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Why is China the main importer of auto parts?

Chinese shipments to India's automotive sector in the first half of this fiscal year were $2,378 million, an increase of 72% over $1,378 million in the same time previous year. China has continued to be the country from which India's automotive industry imports the most automotive parts. However, compared to imports last year, India's exports have increased in value in terms of industry dynamics, the Automotive Component Manufacturers Association of India (ACMA) reported on Monday in its annual report. Let's investigate how China is the main importer of auto parts.

China continues to be the main source of auto parts imports.

China remains the biggest source of auto components import, accounting for 30 per cent during FY22. However, compared to imports last year, India's exports have increased in value in terms of industry dynamics, the Automotive Component Manufacturers Association of India (ACMA) reported on Monday in its annual report.

In comparison to 2020–2021, auto component exports increased by 43%, from 0.98 lakh crore ($13.3 billion) to 1.41 lakh crore ($19.0 billion). The success of the domestic market affected component imports into India as well. According to the report, component imports increased by 33% to 1.36 lakh crore ($18.3 billion) in 2021–22 from 1.02 lakh crore ($13.8 billion) in 2020–21.

Growth in the Auto Industry

"Capex cycle has increased, which has led to growth in both the market and the after-market. We are approaching pre-pandemic levels of capacity utilisation. Vehicle sales, particularly in the PV, CV, and tractor categories, appear to have returned to pre-pandemic levels at this time. According to Sunjay Kapur, president of the ACMA and chairman of Sona Comstar, "there has been some easing in the supply-side challenges of availability of semiconductors, input raw material pricing, and availability of containers.

Vehicle sales are anticipated to pick up steam during the festival season thanks to a spate of new debuts. In addition, he said, the auto industry's increased emphasis on deep localization and the announcement of PLI schemes on advanced chemistry cell (ACC) batteries, autos, and auto parts will make it easier to build a state-of-the-art automotive value chain and turn India into a desirable alternative source of high-end auto parts.

Poor two-wheeler sales, rising insurance costs, high inflation, excessive fuel prices, and high logistics costs are some of the sector's pressing concerns, according to Kapur, who also said that the business is changing as demand for two- and three-wheeled electric vehicles (EVs) increases.

Outstanding performance

"Despite supply-side difficulties, the auto component business displayed a spectacular performance in FY22 as vehicle sales and exports progressively gained traction month after month. According to Vinnie Mehta, Director General of the ACMA, "significant growth was observed across all areas, including supply to manufacturers, exports, as well as the after-market. The estimated 74,203 crore after-market also experienced a consistent growth of 15%. According to him, component sales to manufacturers in the domestic market increased by 22% to $3.41 lakh crore.

China Role in Automotive Industry

The Made in China 2025 programme, a government plan to transform the nation's economy from low cost mass production to higher value-added advanced manufacturing, includes the automotive industry, including new energy vehicles (NEVs), as one of its 10 sectors. By 2020, the Chinese government hopes to have produced one million electric and plug-in hybrid vehicles, with domestic production making up at least 70% of the market there. Additionally, China wants to sell 3 million domestically branded NEVs in 2025, accounting for at least 80% of the global NEV market. This initiative is supported by China's "Automobile Mid and Long-Term Development Plan," which was unveiled in April 2017 and aims to make China a "strong" auto power within ten years.

This plan emphasises China's chance to control this developing market through the development of NEVs, connected, and driverless vehicles. The development of national champions in the fields of auto parts/brands, connected automobile technology, driver assistance, and autonomous systems has been given a number of lofty goals. NEV engines, plug-in hybrid engines, fuel cell systems and critical components, charging stations, battery production facilities, and testing apparatus are the subject of additional regulations.

The government of China has implemented a fleet quota system, which stipulates that automakers, including joint ventures and auto importers, are required to manufacture or import a minimum percentage of NEVs relative to their total manufacturing or importing, as the country moves away from its consumer-level subsidy programme. According to a credit system that lowers the total requirement, the NEV production quota for 2019 is 10% of all vehicles produced, and it increases to 12% for 2020. The release of quotas for 2021 and later has not yet occurred. Automakers who fall short of these goals must forgo certain internal combustion engine vehicle sales or buy NEV credits from other automakers who exceeded their production quotas.

India Urges Its Automakers to Cut Reliance on Imports from China

In order to reconfigure its supply chains, India is pressing domestic automakers to reduce their reliance on Chinese imports of parts for electric vehicles and other automotive components. India is the third-largest economy in Asia.

According to Amitabh Kant, chief executive of the government policymaking organisation Niti Aayog, "it is crucial that some automobile components, which are being imported from China solely on the basis of cost competitiveness and development capabilities, are created here." "Like with solar, we should not really turn into a significant importer of electric vehicle parts."

While the Indian government is pressuring local automakers to switch to EVs, the transition is proceeding much more slowly than in other nations, with battery-powered vehicles making up barely 1% of the country's yearly car sales. Due to the lack of a reliable charging infrastructure and the high cost of electric vehicles, the majority of Indian traditional automakers are reluctant to make the changeover. Connect with Seair Exim Solutions if you require any help with export import data, global trade data, or any other business information. Our experts are prepared to offer you high-quality services at any time.

  • Seair Exim
  • 09-Sep-2022

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