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"In India, there is a unique problem of undercapacity," said Ashvin Chotai, London-based managing director of Intelligence Automotive Asia Ltd. "The entire supply industry has been overcautious."
The lack of capacity is likely to persist for some time as machines for making components have to be custom-made and then installed in plants, said Sanjeev Varma, a senior adviser at Duff & Phelps LLC in Novi, Michigan, and an ex-DaimlerChrysler AG executive.
$30 billion
Bharat Forge Ltd, whose clients include Bayerische Motoren Werke AG and Ford Motor Co, is boosting capacity for making crankshafts by 10 per cent this year, said Executive Director Amit Kalyani. The company, which also makes forgings and transmission parts, is running at full capacity now.
Jay Bharat Maruti Ltd, a supplier to Suzuki's India unit and Mahindra, is adding shifts to make more fuel tanks and exhausts, said Executive Director Nishant Arya.
"We didn't expand last year because of a lack in demand," he said. "Only this year was demand at a high."
Nation-wide, partsmakers plan to spend as much as $2.5 billion in 2010 and may invest $30 billion by 2020 to boost production, said Jayant Davar, president of the Automotive Components Manufacturers Association of India. Concerns about how much automakers will pay for parts amid rising wages and higher steel costs have deterred investment, he said. "If we are assured that the pricing will be fair, then the increase in capacity may happen faster," he said.
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