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India spells opportunity for British auto firms

Britain's automobile industry is increasingly looking at India as a fast-growing market ripe with opportunities.

india Updated: Jan 11, 2006 19:40 IST

Britain's automobile industry, hit by declining sales in the wake of high crude oil prices and dearer borrowing costs, is increasingly looking at India as a fast-growing market ripe with opportunities.

A slew of companies are exploring prospects of joining hands with Indian firms to outsource a part of manufacturing activities to take advantage of the low cost and high technology expertise in one of Asia's fastest growing economies.

In the last three years, there have been 36 partnerships between Indian and British automotive companies, making it one of the key industrial sectors in enhancing the bilateral trade volume between the two countries.

"India is an opportunity for us. The country has a very vast and capable engineering population for research and development in the automobile sector," said Simon Wakefield, managing director of Contechs Consulting.

Essex-headquartered Contechs Consulting is one of the 50 British companies that are in India for the annual high-profile automobile expo, which will start Thursday and see participation from over 1,000 companies representing 22 countries.

"It is quite possible to get work done in India at a significantly cheaper rate than in Britain. Outsourcing will help us become competitive by developing high-quality products and jointly target other potential markets," Wakefield told IANS.

Contechs Consulting, a vehicle designing and engineering company with a worldwide client base, has been outsourcing a part of its technology jobs to India for the last two years.

Analysts say outsourcing of various functions by British companies to India is set to gather pace in the days ahead as annual sales of new cars in Britain fell for the second consecutive year in 2005.

The decline is likely to continue through 2006, according to the auto industry body, Society of Motor Manufacturers and Traders (SMMT). The sales are likely to fall by 2.7 percent in the next 12 months.

This will come on the back of a decline of five percent in sale of new cars in 2005 due to the general economic slowdown and anaemic household spending.

The automotive sector in India, on the other hand, has become a significant contributor to the exchequer with a four percent contribution to the gross domestic product and nearly five percent of the total industrial output.

The car market in India, one of the fastest growing in the world, grew by a better-than-expected 18 percent in the financial year ended March 31, 2005 as rising disposable incomes and cheaper borrowing costs lured middle-class buyers.

Helped by a large pool of skilled and cheaper professionals, India is also fast becoming a global hub for auto parts manufacturing.

According to McKinsey, India's auto components market could grow from roughly $9 billion in sales now to as much as $40 billion by 2015.

Mahindra and Mahindra, one of India's largest automobile companies, last week acquired Britain's largest automotive forging firm Stokes Group Limited as part of the firm's strategy to expand global footprint.

"There is lot of synergy between British and Indian auto manufacturing companies," said Paul Butler of the Advanced Engineering Cluster, which provides collaborative opportunities to companies in the West Midlands, Britain.

"India is not just about cheap labour. Lot of innovative, high quality work is happening there. Many European, American and Japanese companies are already doing work in partnership with Indian companies.

"British companies are now beginning to explore Indian market as the country's economy grows at a rapid pace. The idea is to jointly design and develop new products and share intellectual property," added Butler.

Experts say Britain also has lots to offer to the Indian automobile industry as an international player.

In addition to comprehensive component supply capabilities, Britain has particular strength in all aspects of performance automobile engineering stemming from its globally leading position in motor sport.

First Published: Jan 11, 2006 19:40 IST