'Indian auto sector lags Bangladesh, China on cost competitiveness'

Indian automobile makers and component industry are at a disadvantageous position in respect of labour, fuel and raw material costs when compared to China, Singapore, Indonesia and even Bangladesh, said a study by industry body Assocham released on Thursday.

Citing an Assocham-Thought Arbitrage joint study "Assesssing India's Manufacturing Cost Competitiveness", Associated Chambers of Commerce and Industry (Assocham), in a statement, said that in terms of four parameters - cost of raw material, labour, fuel cost and rent paid, India is a clear loser to China, which is the world's largest producer and has been developing rapidly since the 1990s.

Compared to China, Indonesia and Singapore, India spends heavily on raw materials for manufacturing automobiles and components.

"While these countries spend about 29 per cent, 23 per cent and 57 per cent of their value of output on raw materials, respectively, India spends around 69 per cent, clearly indicating a disadvantage for India," Assocham said.

Indian auto and auto components industry has high labour costs relative to Bangladesh, Indonesia and China. It enjoys a cost advantage only with respect to Singapore, which spends 13.13 per cent of its output value on wages and other benefits to workers.

India spends 8.29 per cent of its output while Bangladesh spends a mere 1.87 per cent, Indonesia 4.46 per cent output value and China nearly seven per cent of its total sales on labour.

In comparison to the proportion of output value spent on fuel by Bangladesh (0.18 per cent) and China (1.22 per cent of total sales), India spends a significantly higher proportion (1.99 per cent) of its output on fuel. Indonesia is the only country over which India enjoys a slight cost advantage, spending 2.03 per cent of its output on fuel, Assocham said.

"In case, we have to realise the Make in India and attract lot more FDI (foreign direct investment), we need to work on reducing the cost of production in all the parameters, especially at a time when the world demand is subdued," said Assocham Secretary General D.S. Rawat.

--IANS

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