ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Small and Medium Enterprises in the Indian Auto-Component Industry

Value chain governance in the automobile industry changed as the latter developed. When Maruti started operation in 1983, it was a turning point in the passenger car market. Prior to this, there was a tendency for the assemblers of automobiles to produce parts and components in-house. The "tierisation" of subcontracting evolved from the operations of Maruti. Value chain governance in the industry shifted from integrated firms to captive units. With economic reforms, the subcontractors of Maruti began supplying their products to other assemblers too. The transformation was from captive value chains to relational value chains. Small and medium enterprises manufacturing auto-components that started business in the 1980s and the 1990s have grown. In the process, small enterprises have expanded to become medium and large enterprises. But in spite of a rapid growth of production, new entrants to the auto-component industry declined in the 2000s. The necessity of high technology led to a significant hike in the initial investment required and raised barriers to entry. But the existing SMEs actively set up new units.

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