Lucas-TVS Ltd is the leading auto parts manufacturer in India. The auto parts giant 's manufacturing products cover the starter motor, alternator, dynamo, regulator, wiper motor, fan motor, window lift motor, blower motor, mechanical and electronic distributor, automotive lighting and ignition coil. Carplus, a subsidiary of Lucas-TVS, is specializing in automotive aftermarket product business. Arun Lamba, vice president of Carplus, has introduced to us the Indian auto aftermarket business and also given us a comparison of aftermarket business between China and India.

Gasgoo.com: How big is the Indian aftermarket business? What are the features of auto components business in India?

Arun Lamba: It's quite huge; about a few hundreds of million dollars would be more linked. Some features are:

1) cost reduction of 25-30% in production in the domestic market compared to overseas;

2) low labour costs;

3) designing, engineering and technical skills;

4) established quality systems;

 5) availability of raw materials; 

 6) adaptability to new technology ;

 7) investment in research and development, coming in from global OEMs.

This stands out positively in favour of India. Key players are willing to invest not only in R&D but also in mechanical and engineering operations. These investments are expected to increase in the near future.

Gasgoo.com: What are the leading companies for the aftermarket business in India?

Arun Lamba: For different categories, the companies are different, for example in electronic, charging systems, lighting system sectors and so on. Lucas is the market leader by far for it has a large market share. Then followed by Bosch, Densel. Basically these three companies hold the market share. If you look at the aftermarket,  then you have a lot of small manufacturers like you have in China who are very active in aftermarket.

Gasgoo.com: What kinds of sales channel are popular in India for aftermarket business? For example, chain stores play a major role in the American aftermarket business, while the auto parts market and 4S stores are most popular in China.

Arun Lamba: India has the auto parts markets too. So you have independent businessmen who promote and distribute the products. And also, the 4S stores. Automakers like Suzuki, Hyundai, Ford, GM and Tata all have their sales channels such as 4S stores in India.

Gasgoo.com: Comparing the aftermarket business in India and China, which do you think is more competitive?

Arun Lamba: It's a mix. The Indian companies are very competitive, and some Chinese companies are also very competitive of the same level. Existing Indian players have an in-depth knowledge of successfully manufacturing automotive components. India enjoys a cost advantage with regard to castings and forgings. The manufacturing costs in India are 25 to 30 percent lower than its western counterparts. India's competitive advantage does not come from costs alone, but from its full service supply capability. Over 20 OEMs have set up their International Purchase Offices (IPOs) in India for the components. This number is expected to double by the year 2010.

Products selling in India from Chinese companies are generally of poor quality, which gives me an perception that Chinese products are of poor quality. But when I come here in China, I can find different kinds pf products, good or poor, and I have many choices.

Gasgoo.com: Is auto financing very popular in India? Do Indian people favor buying cars from auto financing?

Arun Lamba: Yes, the auto financing is very popular in India. More than 60% of Indian people favor to buy cars through auto financing. I know in China, less than 10% of people buy cars using auto financing.

Gasgoo.com: What kinds of challenges do Indian auto component manufacturers face?

Arun Lamba: Though India rides on these inherent strengths, a few risks exist that the auto component manufacturers may have to confront.

1) A global slowdown can derail the prospects of the industry.

2) Volatility in the prices of metals and other inputs could erode the industry's cost competitiveness. Further, global OEMs expect a commitment to 5-10% reduction in prices every year;

3) Tier-1 manufacturers taking up Greenfield projects overseas;

4) Intense competition from counterparts in other emerging economies may add pressure on margins of manufacturers.

Gasgoo.com: With the financial crisis spreading around the world, what is its effect on the Indian auto market?

Arun Lamba: We can look this from two angles. One is the new car purchases drop down because the financial crisis has gone up significantly and consumers' emotion got beaten. New car sales in India also suffered a big drop. But the situation is not that disappointing as what might be in the America. Because India has a large middle class which is still looking at uplifting their standard of living. The Indian automobile industry offers great potential considering the low penetration along with rising income levels and a rapidly growing middle class. The growth expected in the domestic automobile industry will give a fillip to the auto component sector. These factors will see a boost in demand for vehicles, especially passenger cars and two wheelers.

Gasgoo.com: How do you think Tata's Nano development amid the financial crisis? Some analysts say Nano must be a loss-making vehicle, how do you think?

Arun Lamba: India is a high-cost country compared to China, for it has a lot of tax, duties. Automakers must learn to control the cost.  I think Nano will not be a loss-making vehicle, but the profits will be very low.This financial crisis delayed its launch and profit gains but it only needs time.