Chinese component makers capture over 20% share in auto parts after market

ACMA feels local players should focus on entering the Chinese market

The rising share of imports from South Asian countries, especially China, in the auto-component after market has started to worry local component manufacturers. Industry insiders claim that in certain segments like small bearings, the Chinese components have managed to garner a market share of about 40%, while the overall share in the component aftermarket is around 20%.

A recent Crisil report highlights that the imports are mainly coming from China, South Korea, Thailand and Taiwan. "Asian auto-component makers have increased their share of Indian spoils, while those from Europe have clocked a decline," it says adding that, "Imports from Asian countries, especially China, have been rising for the simple reason they make it cheaper. The extent of cost competitiveness ranges from 20% for low-value parts (plastic components, springs and fasteners) to about 50% for critical ones such as pistons and other engine components."Some of the Rajkot-based component makers pointed out that Chinese components are indeed capturing a sizeable chunk of the local replacement parts market.

Bhavesh Bhatt, director of OTO Corporation, a local bearing maker admitted, "In the bearings space, imported parts from China have captured around 40% market share in the passenger vehicle market. In case of commercial vehicle segment,which uses bigger bearings, the share of Chinese parts is still less." Vinnie Mehta, executive director,Automotive Component Manufacturers Association (ACMA) explained that while imports from countries like Germany, Japan and Korea happen as several of the original equipment manufacturers (OEMs) who have parent companies in these countries do import components from these nations. "However, there is no Chinese OEM present in the Indian market. Even then, the imports from the country is on the rise, and currently constitutes nearly 20% of our net component imports." He added that it indeed is a cause of concern.

As per Crisil, the reasons behind China's success in exporting parts to India are, greater scale, lower capex costs and better availability of raw materials. "Scale is substantially greater. In the case of certain components, the capacity of some Chinese players is more than 10 times the average of Indian manufacturers. Capex costs are lower because of local availability of tools/dies/equipment and relatively lower levels of automation. Industry sources said Chinese companies set up facilities to make some engine components at less than a third of what it costs in India. While Indian auto-component makers import several grades of steel and aluminium,for Chinese companies, their local availability improves cost efficiencies," the Crisil report highlighted.

Mehta feels that with wage rates in China going up and its economy slowing down, Indian component makers should seize the opportunity and enter the Chinese market. "There would be significant entry barriers. However, several of the Chinese OEMs have joint ventures with global companies that have a presence in India. Indian component makers can explore their relationships with these companies to make an entry into the Chinese market. However, as there is a huge mandate by the Chinese government to focus on localisation, Indian companies might have to set up base in China to capture the market," he elaborated. The turnover of the Indian autocomponent industry was around $39.7 billion in 2012-13, with imports worth $13.7 billion. As per ACMA estimates, imports are likely to touch $19 billion by 2015-16 (as against imports of $12 billion at that time).