'Embargo on Imports' May Upset Automakers in India
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The
anti-China move will not be as easy as certain spare parts, sourced from the
Asian neighbor, are critical for manufacturing of BS-VI emission norm compliant
vehicles, especially for the India’s Automobile industry.
With the advent of new stringent emission
norms and connected features in vehicles, manufacturers need catalytic
convertors, fuel injection systems and other such electronic parts based on
semiconductors which are not manufactured in India, and also the ones available
in China are cost competitive. Not surprisingly, in February when factories in
China were shut following the coronavirus outbreak, Indian vehicle
manufacturers like Hero MotoCorp Ltd, TVS Motor Company Ltd, Tata Motors Ltd,
Mahindra and Mahindra Ltd and others had scale down production due to shortage
of imported spare parts. With relations between the two countries souring, most
automakers are now looking at ways to locally manufacture some of these
critical spare parts. However, these could take up to five years to see
results.
The Chairman, Maruti Suzuki India Ltd, RC
Bhargava said, “A lot of electronic parts which go into a car cannot be made in
India. Those are not available in India but I cannot complete a car without
those parts...We should now look at how to improve the quality and cost of
Indian products”. While there is a significant dependence on China for internal
combustion engine driven vehicles, the country's is crucial for spare parts of
electric vehicles. Most lithium-ion batteries and cells, and electric motors
are imported from China.
Rajesh Menon, the Director General,
Society of Indian Automobile Manufacturers said, the Indian automobile industry
was pushed into upgrading to BS VI emission norms in just three years which did
not allow for building of domestic supply chains.
The analysts at Motilal Oswal Financial
Services in a report released on June 23, 2020 had said, “Any tariff or
non-tariff barriers to import would push OEMs for localization of these
components in the long term. While we have seen localization drives in
components like alloy wheels over the last few years, we still do not have the
requisite scale/skills in certain segments like electrical and semiconductors”.
