Government must provide more support to auto sector: study

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Ahmedabad, Jan 8 (UNI) Indian auto sector may fail to become the global provider of vehicles and auto services unless government endevours to provide more support and the companies raise the bar themselves, said a report by international consultancy firm KPMG.

KPMG's 'India Automotive Study 2007' acknoledges that the Indian economy has been growing faster than the most optimistic projections and manufacturing sector too has been making an outstanding contribution to that growth.

The study found that senior auto executives were also concerned about India's eroding cost advantage and the increasing challenges of rewarding and retaining talent and about the challenge companies face in building Indian auto brands.

Labour costs were becoming a big concern in an economy that historically was reliant on low wage rates. Companies now report that a shortage of talent was driving up rates and increasing staff turnover. The turnover rate was almost 20 per cent a year in many management levels. Unless companies could learn to retain people for longer, all the benefits of having talented people available would be lost, said the chief financial officer (CFO) of a leading auto component maker.

According to the study, a number of companies raised doubts over whether the Indian government was able to recognise the size and scope of the challenge of building a manufacturing sector of global scale. They said the government was needed to move faster in building domestic and export infrastructure and in encouraging research and development investments.

One concern voiced by many companies was the fear that India might slip behind competitors in creating an alternative fuels sector.

''Fossil fuel is coming to an end and the whole of mankind needs something to replace it,'' said the chief financial officer (CFO) of General Motors (India).

He added that he was not sure whether the government was really geared up to deal with this fact.


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