Cheap Chinese Auto Parts Are Top Draw In India

Business Standard reported according to a report by research and rating agency Crisil that China more than tripled its share of Indian automobile part imports to 21% in 2012 from 6% in 2006.

Europe is the largest exporter of automobile parts to India, accounting for 27% of total imports.About 60% to 65% of the Chinese imports are critical parts like engine pistons, transmission drives, and steering and body components.

The Crisil report said that “Imports from Asian countries, especially China, have been rising for the simple reason they make them cheaper. The difference in price ranges from 20% for low value plastic components, springs and fasteners to 50% for pistons and other engine components.”

India’s share of global automobile parts exports remained below 1% over the last decade because component makers have not been able to catch up with other low-cost Asian destinations. Exports in 2015 are expected to be less than a quarter of the USD 33 billion target set by the Auto Component Manufacturers’ Association in 2003 to 2004.

Raw materials are cheaper in China than in India, making imports more competitive. Indian automobile component makers have to import several grades of steel and aluminium, which escalates costs.

Capital expenditure in China, too, is lower because tools, dies and equipment are easily available and also due to lower automation. According to industry sources, Chinese companies set up facilities to make some engine components at less than a 3rd of what it costs in India.

According to experts, the scale of Chinese players is substantially greater than their Indian counterparts. In some components, the capacity of Chinese players is more than 10 times the average of Indian manufacturers.

The report further stated that non input related costs such as labour, power and other overheads are, however, not materially different from India.

Imports by vehicle manufacturers are driven by factors such as global product platforms and simultaneous model launches, which lead to global component sourcing arrangements.

Automobile makers localise heavily only when a product is a runaway hit. Despite years of operation in India, some foreign companies do not have 85% to 90% locally manufactured components in their vehicles.

Mr Rudi von Meister, president, Asia Pacific region of ZF, a German automobile components manufacturer, said that “Many of the parts we make in India are sourced by companies present here. After sourcing from India, these parts come back in different car models. This happens because companies do not have a greater degree of localisation here.”

Along with China, other Asian countries such as South Korea, Thailand and Taiwan have increased their share in Indian automobile part imports while the shares of Japan and the US have declined.

Source : steelguru.com