By IANS
New Delhi : The $34-billion Indian automotive industry may fail the target of quadrupling sales by 2016 if investments are not made in infrastructure, says a study by global consultancy firm KPMG.
The Indian government’s Automotive Mission Plan calls for sales to more than quadruple to $145 billion by 2016, and for auto sector employment to grow to 25 million from the present 15 million, the report points out.
“Companies interviewed by KPMG expressed the view this rate of growth would be difficult to achieve while infrastructure investment remains relatively low,” said KPMG’s “India Automotive Study 2007 – Domestic Growth and Global Aspirations”, released here Tuesday.
“Senior auto executives are also concerned about India’s eroding cost advantage and the increasing challenges of rewarding and retaining talent, about the pace of consolidation in some parts of the industry, and about the challenge companies face in building Indian auto brands,” the report said.
“The turnover rate is already almost 20 percent a year in many management levels,” the report quoted chief financial officer of a leading auto component maker as saying.
“Unless companies can learn to retain people for longer (periods), all the benefits of having talented people available will be lost,” the CFO added.
Many companies believe that Indian manufacturers will have to work hard to increase productivity as labour costs rise. Yet automating India’s production lines would require more capital than small companies can raise, the report said.
“Indian auto companies can’t just imitate the developed country model, with high productivity through massive automation. It is still too costly to attempt that,” CEO of Kalyani Lemmerz, an auto component company, was quoted as saying in the report.
Above all, companies are concerned about the ability of India’s carmakers to build their brands, the report said.
According to KPMG, its professionals interviewed 40 CEOs and CFOs from different segments of the Indian automotive industry during 2007, asking them for their own forecasts of how their sector would perform over the next few years.