ET Intelligence Group: Driven by a glaring need to reduce dependence on a single source for raw materials, some Indian manufacturers are finding ways to tap alternative supply chains as a part of a strategy widely known as ‘China Plus One’.India imports merchandise worth around $70 billion from China annually, largely in sectors like consumer durables, auto components, pharma and electronics. The share of China in the country’s total imports is about 14%, the second-largest after the Middle-East.The list of Indian manufacturers planning to reduce exposure to imports from the Chinese includes Amber Enterprises, which is India’s largest contract manufacturer of air conditioners; auto component makers Endurance Technologies, Varroc and Gabriel; Hikal, which manufactures intermediaries for pharma and agrochemical sectors; contract manufacturer of personal and home care products Rossari Biotech; and agrochemical company Sumitomo Chemical India. Their aim is to reduce dependence on China by at least 10% and even to nil in some cases in the next few quarters.Endurance has started sourcing the bottom cases for aluminium front forks, which were earlier imported from China, from a local vendor. “Currently, a chunk of our supplies are imported from China. We are planning to reduce it to zero over the next few months,” said Anurang Jain, managing director, Endurance Technologies. The company recently won an order to supply alloy wheels and combined braking system from an automaker which was earlier importing those parts from China.The localisation at several Indian automakers has reached up to 90% and the balance imported raw material is primarily of electronic parts, which is difficult to localise due to lack of scale and capacity. However, Varroc Engineering, a supplier to automakers, has set up an electronic parts unit with an investment of Rs 100 crore. Gabriel India, a supplier of shock absorbers for auto companies, has developed in-house aluminium die tooling to have an alternative supply chain. At present, China fulfils nearly onefourth of India’s total imports of auto components.The domestic consumer durables sector imports nearly half of intermediate parts, including compressors, motors and printed circuit boards from China, which caters to 80-85% of total compressor demand and 95% of motor requirement for washing machines in India. Amber Enterprises, a maker of air conditioners (ACs), has started a motor unit to reduce its reliance on China. The company manufactures more than half of the contract manufactured ACs in India and one-fifth of the total sold in India.“The gradual increase in Customs duty on imported intermediates to promote domestic production and phased manufacturing practices may help reduce dependence on China; it may mirror India’s experience in the mobile phone market,” said Jasbir Singh, CEO, Amber Enterprises.The quantity and value of imported mobile phones came down by 64% and 57%, respectively, in the past three years, according to a reply in Rajya Sabha by commerce and industry minister Piyush Goyal.75462152Hikal, which generates 70% of the revenue from exports of active pharma ingredients, has customers scurrying for an alternative source of inputs amid the global disruption in supply chain due to the pandemic.“The cost factor, which made China a popular sourcing destination, has taken a backseat as clients are more concerned about the sustained availability of raw materials. This has opened a sizeable opportunity for us,” said Anish Swadi, president, strategy & business development at Hikal.Rossari Biotech has chosen the path of innovation to reduce exposure to imports of sanitiser dispensers from China. “We changed our packing of hand sanitizers to flip top from dispensers, this enabled us to deliver more than five lakh units and not miss on revenue opportunity when demand is sky-rocketing,” said Sunil Chari, managing director, Rossari Biotech. The size of the domestic hand sanitizer segment has grown to over ?500 crore from less than ?80 crore a few months ago, Chari added.
from Economic Times https://ift.tt/2SkGlgp
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