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July 02, 2019 01:47 PM

Why Canadian automotive suppliers see India as the next 'land of opportunities'

Roseann Danese
Automotive News Canada
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    WINDSOR, Ontario—Jonathon Azzopardi was still battling jet lag at a recent chamber of commerce symposium titled "Doing Business With India."

    The chairman of the Canadian Association of Mold Makers (CAMM) and owner of Windsor-based auto-parts supplier Laval Tool had just returned in March from his fourth trip to the nation of 1.3 billion people.

    India, he said, is poised for "great growth, but they don't know how to get there; We'd be a great partner for India."

    Canadian suppliers need to set their sights on burgeoning, nontraditional markets, especially in light of the recent announcement by General Motors to end vehicle production at its assembly plant in Oshawa, Ont., said Raj Sahni, a partner with Toronto-based international corporate law firm Bennett Jones.

    "In Canada, as we see, potentially, our own domestic auto space shrinking with the announced exit of GM," Sahni said. "Canadian companies should be looking at opportunities abroad such as India to fill that gap and expand."

    In light of recent trade uncertainty with the U.S., the Canadian government also is pushing companies to diversify by forging business links outside of North America.

    Growing MarketAs the world's fourth-largest market for vehicle sales, India is on track to take the No. 3 position in 2021, according to a 2018 report by McKinsey & Co., a U.S.-based global management consultancy.

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    "It took India around seven years to increase annual production to four million vehicles from three million," the report said. However, the next milestone—five million—is expected in less than five years.

    In November, the Canadian Association of Mold Makers and the WindsorEssex Economic Development Corp. signed two memorandums of understanding with the Tools and Gauge Manufacturers' Association of India (TAGMA) and Engineering Export Promotion Council of India to collaborate on opportunities in the burgeoning Indian market, as well as globally.

    The MOUs were the first step toward "bringing two already successful industrial economies together to build partnerships (that are) focused on harnessing the strengths of our two industries to create a mold-making superpower on a global scale," Azzopardi said.

    The next Mexico?

    Mike Hicks, a CAMM board member and vice-president of the Windsor-based mold component supplier DMS, said there are similarities between the current opportunities in India and those that existed in 2008 for Canadian companies in Mexico.

    "They had a growing automotive sector then, but there was a disconnect," Hicks said. "They were good at assembly, they were good at production, but they weren't good at mold making or tool making."

    India currently imports 60 percent of the molds used in its auto sector, half of which come from Europe, he said.

    "We may not be able to displace the Chinese on lower-cost tooling," Hicks said. "But tools that come from Europe are usually higher-priced tools, and more in the range of the type of tools we do. So, if you can capture some of that, in a growing market, that's huge."

    Azzopardi said India has an "aggressive" target of building seven million vehicles per year.

    "It's larger than Mexico, smaller than the U.S. and three times larger than Canada—they're big numbers. They have the population and they're building the middle class, it's just a question of how fast they align. The middle class has to be able to afford the vehicles they're talking about.

    "CAMM's last trip, in March, generated interest from the heads of about 60 businesses in India. They are looking for partnership and investment opportunities in Canada and Azzopardi sees potential for companies developing advanced materials.

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    "India is very heavily into aluminum and steel," he said. "And we think they, over time, will go down the same path as us, which is to adopt advanced materials. We want to show them way how to reduce the weight of a car by a quarter, using similar materials but in a different variety."

    India auto giant Mahindra & Mahindra "should be on everybody's radar," Azzopardi said, because it has publicly stated it wants to expand into Canada.

    Mahindra reported 11 percent growth in auto sales for its 2018-19 financial year.

    "Mahindra is a very progressive, supplier-based company where they love to integrate more of their suppliers in the supply chain and create healthy supplier relationships," Azzopardi said.

    'Land of opportunities'

    Sahni called India "a land of opportunities" for Canadian automotive companies and suppliers.

    On a per capita basis, India has a relatively small saturation of vehicles, Sahni said. For every 1,000 people of driving age, about 20 own cars. By comparison, Canada's rate is more than 700 cars for every 1,000 people.

    That number in India will grow in the coming years, Sahni said.

    "As the middle class gains more wealth, one of the first things they do is move from having two-wheeled vehicles—motorcycles—into automobiles," he said. "So there's a huge demand that's already existing in India that can't be met."

    Canada can help India develop its industry as vehicle ownership grows across the country, Sahni said.

    "India has a make-in-India policy, so the vast majority of cars 20 years ago were all imported vehicles," he said. "Now, India has a base of manufacturing of its own with cars. There's still a need for parts and technology."

    The adoption of technology, such as electric and autonomous vehicles, lags well behind North American standards, Azzopardi said. "Technologically-speaking, the industry is where Canada was in the 1980s. So that's an opportunity because we can help them get to 2019. It's using our technical know edge and our experience to advance them faster."

    India's population is the second-largest in the world, and the median age of 28 is young by global standards, said Dinesh Bhatia, India's consul general in Canada.

    "If you're looking at automotive parts or the automotive industry, India has probably the largest (driving age) population on the roads," Bhatia said.

    "And that means all the major car manufacturers around the world are present in India, and there's a need for auto parts.

    "The market is huge," Bhatia said. "So when the market is huge, naturally, the potential is huge."

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