2 hrs ago
Operational Fixes Could Free Billions for India’s Auto Suppliers
India’s auto-parts companies have a lot of money tied up in unused or slowly moving inventory.
A consulting report says better factory operations could free some of that money.
Problems include changing production too often, fixing defective parts and moving materials inefficiently.
The report says factories are using only about 75–85 per cent of their available capacity.
Many suppliers are small and medium-sized businesses, known as MSMEs.
These companies need more money to develop software, new materials and cleaner or advanced vehicle technologies.
Most industry leaders said MSMEs are not building these skills quickly enough.
Better operations could help suppliers invest in research, technology and worker training.
The report estimates that higher productivity could also increase yearly sales substantially.
India’s auto-component suppliers hold about Rs 98,000 crore in inventory, the Vector Consulting Group report said.
Operational improvements could unlock Rs 29,000–39,000 crore in industrywide working capital, including Rs 4,000–5,600 crore for MSME suppliers.
Frequent changeovers, quality losses, rework and poor material flow leave plants operating at 75–85 per cent utilisation.
MSMEs represent 80 per cent of manufacturers, but 95 per cent of industry leaders said they are not investing quickly enough in future capabilities.
A 30 per cent productivity improvement among auto-component MSMEs could generate Rs 74,000–88,000 crore in additional annual turnover.
- Who
- India’s auto-component suppliers, especially MSMEs, and the Vector Consulting Group.
- What
- A report identified operational changes that could unlock Rs 29,000–39,000 crore in working capital for India’s auto-component industry.
- Where
- India, including the country’s auto-component manufacturing industry.
- When
- The report was cited on Thursday; no specific date was provided.
- Why
- Operational inefficiencies are tying up inventory and limiting suppliers’ ability to invest in technology, research, product development and workforce training.
Key facts
- Inventory held
- About Rs 98,000 crore by India’s auto-component suppliers.
- Potential working capital unlocked
- Rs 29,000–39,000 crore industrywide.
- MSME working capital opportunity
- Rs 4,000–5,600 crore.
- Current plant utilisation
- Approximately 75–85 per cent of installed capacity.
- MSME share of manufacturers
- About 80 per cent.
- Potential productivity gain
- A 30 per cent improvement could enable Rs 74,000–88,000 crore in additional annual turnover.
- MSME turnover base
- Approximately Rs 2.4–2.9 lakh crore.
Quotes
Ravindra Patki
Managing Partner at Vector Consulting Group
“Unlocking the cash trapped in operations, improving the economics of the existing business, and then channelling the surplus into enhancing capabilities will determine how Indian suppliers grow in the future automotive value chain”
thehansindia.com
“When operational instability ties up working capital and erodes productive capacity, suppliers have less surplus to invest in engineering, technology and product development. The idea is to change that cycle.”
thehansindia.com
Sources
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