Chinese Auto Part Manufacturers Penetrating Indian Markets Aggressively

They were swarming the Delhi Auto Expo this year- more than 100 of them. The Chinese auto component makers had the biggest presence among all foreign automotive players in the event.

In 2000, the Chinese auto parts component imports was just about Rs 30 crore, however in 2009, it accelerated to over Rs.2500 crore, comprising 10 percent of the total Indian auto component market. In 2000, it was less than 1 percent.

According to Automotive Component Manufacturers Association of India (ACMA) imports of components from China registered a 97 percent compounded annual growth rate in the last seven years. The major reason for the influx of Chinese auto component manufacturers in India is perhaps because the 12,000 odd auto parts companies in China are far more aggressive as opposed to the 5000-plus companies in India. Moreover lower wages, steel prices, power tariffs and taxes are lower in China.

Plus, wage rates in China are 15 to 25 percent lower vis–vis India and the companies in China are said to get high subsidy on power usage. Further, ACMA has taken into account the disparity between Indian and Chinese auto component companies factory-to-factory cost which includes the cost of transport, octroi, customs duty and others a massive 45 percent in Chinas side. The deluge started after the government reduced the import duty from 15 percent in 2005 to 12.5 in 2006 and 2.5 in the subsequent year.

India is one of the biggest importer of Cheap Chinese tyres, which fulfills the demand of not just the demand of after-market, but also serves the original equipment manufacturer demand. The demand suddenly shot up due to the short supply of adequate commercial vehicles tyres in the local market.

According to an executive of one of the Chinese companies, Chinese products are not just 40-50 percent cheaper, but they are also of good quality standards and can give a tough fight to the Indian counterparts.

According to Managing Director of a leading auto component manufacturer: If Chinas influx into India is not controlled it would pose a serious threat to India in the future.

However, many say the fears are misplaced considering the fact that most of the Indian companies opt for 100 percent local products and are very particular about quality.

Even vehicle makers in India including cars, two-wheelers and commercial vehicle making companies wish for steady and continuous supply of parts without compromising on quality.

Even the President and Managing Director of Ford India said : We have much better rapport with local suppliers of India as compared to the Chinese suppliers, so we will continue to source Indian parts though Chinese parts cheaper.

Likewise even Japanese auto majors are in support of the Indian Auto component manufacturers. In fact Nissan which has started a new facility in the outskirts of Chennai has signed several contracts with Indian suppliers to gain from the cost effective advantage. According to senior personnel of the company Indian suppliers are more skilled and easier to work with, if an alteration in design is required than it can made done sans any hassles.