New Delhi: Italian car-to-tractor maker Fiat Group has set up a purchasing office in New Delhi as it seeks to source as much as €250 million (Rs1,595 crore) worth of auto components from India to take advantage of lower costs, said a top company executive.
“Whatever it is possible to buy from India, we’ll buy,” said Gianni Coda, chief executive officer of Fiat Group Purchasing srl. “We have to be competitive in selling cars, selling trucks, selling tractors... We need to reduce costs.”
Cheaper option: Gianni Coda, president of Fiat’s Latin America unit
Fiat, which entered India as long as 50 years ago, currently sells cars through the dealers of Tata Motors Ltd, India’s largest auto maker by revenues, and tractors through its fully owned unit, New Holland India Pvt. Ltd. The company also purchases parts worth €30 million for exports to its factories worldwide.
Coda said that on an average, Indian part makers sell 12-15% cheaper than those from Western Europe and it is targeting increased sourcing from “best cost countries” such as India and China. A company statement said it intended to buy €8.5 billion worth of auto parts from such new sources by 2010.
International automobile manufacturers such as General Motor Corp. (GM) and Volkswagen AG are increasing their sourcing of auto components from low-cost countries in general and India in particular, as they battle higher labour and health care costs in their home countries. GM, for instance, has said it wants to buy up to $1 billion (Rs4,120 crore) worth of auto parts every year from India by the turn of the decade.
Exports of auto components from India increased 25% to an estimated $3.6 billion in 2007-08, from $2.87 billion a year ago, according to the Automotive Component Manufacturers Association of India, an industry body.