India's Auto Dream At Risk.....

India's eroding cost advantage and lack of government support may pose a threat to the country's dream of becoming a global hub for automotive industry, research firm KPMG reveals.

In its latest report on Indian auto-manufacturing sector, KPMG said despite Indian economy beating all growth projections, manufacturing companies are themselves skeptical about coping up with this rapid transition. The research firm, which interviewed 40 CEOs and CFOs from the Indian automotive industry, said that senior auto executives are concerned about India's eroding cost advantage and the increasing challenges of rewarding and retaining talent.

"There are also some concerns expressed about government commitment to building the sector. Labour costs are becoming a big concern in an economy that historically was reliant on low wage rates. Companies now report that a shortage of talent is driving up rates and increasing staff turnover," KPMG said.

Indian Automotive industry is worth around 34 billion dollars presently and contributes nearly five per cent to the country's GDP with a capacity to produce 15 lakh vehicles per annum. It generates employment for more than 13 million people directly and indirectly.

The Automotive Mission Plan (AMP) targets to quadruple sales to 145 billion dollars by 2016, and generate employment for 25 million people.

"The turnover rate is already almost 20 per cent a year in many management levels. Unless companies can learn to retain people for longer, all the benefits of having talented people available will be lost," KPMG quoted CFO of a leading auto component maker.

KPMG said the companies surveyed were apprehensive about achieving the targeted growth as investment in infrastructure remains relatively low. Manufacturers believe that modernising production line to match global standards would require huge investments, which a number of small manufacturers can not afford, it said.

Auto makers identified building brand identity and competiton with globally established players as the biggest challenge to India's credentials of becoming a global automotive manufacturing hub.

The report also said a number of companies raised doubts over the Indian government's ability to recognise the size and scope of the challenge of building a manufacturing sector of global scale.


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