Business standard reported that 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 said 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.
It said that "Asian auto-component makers have increased their share of Indian spoils, while those from Europe have clocked a decline, 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."
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 that 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."
Some of the Rajkot-based component makers pointed out that Chinese components are indeed capturing a sizeable chunk of the local replacement parts market.
Mr Vinnie Mehta executive director of Automotive Component Manufacturers Association said 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. Mr Mehta said that "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. It indeed is a cause of concern.”
Mr Mehta said 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. He said that "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."
Source:- steelguru.com
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