Export Powerhouse'. With more than 19 million jobs connected directly and indirectly to the automotive sector, India is the South Asian leader in that industry, the World Bank noted.
India-based auto parts manufacturers have acquired the technical and managerial skills from leading original equipment manufacturers (OEMs) established in India and a growing ability to meet the needs of disparate and discerning customers in competitive export markets, it pointed out.
The report said a few leading global automotive parts manufacturers have already moved their research and development (R&D) centres to India such as Bosch -- which conducts most of its global R&D with 15,000 workers in Bangalore. Others including BMW, Mercedes, Renault-Nissan, Volvo, GM, Ford and Honda are gaining the confidence to do the same soon. "As they do, there is likely to be further growth and sophistication in the country’s related electronics, machining and tooling sectors, as well," the multilateral lending agency said.
As per the report, India is the world's sixth-largest auto producer by volume, but it owns less than 1 percent of global export markets compared with more than 3 percent for China, 4.5 percent in Korea and 7 percent in Mexico.
"The average auto firm in India exported only 5 percent of its total sales, compared to 16 percent in China," it said. The average labour productivity of 500 automotive firms surveyed in India by the World Bank was less than one-third the level in China, with Pakistan trailing further behind.
Also, relatively few of India's OEMs operate at the industry standard for an efficiency of 100,000 units per model, which significantly trails levels in competitor countries, the World Bank said.
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