Import from China may hit Indian auto component industry

BL reported that despite a huge surge of 70% YoY in imports of auto components at INR 2,200 crore ($514 million) in 2007-08, Indian auto components industry is not alarmed as auto majors have a perception of inferior quality form Chinese units and as such it accounts for just about 3% of total business size of INR 70,000 crores (US$1 = INR 42.8 currently, 10 million = 1 crore).

The report said that “Chinese threat is today referred to as something lurking on the horizon, something to be alert about, but nothing that causes a loss of sleep. OEMs use the ‘China factor’ as a stick to beat their vendors into price reduction or at least as a deterrent against demands for price increases.”

But Industry associations have taken a hard line against imports from China. Mr Vishnu Mathur ED of Automotive Components Manufacturers Association said that sourcing by Indian OEMs is based mostly on price arbitrage, which is artificial because often the Chinese products come at a price less than the raw material costs of Indian manufacturers. He said that “If it is a fair competition, we have no issues. If the OEMs import from China, what will happen to component manufacturers who have created capacities, based on long term supply chain commitments?”

Just as the components industry is alert against imports, OEMs are always on the lookout for what best they could buy from China. Even the public sector BEML recently opened a purchase office in Shanghai.