Lack of skilled manpower can hurt Indian auto industry: E&Y

The slow pace of infrastructure development can also stymie the industry’s growth plans, says the consultancy

India may have become the second-fastest growing auto market in the world, but the country’s automotive industry is up against the problem of lack of skilled manpower that can hamper its growth, according to consultancy firm Ernst & Young (E&Y).

Besides, slow pace of infrastructure development can become a roadblock to the industry’s drive to achieve a total turnover of $145 billion and provide an additional employment to 25 million people by 2016 under the Automotive Mission Plan (AMP), reports PTI.

“Skilled labour and infrastructure are the biggest challenges in front of the auto industry. A shortage of 5 million people is there at present only in the manufacturing field of the industry,” said E&Y national leader (Automotive Sector) Rakesh Batra.

Manufacturing accounts for about 30% of the entire automotive sector, he added.

“The industry provides direct and indirect employment to over 13 million people. Though India produces the highest number of engineers in the world, it is expected that only 20%-30% of them are employable,” Mr Batra said.

As per E&Y, the Indian industry will need an additional 30 million personnel by 2022 to meet growing requirements of the market, which became the second fastest growing last fiscal in the world with 26% increase, next to China's 42%.

On the infrastructure front, Mr Batra said: “Since auto production hubs are scattered unevenly in India, there is a vast movement of auto products across the country, which is very inefficient because of infrastructural and policy challenges.”

Indian ports are also not adequately equipped for exports with electronic information exchange, he added.

“Compared to other nations, the current pace of development is a matter of concern,” he said.

Mr Batra also said that India lacks in expert R&D capabilities such as prototyping of a product.

“Domestic players spend less than 1% of their turnover on R&D compared to the global average of 5%-8%,” he said, adding that the centres set up here by international firms are confined only to localisation of imported parts and data services.

Mr Batra said that despite all these lacunae, the domestic passenger vehicle market is expected to reach 3 million units by FY15 from the current level of about 1.9 million units.

“Exports of passenger vehicles are also likely to cross 1 million units by FY15. Last fiscal it was about 0.4 million units,” he added.

Mr Batra said that the domestic two-wheeler industry is also expected to grow to 16 million units from the current 10 million units.

He said that India is likely to retain the position of the second-fastest growing auto market after China in this fiscal.



Shadi Katyal

6 years ago

This problem is not only in the auto industry but every industry in India lacks trained personals. This is a cultural phenomena as no one wants to get his hands dirty and thus even an engineer does not know to change tire or check a battery..
Well infrastructure is another story and we have been talking since 60's while Govt has failed due to lack of investments as most of the funds go in the pockets of politicians.
While on one side NRI are not allowed to invest more than 17% in industry but GOI wants NRI to invest 100%. Due to lack of capable and trained engineer in this field also creates problems.
Quality is not our motto

India gains more say in the World Bank

The country is now the seventh largest member in terms of voting power, with the United States leading the table with 15.85%, Japan (6.84%), China (4.42%), Germany (4%), France (3.75%) and the United Kingdom (3.75%)

India saw its say in the World Bank increasing a bit after member nations approved a shift in voting rights, while China’s voice in the funding agency grew louder than that of Germany, France and the UK.

Both India and China has enjoyed an identical 2.77% voting rights. While India’s voting power stands increased to 2.91%, China leaped to 4.42%—placing it third overall.

India is now the seventh largest member in terms of voting power, with the United States leading the table with 15.85%, Japan (6.84%), China (4.42%), Germany (4%), France (3.75%) and the United Kingdom (3.75%).

Membership of the financial institution gives certain voting rights that are the same for all countries, but additional votes are granted depending on a country’s financial contributions to the organisation.

Since 2008, emerging economies have overall gained 4.59% in voting rights.

“The change in voting power helps us better reflect the realities of a new multi-polar global economy where developing countries are now key global players,” said World Bank president Robert B Zoellick.

The member-nations also agreed to raise more funds for global aid at the annual spring meeting of the World Bank and the International Monetary Fund (IMF).

The change gives emerging nations more say in how the bank is run and how its funds are disbursed.

“This change in voting share, giving developing countries over 47%, is a significant step,” Mr Zoellick told reporters, hoping that shareholders will review the approach in 2015.

Mr Zoellick said that at a time when multilateral agreements between developed and developing countries have proved elusive, this accord is all the more significant.

This increase fulfils the Development Committee commitment in Istanbul in October 2009 to generate a significant increase of at least 3 percentage points in Developing and Transition Countries’ (DTCs) voting power.

“We, in calculating this, looked at the size of the world economy, using purchasing power but also exchange rate measures, but also, as a development institution, the contribution to development including the contribution to IDA, our fund for the poorest, the World Bank head said.

The governments also approved over $90 billion in extra money for the World Bank’s various arms that provide aid and capital to member countries.

Mr Zoellick said that the shift in voting powers was designed to try to reflect past contributions, citing the example of Japan that has been “a very gracious contributor” and to encourage new ones, including developing and transition countries.

The 186 countries that own the World Bank Group also endorsed boosting its capital by more than $86 billion for the International Bank for Reconstruction and Development (IBRD), the arm that lends to developing countries.

The increase would come from a general capital increase and a selective capital increase linked to the change in voting powers, including $5.10 billion in paid-in capital.

It further agreed on a $200-million increase in the capital of the International Finance Corporation (IFC), the World Bank Group’s private sector arm, as part of an increase in shares for developing and transition countries.

IFC will also, subject to board approval, consider raising additional capital through issuing a hybrid bond to shareholding countries and through retaining earnings.

The IBRD 2010 realignment will result from a selective capital increase of $27.80 billion, including paid-in capital of $1.60 billion.

Noting that this represents a dynamic transformation for the World Bank Group, Mr Zoellick said that the additional capital means that the bank will no longer face the possibility that it would have to cut back its lending later this year.

“We came into this crisis well-capitalised, thanks to sound financial policies. We have provided a record $105 billion in financial support since the crisis began to bite in July of 2008. This additional capital means that we will be able to continue to play the role that is demanded of us,” he said.


Compact car sales grow, but margins remain stressed: CRISIL

The ratings agency has said that costs have increased as manufacturers have stepped up product development expenditure, and incurred higher marketing and selling expenses

Ratings agency CRISIL has said that according to its research study, during FY11, margins of car manufacturers will be under pressure despite sustained growth in compact car volumes.

CRISIL has said that cost pressure has been mounting on car manufacturers with a decline in sales per model. Costs have increased as manufacturers have stepped up product development expenditure, and incurred higher marketing and selling expenses per unit of sales.

“To maintain margins and benefit from scale efficiency, car manufacturers would need to increase sales per model in the compact car segment rather than focus on overall sales by introducing more models,” said Manoj Mohta, head for research, CRISIL.

During FY11, total sales of compact cars are expected to increase by 11%-13%. However, sales per model or variant will be 6% to 7% lower than the previous year due to growing competition and new model launches, the ratings agency said in a release.

“While total sales in the compact car segment have increased 14% each year from 2006-07 to 2009-10, average sales per model have declined 12%,” said Mr Mohta.

Over the past five years, competition has been intensifying in the compact car segment with an increase in the number of models and manufacturers. The number of compact car models increased to 21 from nine and the number of players to eight from five, between March 2005 and March 2010. The launch of four new models and entry of three players this fiscal will further intensify competition, it added.

Also, manufacturers have been offering more value-added features in compact car models such as power windows, power steering and electronic devices to maintain market share. These factors have added to the manufacturers' costs without a commensurate increase in realisations, the ratings agency added.


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