China factor makes Indian auto parts makers see red

They were everywhere at the Delhi Auto Expo this year — over 100 of them. The Chinese auto component makers recorded the biggest presence among all foreign automotive players in the event. With good reasons.

The Automotive Component Manufacturers Association of India (ACMA) says imports of components from China has registered a 97 per cent compounded annual growth rate over the past seven years. The reason why China is making inroads is simple: According to a report by research firm A T Kearney, the 12,000-odd auto parts companies in China are far more competitive than the 5,000-plus companies in India due to several factors, including lower wages, steel price, power tariffs and taxes.

Rajendra Kankaria, chairman, Uma Precision, says: “At least in precision components, there is no sign of any threat to Indian suppliers on the basis of quality. Precision components require special attention, as these form critical parts in any machine. Even in terms of cost, we match them or are even lower than them.”


Besides, vehicle makers in India – comprising cars, two-wheelers and commercial vehicle making companies – prefer steady and uninterrupted supply of parts that could help ramp up production in the shortest period of time, while not compromising on quality to avoid any lag period.

Michael Boneham, president and managing director, Ford India, says: “There is a significant cost advantage in India on components that is second to none. The understanding that we have with our local suppliers is much stronger and superior than we could have had with a Chinese counterpart. We will continue to source Indian parts even if the same parts are sold by Chinese companies at a lower cost.”

Similarly, Japanese auto major Nissan, which is establishing a new factory just outside Chennai, recently signed several supply contracts with Indian suppliers to gain from the low-cost advantage. The new facility will start production this month with the first product being the Micra small car.

A senior executive of the company says Indian suppliers are much more adept and easier to work with, as any alterations in design of the component can be made without much hassles.