The rising input cost has pushed car companies to tap cheaper sources across the world for easing their manufacturing costs. In order to achieve this purpose car companies have gone to set up centralized agencies to tap source market for them.
US car majors General Motors, Ford Motors, Suzuki Motors and Fiat have already formed such centralised agencies.
Fiat Motors has opened its International Purchase Office to expand its sources for low cost components in India. The company plans to source Rs 1600 crore by 2010. This is a quantum jump from the current Rs 200 crore.
The CEO of purchasing division of Fiat Groups Gianni Coda said “We are looking to cut inputs cost by 10-15 percent. For this purpose we are looking at India and China to supply us low cost components. We are also looking for long term partners who will cater to all companies owned by Fiat Groups. In past we have witnessed that by sourcing large volumes for the entire group, has helped us cut down input expenditure.”
Currently, Fiat sources components from Eastern Europe, Northern Africa, South America, India and China. The total worth of components sourced from these countries is Rs 4,800 crore, which has now been increased to Rs 6,000 crore.
Suzuki Motor Corporation is also planning to introduce a global sourcing policy for its various subsidiaries including Maruti Suzuki India.
Major US car companies General Motors and Ford Motors have been looking at various component manufacturing facilities in India and China for their global sourcing plans.
General Motors has allocated a sum of Rs 4,000 crore for sourcing cheaper OEM components from India. A senior GM official in India said “We have a target of $1 billion from India that includes sourcing components for our worldwide subsidiaries. We are also looking at sourcing components from other low cost markets.”
Ford has plans of making India its hub for sourcing components. The Managing Director and President Arvind Mathew said “we are looking at vendors who can offer products at competitive prices. There are already over 20 vendors from India and more vendor companies are being studied for feasibility.”
The car companies are aggressively pushing for price cut down and the first step in this direction would be to cut down input expenditure. More and more Indian companies will gain from this move and climb global ratings with more exposure of internal brands.