Bosch India to Invest $23 Million to Augment Capacity of its Manufacturing Facility in Jaipur

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Researched by Industrial Info Resources (Sugar Land, Texas)--Bosch Limited (BSE:500530) (Bangalore, Karnataka), the Indian subsidiary of leading global automotive components manufacturer Bosch Group (Stuttgart, Germany), has announced plans to invest $23 million during the next two years to ramp up capacity at its manufacturing facility in Jaipur, Rajasthan, as part of the group's strategy to invest $445 million in various projects across the country. According to Ashok Abraham, who is the head of the manufacturing facility at Jaipur, the augmentation program will help to increase the Bosch VE pump production capability from 1,800 units per day to more than 2,000 units per day. The company has earmarked nearly 25% of its $445 million investment on its automotive group and related research and development activities.

The expansion project became critical after Bosch had to import distributor pumps from its facilities in Japan, Brazil, China and Germany in October last year. The demand was spurred by sharp growth in the country's automobile sector. The company imported about 25% of its total distributor pump demand. The Jaipur facility, which is one of Bosch's six facilities manufacturing specialized VE pumps, is located on a 2,000-square-foot area. To date, the company has invested almost $70 million on various modernization and expansion programs at the Jaipur facility. In 2008, manufacturing activities at the Jaipur plant came to a standstill for nearly two months after workers went on strike. Currently, this plant employs 1,200 people.

Globally, the Bosch Group, which employs 280,000 people, operates 300 subsidiaries and affiliates. In 1953, the Bosch Group began manufacturing operations in India. Presently, the company manages three development and 14 manufacturing facilities in India, employing 18,000 people. In India, the company's business segments include engineering and information technology, building and consumer goods, industrial technology services and automotive technology.

Bosch's decision to expand capacity of its operations in India comes at a time when the country's automobile industry is experiencing unprecedented growth. Spearheaded by Tata Motors Limited (BSE:500570) (Mumbai), which launched its Nano range of small and affordable cars, several Indian and international auto majors are turning their attention to the development of compact size cars. With government support and technical expertise, India is expected to emerge as a popular destination for the manufacture of small cars. New car models and stimulus packages also will provide the much-needed thrust.

A study conducted by global consulting company Ernst & Young (New York, New York) shows that during 2009-2020, India's automobile market will record the fastest compounded annual growth rate (CAGR), at 14%. The CAGR will be more than the combined CAGR of Japan, North America and Europe. During this period, the CAGR of China's automotive sector is estimated to about 6%. According to Rakesh Batra, Partner at Ernst & Young, India will be among the top five passenger car markets in the world by 2020. During this period, India's passenger car sales are expected to reach 20 million units.

In a related development, India's small cars market is forecast to overtake Japan, which is the world's top manufacturer of compact-size cars. Last year, India overtook Brazil as the world's second-biggest manufacturer of small cars. According to Carl-Peter Forster, the managing director and chief executive officer of Tata Motors, India is set to become the global small car manufacturing hub and account for nearly 80% of the market share in the future. In 2009, 1.48 million small cars were sold in India.

The overwhelming growth in the automobile sector has also made a positive impact on the domestic automotive component industry. In 2009-10, this sector recorded a turnover of $21 billion, including exports of $3.2 billion. By 2020, while the automobile sector is expected reach $108 billion to $119 billion, and the automotive components industry will witness growth to $103 billion to $113 billion. This fiscal year, the passenger, commercial vehicles and utility vehicles segments are forecast to grow 12% to 13%, 19% to 20%, and 13% to 14%, respectively.

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