5th Largest
Commercial Vehicle Market in the World
Auto Policy of the Government of India - Vision
Policy Objectives - This policy aims to promote
integrated, phased, enduring and self-sustained growth
of the Indian automotive industry. The objectives are
to :-
Exalt the sector as a lever of industrial growth and
employment and to achieve a high degree of value addition
in the country;
Promote a globally competitive automotive industry
and emerge as a global source for auto components;
Establish an international hub for manufacturing small,
affordable passenger cars and a key centre for manufacturing
Tractors and Two-wheelers in the world;
Ensure a balanced transition to open trade at a minimal
risk to the Indian economy and local industry;
Conduce incessant modernization of the industry and
facilitate indigenous design, research and development;
Steer India's software industry into automotive technology;
Assist development of vehicles propelled by alternate
energy sources;
Development of domestic safety and environmental standards
at par with international standards.
Companies can take advantage of the tremendous prospects
in the automobile sector combined with big tax benefits,
grants, subsidy offered by the Indian government by setting
up an in-house R and D centre.
We can help you with all the formalities required to set
up in-house r and d centre including project report, tax
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in automobile industry.
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Internationalization of technologies, R & D and production is becoming a common phenomenon for attaining and
retaining global competitiveness. India can and should take advantage of its comparative advantages over other
developing countries, particularly in the context of our need of promoting exports of high value added products
and services. There is a need for structured documentation of our technological and industrial capabilities and
strengths, showcasing and demonstration of technology export capabilities and facilitation of technology transfer
and trade at the firm level.
The Role of Government in Machine Tool Sector:
SME trans-nationalization can take different forms - including exporting, alliances /mergers across national
borders, technology transfers and the establishment of operations or offices in other countries. The process is
often sequential with clearly identifiable stages –
i. Exports of products (directly, through agents or buyback arrangements)
ii. Alliances - sales via licensing or franchising, technology transfers
iii. Foreign Direct Investment (FDI) including overseas mergers / acquisitions
This approach has the advantage of minimizing risk and investment required at each stage of growth while
allowing for learning and experience gathering before further expansion. The benefits and challenges at each stage
of trans-nationalization is summarized below –Importance of the machine tool industry
The machine tool industry is universally recognized as a strategic industry for driving industrialization of a country.
Known as a ‘mother industry’, it produces capital goods such as lathes and machining centres for a broad spectrum
of the manufacturing sector. The demand for machine tools is largely from the automotive (including ancillaries
and component manufacturers), capital goods and consumer durable sectors. Intermediate goods sectors such as
auto ancillaries, bearings and electronic components are also important sources of demand.
GLOBAL MACHINE TOOL INDUSTRY
3.1 Industry characteristics
Ø Highly heterogeneous:- It is estimated that there are over 3000 different types and sizes of machine
tools. The machine tool industry is made of mostly small and medium sized firms. In Germany, for
example, there are about 320 machine tool companies employing 65,000 employees with an annual
turnover of about $ 10 billion. Only 3% of the manufacturers employ more than 1000 people. Similarly,
the industry in Italy comprises of about 450 firms, 70% of which employ less than 50 people.
Ø High capital intensity:-This results from the large requirements for working capital due to small batches,
low degree of automation in production and large variety of products.
Ø Foreign direct investment is low though international trade is significant:- The small size of machine tool
firms makes foreign investment impractical while the presence of wide network of machine tool
distributors worldwide often makes it unnecessary.
3.2 Key statistics
· The global machine tools industry had a turnover of about US$ 59.55 billion in 2006.
· Japan is the leading machine tool manufacturing country, accounting for about 23% of global production.
· China is the leading consumer of machine tools, with US$ 12.94 billion worth of consumption – approx.
21% of machine tools consumed worldwide.
· Germany is the largest exporter with exports totaling US$ 7.52 billion or 25 % of world trade in machine
tools.
· International trade is a very important feature of the industry – 55% of total production is exported.
· Globally, India ranks 18th in production (US $ 0.41 billion) and 11th in consumption (US $ 0.88 billion).
Indian machine tool industry – current status
The Indian machine tool industry comprises about 450 units spread all over the country. Of these, only about 200
can be considered as organized sector units with annual turnover of more than Rs.2 crore. Moreover, the number
of units assembling complete machine tools is much lower.
The ten largest firms, comprising industrial groups such as HMT Machine Tools, Ace
Designers, Jyoti CNC, Bharat Fritz Werner (BFW), Ace Manufacturing Systems, Lakshmi Machine Tools (Machine
Tool Division), TAL Manufacturing Solutions, Perfect Machine Tools, Lokesh Machines and PARI account for more
than 50% of India’s assembled machine tool production.
There are about 25 units such as Pragati Automation (Bangalore), Electropneumatics (Pune), Janatics Pneumatic
(Coimbatore) and ISGEC (Noida) that have sales in the range of Rs. 40 - 100 crores.Machine tool exports from India
is insignificant – valued at just over Rs 60 crore in 2006- 07.
Industry has experienced strong growth in recent year, the Indian machine tool industry has grown at over 35%
p.a. during the last five years. Imports now account for 70% of domestic machine tool consumption, up from 42% in 2002. Figure 8: Market share of imported machine tools
Besides, import content of domestically manufactured machine tools is high, especially
for CNC machines The industry is dependent on imports for critical items such as:-
• Linear guides and ball screws
• Precision bearings
• Servo motors, drives and CNC systems
• Spindles
However, export of machine tool accessories is significant – over Rs 600 cr in 2006-07.
To better understand the approach of Indian SMEs to exports, survey respondents can be
segmented into four categories as shown in the framework below – Trans-nationalization – opportunity and necessity
Indian machine tool manufacturers possess the following strengths –
· Ability to produce standard machine tools with quality levels at par with competitors such as Korea and
Taiwan. Most Indian firms now possess ISO quality certification.
· Competent design skills, though there are concerns that this strength is being eroded due to attrition of
talent.
· Capable of building tooled up and special purpose machines engineered to meet customer needs. In this
segment of the market, Indian manufacturers are very price competitive against similar machines from
Europe. Korean, Taiwanese and Chinese manufacturers do not have any large presence in this segment.
Considering that world trade in machine tools is about $ 65 billion annually, India’s presence in the global market is
insignificant – less than 1%. It follows that, given the strengths of the industry and the size of the global market,
Indian firms have significant export and transnationalization potential. Machine tools - a strategic industry
The following features and developments in the machine tool industry need to be underscored - · A vibrant and technologically advanced domestic machine tool industry is critical for the growth and
development of India’s manufacturing sector. The industry has an enormous multiplier effect on
manufacturing output (typically 1:100) and hence employment generation. Economic studies suggest that
a one rupee value of machine tool production creates a ten rupee output for the broader capital goods
industry and a hundred rupee output in downstream consumer goods.
A technologically advanced machine tool industry is vital to meet the requirements of programmes in
India’s strategic sectors – Space, Defence and Nuclear Energy.
· Advanced manufacturing countries have always supported the machine tool industry as a strategic
industry. Most recently, China and Taiwan have revealed ambitious plans to secure global domination of
the industry.
· Indian machine tool industry has inherent strengths but it is not keeping pace with highly dynamic
competitors such as Korea, Taiwan and China in technological capabilities.
· Current and future path of technology of key machine tool sub-systems is controlled by a few large global
firms that are unlikely to make state-of-art technology available to Indian firms. India must ensure
technological self-reliance in the machine tool industry. We, therefore, recommend that the machine tool industry be declared a strategic industry. A national programme for developing indigenous technology must be instituted. The objective of this programme should be
the development and commercialization of key machine tool components and subsystems - spindles, CNC controls,
servo motors, precision bearings and guide ways – for the benefit of Indian manufacturers. Research &
Development must be encouraged in Machine tool Industry. RECOMMENDATIONS
Policy measures designed to improve performance of firms in the machine tool industry should be formulated
within the context of national goals and the broad objectives of industrial policy.
The Government of India has articulated the need to achieve a growth rate of 14% p.a. in the manufacturing sector
in the coming decade and increase its share of national GDP to 30% from the current level of 17%. To achieve this
goal, NMCC has identified the following policy objectives for the manufacturing sector –
a) Enhance Government focus on manufacturing competitiveness
b) Creating conditions for investment in and growth of the manufacturing sector
c) Lowering the cost of manufacturing
d) Investing in innovation
e) Strengthening education and training at all levels
f) Adoption of global best practices in manufacturing
g) Right market framework, competition and regulation
h) Infrastructure development Challenges In Machine Tools Industry:-
- Business transactions to sustain and grow core revenues
- Cost reduction
- Performance improvement
- Emerging markets
- Excess labour, production capacity,
- Bulk inventory, and pressures on margins
- Retail and distribution performance
- Improving supply chain efficiency
- Environmental sustainability
- I.P.R
- R & D outsourcing
- Brand Valuation
- To setup In-House R & D Centre
- Tax Credit on Global R & D
- Managing regulatory compliance
- Reputation management
Companies can take advantage of the magnificent prospects in the automobile sector combined with big tax
benefits, grants, subsidy offered by the Indian government by setting up an in-house R and D centre.
