Auto companies say disruptions in Chinese imports will hurt their recovery

The Indian automobile industry has sounded alarm bells over delays in Customs clearance for imports from China. The move, they said, would hurt the recovery of the industry, which has been reeling from the shock of a yearlong slowdown further worsened by the Covid-19 pandemic.

Amid heightened tensions along the Line of Actual Control with China, all shipments coming from China are being physically checked at ports and airports by Customs officials following a nationwide alert regarding enhanced risk weightage ascribed to consignments from that country. This is delaying shipments of crucial automobile components, said executives of auto players.

“Inordinate delays in clearance because of congestions at ports could eventually impact the manufacturing of vehicles in India. The industry is piecing itself together as growth is limping back; any further disruption at this juncture is best avoided,” said Rajan Wadhera, president, Society of Indian Automobile Manufacturers (SIAM).

Industry executives said while China-based manufacturers, such as MG Motors, have been affected the most, almost all automobile manufacturing process would slow down if 100 per cent manual checks of Chinese imports continued.

Over a quarter of India’s auto part imports — worth $4.2 billion — came from China in 2019, according to the data from Auto Component Manufacturers’ Association of India (ACMA). These included engine and transmission parts. 

Some of these components are critical and hard to source from elsewhere immediately, said executives of global auto component manufacturers, such as Bosch Valeo and Minda Industries, which have set up shop in India because of the country’s large consumer base.

“Some of the items imported from China are critical components, such as parts of engines and electronics items, for which India is yet to develop domestic competence. The automotive value chain is a highly complex, integrated and interdependent; non-availability of even a single component can, in fact, lead to stoppage of vehicle manufacturing lines. Post the lockdown, production in the component industry is gradually picking up in tandem with the growth in vehicles sales. It is, therefore, in the best interest of the industry and the economy that any further disruptions are best avoided,” said Deepak Jain, president at ACMA.

Though Customs officials told Business Standard that the move was based on specific intelligence related to narcotics smuggling and illegal imports of undervalued items, industry saw it as a trade retaliatory measure. The development coincided with the government making it mandatory for sellers to mention “country of origin” on products to be sold on the procurement portal Government e-Marketplace.

R C Bhargava, chairman of India’s largest auto firm Maruti Suzuki, said in order to reduce dependence on Chinese imports, it is necessary that Indian firms be much more competitive, deeper and widespread. He warned that shunning products from China may lead to a price increase in the short run.

“Everybody knows that importing products over time actually becomes more and more expensive as the rupee gets weaker. So it is not really in anybody's commercial interest to continue to import; you import because you really have little choice in the matter," Bhargava added.