India's auto component sector may loose competitiveness

India’s auto component sector may loose competitiveness

Surging steel prices may endanger the competitiveness of Indian auto component sector in the global market. Two main factors are responsible for the industry's plight. One of them is unstable and increasing prices of key inputs and the other one is the appreciation of Indian currency Rupee against the US Dollar. Global automobile manufacturers act prudently about signing new contracts as well as renewing the existing ones for certain auto components from India due to the rising cost of components. In this situation, India may loose its competitiveness in auto components against the countries such as Mexico, Turkey, Brazil, and Eastern European countries like Czech Republic which have recently joined the European Union and China. Meanwhile, most domestic exporters of auto components have demanded for a price revision from original equipment manufacturers, but it has been denied. Under these circumstances, most affected may be auto components which require pig iron and alloy steel. Pig iron prices have nearly trebled in the last fourteen months while alloy steel prices, which used to make components such as crankshafts, gears and axles, have increased more than 40% in the same period. If the constant rise in input costs continues, India's exports may eventually suffer. India's export of auto components surpassed the $1 billion in 2003-04.