India’s eroding cost advantage and lack of government support may pose a threat to country’s dream of becoming a global hub for automotive industry, research firm KPMG reveals.
In its latest report on Indian auto-manufacturing sector, KPMG said despite Indian economy beating all growth projections, manufacturing companies are themselves sceptical about coping up with this rapid transition.

New challenges

The research firm, which interviewed 40 CEOs and CFOs from Indian automotive industry, said that senior auto executives are concerned about India’s eroding cost advantage and increasing challenges of rewarding and retaining talent.

“Labour costs are becoming a big concern in an economy that historically was reliant on low wage rates. Companies now report that a shortage of talent is driving up rates and increasing staff turnover,” KPMG said.
KPMG said companies surveyed were apprehensive about achieving the targeted growth as investment in infrastructure remains relatively low.

Manufacturers believe that modernising production line to match global standards would require huge investments, which a number of small manufacturers can not afford, it said. Auto makers identified building brand identity and competiton with globally established players as the biggest challenge to India's credentials of becoming a global automotive manufacturing hub.