Abstract
Since its inception, the automotive industry is observed to be characterized—at a global level—by a high degree of regional concentration or clustering. This striking feature has nonetheless tended to be encrypted in many countries’ automotive sector depicting that the industry is often guided by regional/cluster dynamics. Clusters in the automotive industry however, differ in fundamental aspects from the usual ‘clusters’ or small firm agglomerations identified by Alfred Marshall. In fact, clusters in the automotive industry appear to take the form of ‘hub-spoke agglomerations’ consisting of complexes of suppliers surrounding a central hub or assembly facility. Similar to the global pattern, Indian automotive sector exhibits regionalization of the automotive firms scattered over four regions (North, South, West, and East) (see Fig. 5.1). The auto components firms are accordingly distributed in and around the principal automotive manufacturers thus creating a distinct geographical demarcation in terms of their location in regions.
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Notes
- 1.
The global automotive industry has taken the form of global localization with the development of regional clusters of production linked to global sourcing and marketing strategies.
- 2.
Clusters differ in forms (see e.g. Markusen 1996; Van Dijk and Sverrisson 2003) and exist at different scale levels. The spatial connotations of the cluster concept are rather vague in the literature (Van Dijk and Sverrisson 2003; Beerepoot 2005). In the context of this study, the concept of clustering is simply used to connote the phenomenon of spatial and sectoral agglomeration of similar firms (here, auto component firms).
- 3.
All the information is taken from ACMA publications (Buyers guide), and in some cases, from the web sites of auto component firms.
- 4.
Furthermore, there is one specific problem regarding the geography of India per se. This problem lies in the geography of India and can be explained by the existence of a so-called National Capital Region (NCR) surrounding the city-state of New Delhi. As such, it consists in the fact that there are two neighboring states in the NCR, both of which exhibiting a notable number of auto component firms in the cities of Noida and Gurgaon, respectively. Hence, viewing NCR as one geographical entity, or rather economic space, seems appropriate.
- 5.
This refers to both ACMA member firms and others (non-member firms). However it may be noted here that ACMA represents more than 95 % of the total organized sector firms in India.
- 6.
In view of this fact, in the subsequent analysis we concentrate only on these three locations for our study.
- 7.
These states together account for approximately 1/3rd of India’s manufacturing value added. Chemicals and related products are the major manufacturing output of this region.
- 8.
In fact, there is a close association between the two categories of industries.
- 9.
While companies like TVS dominated the Southern region, Bajaj, Telco and Fiat ruled the roost in the West (see the automotive map in Fig 5.1).
- 10.
As shown by Thomas (2002), the share of north (combined share of four states viz., Uttar Pradesh, Haryana, Punjab and Rajasthan) increased from 16.7 to 18.9 % in India’s manufacturing in the eighties and nineties.
- 11.
Interview with the Chairman, ACMA, Northern region.
- 12.
However, in southern region, there have been many additions in the number of firms recently due to the establishment of major international car manufacturers. This is not captured in our analysis due to data limitations.
- 13.
Here we define the firm-sizes as per the number of employees. We define small firms as those having less than 100 employees, medium having 100–250 employees and large having >250 employees.
- 14.
The HHI is calculated by summing the squares of the individual market shares of all the participants. For example, a market consisting of four firms with market shares of 30, 30, 20 and 20 % has an HHI of 2600 (302 + 302 + 202 + 202 = 2600). The HHI ranges from l0,000 (in the case of a pure monopoly) to a number approaching zero (in the case of an atomistic market).
- 15.
(N-firm concentration ratio consists of the market share, as a percentage, of the N largest firms in the industry).
- 16.
The auto component industry in India is fairly small in scale as compared to its global counterparts. As reported in a study by Mckinsey (1995), the industry as a whole stands at about the same scale as a single fairly large tier-one automotive supplier (e.g., Sumitomo Electric), and one-tenth the size of the world’s largest component company (e.g., Delphi). Even large firms have low turnover per employee ranging between $20,000 and $60,000 a year (Intecos-cier 2001).
- 17.
The general inward-orientation of the industry had resulted in low exports. Other factors which have also contributed to low export intensity are poor price-competitiveness on account of domestic operations, higher number of defects and spurious parts and inadequate technological sophistication etc. However as we analyzed in Chap. 4, the trend seems to have reversed in the recent years. The differences across regions in more recent export performances could not be verified here due to data unavailability.
- 18.
It may be noted that the market of the component industry is mainly divided between OEM and replacement markets Because of the high average age of cars, replacements comprise more than 60 % of the total Indian component market, with the rest goes towards OEM. However, we don’t have access to such break up of data and hence it is not verified.
- 19.
However, there might be a small bias in the categorization of exporting/non-exporting firms on the basis of the sheer numbers due to the inclusion of just 1 year for verification.
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Diebolt, C., Mishra, T., Parhi, M. (2016). A Comparative Regional Analysis of Indian Auto Components Industry. In: Dynamics of Distribution and Diffusion of New Technology. India Studies in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-32744-0_5
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