Indian auto component industry to cut dependence on China, border clash catalyst: ACMA

New Delhi: The USD 57 billion-Indian auto component industry has started taking steps towards “deep localisation” to de-risk business from Chinese imports with the border dispute between the two countries only acting as a catalyst to speed up the process, according to industry body Automotive Component Manufacturers Association of India (ACMA).

The domestic automobile industry is also seeking to cut dependence on Chinese imports after facing a severe shortage of critical components due to the coronavirus pandemic, as companies based out of China currently continue to be the leading suppliers of automotive components.

In 2018-19 India imported auto components worth USD 17.6 billion, of which 27 per cent – USD 4.75 billion – were from China.

“With COVID-19 and associated lockdowns, all economies and industries have started to look inwards and minimise their reliance on imports. The auto industry in India has started to de-risk itself and is working on deep-localisation” ACMA Director-General Vinnie Mehta said.

“This cannot be done singularly by either the industry or the government, both will have to work in tandem,” Mehta said, adding, “ease of doing business, availability of capital at lower rates and globally competitive logistics and energy costs are some of the prerequisites that the government should look into to ensure the growth of the domestic auto component industry.”

He, however, stressed on avoiding any knee-jerk reactions in the current situation.

“Post the lockdowns, our value chains (including automotive) have been severely disrupted and are in disarray. We are gradually piecing them together. Any further disruptions would only be detrimental to the interest of industry and the economy,” Mehta said.

He noted that while encouraging a localisation strategy, the country should also not shy away from investments coming from China.

“India should welcome investments from China as they are needed for job creation and technology absorption. We should, however, not be serving our domestic market on a platter, we should ensure that investments lead to the creation of Indian IPs as also exports,” Mehta said.

The major component imports from China include drive transmission and steering parts, electronic and electrical items, cooling systems, suspension and braking parts.

Lack of technological competence with domestic players in various segments like electronics and BS-VI components and sheer price advantage are the two main factors which support Chinese imports, Mehta said.