The foreigners are here

Recently at Automechanika, a show for the automotive aftermarket trade in Frankfurt, Germany, India was literally at the centre of Bosch's stall. This was in the form of a silver Tata Nano, for which the company devised an all-new diesel injection pump. Bosch, the world's largest parts maker, expects India to soon overtake Germany as its fifthlargest market, says Robert Hanser, President of the company's global automotive after markets business. It is these small cars that will drive growth for companies such as Bosch, he adds.

The company's India revenue was around a billion dollars last year and its local automotive after markets business is actually the fourth-largest globally - ahead of China and Japan. Bosch is also betting on rapid dieselisation of vehicles (for better power) to increase sales of its diesel injection gear. Around a fifth of Indian vehicles today are powered by diesel, compared to 50 per cent in Europe.

The small car explosion is also good news for another global giant Delphi, once a part of GM, but now a standalone auto parts maker. The company made the instrument cluster for Tata's Nano - 30 per cent cheaper than competing products - and is looking to leverage this advantage with other manufacturers. Delphi has a 700-strong technical centre in Bangalore.

Companies such as Bosch and Delphi, among others, are betting on a steady but sure movement east of the global automotive industry. According to a study by consulting company Booz and Co, the overall passenger vehicle market in India is expected to grow from 1.7 million units in 2008 to 2.4 million units by 2013, surpassing the markets in Italy and Spain. "By 2012, annual car sales worldwide will increase by about 11 million units per year, with India expected to account for 20 per cent of the increase," the study notes.

Not surprising that global giants such as Bosch, Continental and Delphi are building, buying capacity and allying with local firms to tap India as a market and a low-cost manufacturing destination. It is a wake up call for the highly fragmented 500-odd domestic parts makers who at times can't handle orders larger than 50,000 units. That is a problem for companies such as Volkswagen or Nissan-Renault, which want to ramp up rapidly here.