Ancillaries : Defining SMEs

Auto  component  SMEs   are   one  of  the  fastest  growing  within  the   SME  category  of 
industries.  These  units  are  key  contributors  to  the  total  production  of  auto  components 
and also have a significant share in the exports of the industry.  
As  part   of  a  highly   fragmented  industry,  these  companies  mostly  are  part  of  the 
unorganized sector. They operate  in  a  tier  framework,  and  most of  the  companies  in  the 
SME segment are in the Tier II or below. Few of the suppliers to  OEMs  are  medium  scale 
enterprises. 
The  SMEs  are  riding  a  boom  phase,  driven  by  demand  from  global  auto  manufacturers. 
The   industry  is   undergoing  a  major  restructuring  and  many   existing  companies  are 
expected  to  move  up  in  the  value  chain  to  a  higher  tier.  Nevertheless,  sustenance  and 
survival  still  remains  an  issue  of  concern  for  these  companies as they will have to absorb 
global best practices in this competitive environment. 
Cost  competitiveness,  customer  orientation,  lead  time,  are  some  key  factors  the  auto 
component SMEs will have to imbibe to survive in the new global set‐up. At the same time, 
these companies face the limitations of being SMEs, like 
 Low capital base  
 Limited generation of surplus funds for re‐investment due to tight working capital 
cycle  
 Lack of awareness of business opportunities  
 Inadequate exposure to international environment  
 Limited geographical diversity of markets  
 Obsolete Technology  
 Poor infrastructure facilities  
Despite  these  limitations,  the  SMEs  have  managed  to  significantly  contribute  towards 
development of India’s industrial base. The key risks that the auto component SMEs faces 
include: 

Auto  component  SMEs   are   one  of  the  fastest  growing  within  the   SME  category  of 
industries.  These  units  are  key  contributors  to  the  total  production  of  auto  components 
and also have a significant share in the exports of the industry.  
As  part   of  a  highly   fragmented  industry,  these  companies  mostly  are  part  of  the 
unorganised sector. They operate  in  a  tier  framework,  and  most of  the  companies  in  the 
SME segment are in the Tier II or below. Few of the suppliers to  OEMs  are  medium  scale 
enterprises. 
The  SMEs  are  riding  a  boom  phase,  driven  by  demand  from  global  auto  manufacturers. 
The   industry  is   undergoing  a  major  restructuring  and  many   existing  companies  are 
expected  to  move  up  in  the  value  chain  to  a  higher  tier.  Nevertheless,  sustenance  and 
survival  still  remains  an  issue  of  concern  for  these  companies as they will have to absorb 
global best practices in this competitive environment. 
Cost  competitiveness,  customer  orientation,  lead  time,  are  some  key  factors  the  auto 
component SMEs will have to imbibe to survive in the new global set‐up. At the same time, 
these companies face the limitations of being SMEs, like 
 Low capital base  
 Limited generation of surplus funds for re‐investment due to tight working capital 
cycle  
 Lack of awareness of business opportunities  
 Inadequate exposure to international environment  
 Limited geographical diversity of markets  
 Obsolete Technology  
 Poor infrastructure facilities