There was a call to collaborate, monitor capacity and take stock of mutual competencies, given the view that organisations were working independently and not pooling resources.
This first meeting with the automotive industry stakeholders was part of a long-term road map aimed at increasing localisation of production.
PUdaily, Shanghai —— MUMBAI: Top officials at the Department of Heavy Industry recently met stakeholders of the automotive industry to discuss their localisation initiatives, amid the government’s push on Atmanirbhar Bharat (self-reliant India).
Representatives of the Society of Indian Automobile Manufacturers, Automotive Component Manufacturers Association (ACMA) of India, state-run BHEL and HMT, testing agencies and automakers including Volkswagen, Tata Motors and TVS Motor attended the meeting chaired by Department of Heavy Industry secretary Arun Goel, people in the know said.
This first meeting with the automotive industry stakeholders was part of a long-term road map aimed at increasing localisation of production. There was a call to collaborate, monitor capacity and take stock of mutual competencies, given the view that organisations were working independently and not pooling resources.
“It is critical for Motown bodies to come together to support each other at this time,” one of the attendees told ET.
“The government doesn't want import dependence but import substitution. Localisation is a must as it brings predictability, especially with exchange-rate fluctuation,” Toyota Kirloskar senior vice president (sales & service) Naveen Soni said. He said seven key suppliers of the automaker had set up their facilities near its factory outside Bengaluru, which had helped reduce logistic costs.
There is a view that resources of PSUs such as BHEL and HMT, including their real estate and pool of engineers, could be used. The department is trying to map the resources to see how they can work together, said the people.
“We need specific localisation efforts for electronic components as we cannot rely only on imports. And, there is an opportunity here to localise by pushing for reskilling of these sectors,” Frost & Sullivan vice president (mobility practice) Kaushik Madhavan said. Collaboration is a must to build the ecosystem, he said.
While two-wheeler manufacturers have a comfortable level of localisation, some of the car manufacturers are struggling to implement their plans to localise, especially given the cost to set up facilities and time limits.
“To attract companies to produce locally, we need to be competitive and reduce costs compared to other countries,” ACMA director-general Vinnie Mehta said. “Having said that, localisation and new product development cannot happen overnight. It takes 2-3 years to develop new products and test and validate them thereafter.”
Suppliers are taking this step to safeguard against any global sourcing fluctuations affecting the availability of critical parts.
While ancillaries are bullish about the localisation initiatives, a section of auto majors who were earlier against this idea are also now embracing the local manufacturing route. Companies like Mahindra & Mahindra, Maruti Suzuki and Toyota are supporting component makers in the endeavour to lower import dependence. Mahindra has reduced dependence on imports at the tier-1 level to low single digits.
The $57 billion Indian auto component industry has started steps towards deep localisation to de-risk business from Chinese imports. The recent border standoff between India and China will likely hasten this process. India imported automotive components worth $4.75 billion from China in fiscal 2019, up 7% from the previous year, according to ACMA figures. Companies have maintained that for certain parts, if the price difference is more than 5-7%, import does not make it that cost competitive.
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