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China eyes auto parts market

By Suveen K Sinha in New Delhi
January 17, 2006 10:54 IST
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Even as the Indian automotive component industry is raising the red flag over import of cheap vehicle parts from China, a delegation from the Chongqing province of China is here to look for business opportunities.

The automobile industry forms the core of Chongqing's economy. The province is home to 10 automobile manufacturers (cars, light commercial vehicles), 13 special vehicle makers (buses, tractors), 23 two-wheeler makers and 500 component manufacturers.

India's biggest car show

The delegation - headed by one Ms Yin, the director of trade, Chongqing - held meetings with a large number of Indian automotive component companies.

"They came here to look at India as a market for auto components and how to address this market," Ashok K Taneja, president of the Automotive Component Manufacturers' Association, told Business Standard.

Those who attended the meeting say the Chinese delegation offered to provide technology if an Indian company wanted to set up, say, a unit to make cylinder heads. It also expressed willingness to forge a partnership. However, the delegation did not talk about an Indian company setting up, or helping to set up, a unit in China.

Of late, Indian automotive component makers have been uneasy over Indian vehicle-makers sourcing Chinese components which, even after paying 15 per cent customs duty, work out to be about 10 per cent cheaper than the same components made by Indian companies.

Leading Indian commercial vehicle and two-wheeler-makers are believed to have placed large orders for made-in-China components. Interestingly, the tenures of these contracts are short, about three months, allowing price revisions by the Chinese suppliers at a short notice. The norm in the industry so far has been for one to three years.

"Indian automobile makers are serious about pursuing a strategy of importing components from China even though they know that it may not be sustainable in the long term," said an Indian component maker.

The ACMA, in fact, claims that the Union government has agreed to institute a study into the alleged dumping of automobile components in India.

Import of wheel rims and steering suspension systems from China have surged in the last few months. While imports from China have been strong since 2002-03, a marked shift in the bilateral trade, favouring China, emerged in 2005. In 2003-04, while China's imports from India were of Rs 107 crore (Rs 1.07 billion) to India were a notch lower at Rs 91 crore (Rs 910 million).

This balance of trade shifted in the previous financial year, in which exports to China from India were only worth Rs 88.45 crore (Rs 8.84 million), while imports from China shot up to Rs 140 crore (Rs 1.4 billion). Between January and August 2005, the tilt was sharper, with a trade balance of Rs 98 crore (Rs 980 million) in favour of China, with imports from China at Rs 189 crore (Rs 1.89 billion).

According to Taneja, the dumping of components from China could become a threat to the Indian component industry's vision to emerge as a $40-billion business by 2014.

According to the ACMA, the industry is likely to close the current financial year with a total turnover of $10 billion, including $2 billion in exports. Last financial year, the total size of the industry was $8.7 billion, of which $1.4 billion came through exports.

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Suveen K Sinha in New Delhi
Source: source