Exports of auto components from Indian firms, whose manufacturing costs are 30-40 % lower than in the West, have grown at 25 % a year in the past five years. Researchers say that India's exports can hit $20-$25 bn by 2015, as nearly 40 % of an estimated $1.7 trillion in auto components requirements is likely to be outsourced to low-cost countries by then. Indian firms want to grab a share of this market and are expanding at home, while eyeing overseas acquisitions to quickly access capacity and customers.

While foreign auto makers, including Ford Motor Co., General Motors Corp., Honda Motor Co. Ltd., Toyota Motor Corp., DaimlerChrysler AG and Hyundai Motor Co. Ltd., are looking to increase their presence in fast-growing markets such as India and use it as an export hub, firms such as Bharat Forge, Amtek Auto Ltd., Motherson Sumi Systems Ltd., Sundram Fasteners Ltd. and units of Tata Motors Ltd. have made overseas acquisitions worth nearly $120 mn in recent months.

Tata Technologies, a unit of India's top bus and truck maker, last week agreed to buy UK engineer and design firm INCAT Technologies. Parts maker Tata AutoComp Systems has bought insolvent German firm Wundsch Weidinger and has more than a dozen joint ventures with companies such as Visteon and Stadco. The strategy has also worked for Bharat Forge, the world number-two in forging, which has bought German and US forging firms and aims to unseat leader ThyssenKrupp by first establishing itself in Europe, then in North America and China

India has around 450 firms making branded auto parts, with another 5,000 in the unbranded space, mostly clustered near the vehicle manufacturing hubs in New Delhi, Mumbai and Chennai.

Our Say Long controlled by families and limited to the home market, Indian firms are now looking overseas for market share, economies of scale and to boost profitability. Companies are beginning to realise the large opportunity and the way to speed up getting a share of the market is to acquire a business which already has a client base. Analysts state that this move is well timed considering that growth in the auto sector in the West has almost flattened (but that's where the manufacturing capacities are) while growth is in eastern markets (but there isn't enough capacity). Plus, margins of western firms are under threat, but they have a customer base, intellectual property rights and technologies, and are considered very expensive. However, analysts also caution that global acquisitions may not be a panacea for all Indian firms, and that some also lack the resources and the ability to integrate overseas operations. Smaller firms, lacking larger firms' clout, are particularly vulnerable. The reduction in import tariffs and a free trade agreement with Thailand can also blunt their cost advantage.