The Society of Indian Automobile Manufacturers (SIAM) and the Automotive Component Manufacturers Association (ACMA), with help from Ernst & Young, concluded a study last week that identified 12 key components with localization potential.
This aims to reduce imports by 15-20%, or 34,400 yen crore, over a five-year period.
These elements include transmission and steering, engine and its components, electrical and electronic components, and iron and steel, which account for over 75% of auto parts imported into the country.
Industry stakeholders said that in addition to securing a greater role in the global supply chain, the exercise will also help reduce reliance on China, which accounted for 32% of imports during fiscal year 20. Indian automobile manufacturers and suppliers imported components valued at lakh 1.75 crore (excluding imports of aftermarket components) during the period.
“The biggest advantage of ‘China Plus One’ is that now the whole world has seen that there shouldn’t be overdependence on just one region,” said a top industry executive. . “There is a massive exercise on (between SIAM and ACMA) to see what the potential localization opportunities are, where we need to invest and develop our capacities. ”
The study, concluded after in-depth interviews with 18 major original equipment manufacturers (OEMs) and 42 suppliers, said the industry should aim for a 2-5% localization across the 12 product lines identified during in the first two years, and from 17% to 21% over the next three years.
“The coronavirus epidemic has exposed vulnerabilities in supply chains and the risks of over-reliance on a region. This is the biggest learning and the biggest opportunity for us to move forward, ”said a second industry executive. “Overall, there is also a transition in mobility. Now is the right time to ensure, as we move smoothly towards new mobility, that we focus on creating more added value and localization. This helps to ensure that we are not dependent on imports, but that we are developing our capacity as an industry. ”
Of the 12 components identified for location, transmission and steering represent the largest share of imports with 22%, followed by electrical components and
at 16% and 13%, respectively.
Industry insiders said that with the increase in automatic transmission (AT) demand in the country, the share of transmission and steering in auto parts imports has increased. About 55% of these imports come from China, South Korea and Germany.
The study showed that automakers and suppliers in India can target 2-4% localization in 0-2 years and 18-22% in 2-5 years for these product lines.