December 03, 2008

Indian auto industry sets eyes on Eastern Europe

BS reported that Indian auto component and tyre companies are making a beeline to set shop in Europe, especially Eastern Europe considering the large and growing market for their products in that region. Another critical reason why Indian auto companies want to enter Eastern Europe is the possibility of labor arbitrage.

Some of the recent moves in this regard are listed below
1. In March 2008, Apollo Tyres announced that it is setting up a EUR 200 million Greenfield venture outside Hungary
2. Amtek Auto will set up a production base which will come in to operation in 2009 in Romania
3. Sundram Fasteners has manufacturing bases in the UK & Germany
4. Bharat Forge & Sona Koyo Group’s operations in Europe extend to France and Germany.

The report cited Mr Sunam Sarkar chief marketing & sales at Apollo Tyres as saying that "The replacement market is around 250 million tyres a year. Replacement and OEM together adds up to around 300 million passenger car tyres a year."

Mr Amit Kalyani executive director at Bharat Forge said that "Europe has the size and scale to become a large market for us and European customers were focused on technology. Today, it is our largest market in the world and also very fast growing market for us. It is not just the number of vehicles but the value of vehicles that are sold in Europe that is significantly higher than rest of the world. Cost is the biggest challenge. Besides wage costs going up, you have tremendous increase in energy costs, tremendous increase in steel which is global. Costs are a killing factor in Europe."

An Amtek Auto official said that "While parts of Europe like the UK and Spain have expensive labor, Eastern Europe is cheaper. While they are 3 to 4 times more than India, they are 5 times less than the rest of Europe."