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Automobile Ancillary Industry Analysis

8813 words - 35 pages

Introduction"......The biggest auto ancillary company in the world, Delphi, had sales in 2004 of $28.7 billion, yet lost $36 million. Its main competitor, Visteon lost a mammoth $1,499 million. Even as American auto ancillary giants struggle, Bharat Forge has enjoyed revenues and profits rising at 30 per cent annually, has taken over a German company CPD, and become the second biggest forging company in the world. Even a medium-sized Indian company, Amtek, has taken over GWK (UK), New Smith Jones (US), and may take over Sigma (UK).Size made the dinosaurs look pretty powerful for a time. But, as the saying in boxing goes, "the bigger they come, the harder they fall." The dinosaurs became extinct because they could not adapt to a changing environment. The cockroach could, and so flourished while the dinosaurs disappeared..."(from The Dinosaurs Were Big Too by Swaminathan S. Anklesaria Aiyar)The Indian automotive components industry is indeed one of the best "global Indian takeover" stories ever. Posting audacious growth rates in an industry where the largest player has not so long back filed for bankruptcy, the sector is slated to be one of the growth drivers of the Indian economy. Single-handedly it has made Indian manufacturing one of the nerve centers of the global auto industry. Not only have these companies proved their ability to meet (and indeed exceed, as the series of Deming Awards has shown) global standards in manufacturing, it is also expanding aggressively on a global level. In the following pages we present an analysis of the environment within which the industry functions, the forces that shape its structure, and the competitive dynamics which separate the best from the rest. This report attempts to understand the circumstances and developments which led to Indian auto ancillary manufacturers attaining their current pre-eminent status among global automotive components manufacturers.Evolution of the global automotive components industry and current trendsThe fortunes of the global automotive components industry are inextricably linked to those of the global automobile industry, and quite naturally so. As a detailed discussion of major forces shaping the auto ancillary industry later in this document shows, customers (i.e. automobile companies) play a major role in determining the structure and dynamics of the auto ancillary industry. This is why an understanding of the challenges the automobile industry faced and its responses to them is crucial in any analysis of the present structure of the automotive components industry.The auto industry is often thought of as one of the most global of all industries - buffeted by forces of demand and supply, growth and recession, and competition from all over the world. Its products have a worldwide reach but (at least in the present) it is dominated by a handful of large conglomerates that wield tremendous power over suppliers.Traditionally dominated by the Triad of developed regions (the United...

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