"By next year, our purchasing office here will increase the quantum of outsourcing from India by 70 per cent to around $1 billion," Gianni Coda, CEO of the Italy-based Fiat Group Purchasing, said. Coda made the announcement during the 49th national conference of the Automotive Component Manufacturers Association of India, or ACMA, held in the capital on Thursday.
In India, the Fiat Group sources components for its passenger cars, farm equipment, construction equipment and truck businesses. The amount indicated for next year does not include auto parts for the Chrysler brand, which Fiat took over this year. The quantum of components sourced from India constitute around 5 per cent of Fiat's global business requirements.
The Fiat Group has primarily three layers of operations in India. First, its 50:50 joint venture with Tata Motors manufactures Fiat-badged cars like the Punto and Linea. As an OEM (original equipment manufacturer) in the farm machinery segment, it manufactures tractors under the Case New Holland brand in Greater Noida.
Two, through 15 joint ventures (JVs) with local auto parts manufacturers, the group produces vehicle components both for the domestic and export markets. Prominent tie-ups include those with Tata Motors (transmission & engines) and Maruti Suzuki (power train ECUs).
Three, it sources auto parts through independent auto component vendors.
Fiat executives say the 70 per cent surge in outsourcing for next year comes as a result of the strong vehicle demand posted by the domestic market.
"Since our Fiat models, like the Linea and Punto, will incorporate greater levels of localisation, we will increase outsourcing of car parts from the domestic market. Also, over the last three months, the domestic infrastructure segment has revived, leading to an increase in demand for construction equipment. Next, some global markets are witnessing a pick-up in demand for automobiles. All these factors compel us to increase outsourcing from India, which is a good destination on quality cost parameters," a FIAT executive said. The executive further added that the IVECO branded trucks would be launched in the domestic market too.
Coda said contracts worth $210 million (over Rs 1,000 crore) have been finalised, while another $300 million (nearly Rs 1,500 crore) worth of auto component contracts are under evaluation. The company said it will invest further in its domestic operations and will source an increasing quantity of auto components from the domestic market over the coming years.
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