NEW DELHI -- India's auto parts industry has the potential to expand fivefold by 2015 to $33-40 billion from $6.7 billion in 2003-04 by exploiting local cost advantages, consulting firm McKinsey & Co. said on Thursday.
Indian industry sales in 2015 would include exports of $20-25 billion and $13-15 billion in the domestic market and indirect exports, McKinsey said in a report presented at an annual Automotive Component Manufacturers Association of India meeting.
The firm estimated global auto parts sales in 2015 would be $1.6 trillion and said Indian firms could address 40 percent of that market valued at about $650-700 billion.
"The potential growth could create 2.5-3.0 million additional direct and indirect jobs and provide significant employment opportunity for people in rural areas and small towns," McKinsey said.
Vehicle makers in high-cost countries like North America and Western Europe, spurred by increasing cost pressure in their home markets, are likely to increase purchase of auto parts from low cost countries like Brazil, China, India and Thailand, it said.
But Indian companies would need to create strong foundations in operational performance to meet global benchmarks on cost, delivery and quality.
ACMA, which represents over 400 firms making auto parts for India's $14.3 billion vehicle industry, estimated Indian industry production at $6.7 billion in 2003/04 (April-March).
It said production had grown at an average annual rate of 17 percent in the past three years.
Exports rose 27 percent annually over the same period to touch $1.0 billion in 2003/04 as global vehicle makers made a beeline for India in search of low-cost, high quality auto parts to beat stiff competition in their home markets.
Several global auto firms like Japan's Toyota Motor Corp. and parts maker like Delphi Inc. have begun producing parts in India, taking advantage of its wage-based cost advantage and large pool of low-cost engineering professionals.
The chairman of India's Bharat Forge Ltd., the world's second-biggest forging firm, said he expected industry sales to rise by 25-30 percent a year over the next few years.