Cheap Chinese auto parts are top draw in India

Vehicle manufacturers of domestic and international brands in India consumed about a third of the total imports of auto parts

According to a report by research and rating agency Crisil, China more than tripled its share of Indian automobile part imports to 21 per cent in 2012 from 6 per cent in 2006.

Europe is the largest exporter of automobile  parts to India, accounting for 27 per cent of total imports.

About 60-65 per cent of the Chinese imports are critical parts like engine pistons, transmission drives, and steering and body components.

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

India’s share of global automobile parts exports remained below 1 per cent 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 $33 billion target set by the Auto Component Manufacturers’ Association in 2003-04.

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 third of what it costs in India.

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, according to experts.

Non-input related costs such as labour, power and other overheads are, however, not materially different from India, the report further stated.

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 85-90 per cent locally manufactured components in their vehicles.

“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 (automobile) companies do not have a greater degree of localisation here,” said Rudi von Meister, president, Asia Pacific region, ZF, a German automobile components manufacturer.

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.  “Glass, tyres, rubber, aluminium bearings and electronic chips are imported by a car manufacturer in India from China because they are available cheaper there. This is affecting local parts manufacturers,” said an automobile component vendor based in Pune.

CHINESE CHEQUERS

• According to a report by research and rating agency Crisil, China more than tripled its share of Indian automobile part imports to 21 per cent in 2012 from 6 per cent in 2006
• About 60-65 per cent of the Chinese imports are critical parts like engine pistons, transmission drives, and steering and body components
• Capital expenditure in China, too, is lower because tools, dies and equipment are easily available