Auto companies ready for localisation drive

With top automakers worldwide embarking on a ‘China Plus One’ de-risking journey, India’s motown is eyeing twin localization benefits: slashing imports of critical vehicle content by up to a fifth in five years, and ensuring a bigger future share of the global parts business. The Society of Indian Automobile Manufacturers (SIAM) and Automotive Component Manufacturers Association (ACMA), with the help of Ernst & Young, last week concluded a study that identified 12 key components with localisation potential. This is aimed at cutting imports by 15-20%, or ₹34,400 crore, over a period of five years. 85163502These items include drive transmission and steering, engine and engine components, electricals and electronic components and iron and steel, which account for more than 75% of auto parts imported into the country.Industry stakeholders said apart from ensuring a larger play in the global supply chain, the exercise will also help reduce dependence on China, which accounted for 32% of imports in FY20. Indian automakers and suppliers imported components worth ₹1.75 lakh crore (excluding aftermarket component imports) in the period.“The biggest benefit of ‘China Plus One’ is that now the whole world has seen there should not be overdependence on any one region,” said a top industry executive. “There is a massive exercise on (between SIAM and ACMA) to see what potential localisation opportunities are there, where we need to invest and grow our capabilities.”The study, concluded after extensive interviews with 18 major original equipment manufacturers (OEMs) and 42 suppliers, said the industry should target localisation of 2-5% across the identified 12 product lines in the first two years, and by 17-21% over the next three years.“The coronavirus outbreak has exposed the vulnerabilities of the supply chains and the risks of over-dependence on one region. That’s the biggest learning and opportunity for us going forward,” said a second industry executive. “Globally, there is also a transition in mobility. It is an opportune time to ensure, as we smoothly transition to new mobility, to focus on creating more value-addition and localisation. This is to ensure we are not import dependent, but grow our capability as an industry.”Of the 12 components identified for localisation, drive transmission and steering accounts for the largest share of imports at 22%, followed by electricals and engines at 16% and 13%, respectively.Industry insiders said with the surge in demand for automatic transmission (AT) in the country, the share of drive transmission and steering in auto parts imports has been rising. About 55% of such imports happen from China, South Korea and Germany.The study has held automakers and suppliers in India can target localisation of 2-4% in 0-2 years, and 18-22% in 2-5 years across such product lines.

from Economic Times https://ift.tt/3CxnJir