Govt working on road map to promote India as auto export hub
Increased exports will be a boost to local auto makers as it is considered more lucrative than selling in domestic market
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New Delhi: The Union government is planning to draw up a long-term road map to promote India as a major hub for exports of automobiles and spare parts with a focus on Africa and Latin America.
The commerce ministry is in consultations with industry body Society of Indian Automobile Manufacturers (Siam) and leading auto makers to help prepare the plan, two people directly aware of the development told Mint.
The Engineering Export Promotion Council of India and consulting firm Deloitte Touche Tohmatsu India Llp have been offered the mandate to undertake a detailed assessment of the opportunities available for India’s auto industry in overseas markets, said the two people cited above who did not wish to be named.
“The commerce ministry wants to promote exports of automobiles and spare parts to at least 130 countries across the globe. Though most the leading companies export their products from India, there is still huge potential across the globe especially in Africa and Latin America," said the first of the two people mentioned above. “In India most of the global automobile companies are operating, so it will be hugely beneficial for them as well."
Increased exports will be a boost to local auto makers as it is considered more lucrative than selling in the domestic market alone. It will allow them to partly insulate their operations from any slowdown in domestic sales.
Senior officials from the ministry have already held several rounds of discussions with senior executives of some of the vehicle manufacturers and Siam, the two people said.
A key focus of the commerce ministry is to drive exports to countries such as Nigeria, Algeria, Egypt, South Africa and Kenya in Africa, and to Chile, Peru and Colombia in Latin America.
Also discussed were ways to drive exports to West Asian countries such as Saudi Arabia and Southeast Asian nations such as Indonesia, Philippines, as well as Australia, said the two people cited above.
“Some of the manufacturers export to countries in Latin America and other destinations but the number of vehicles exported is nowhere near the potential," said the second person aware of the development. “This move will also earn invaluable foreign exchange for the government. For example, the entire automobile market in Australia depends on exports. So, if we can further increase our exports there through certain agreements, then it will be beneficial for the country as well as the companies."
Automobile exports jumped 24% year-on-year in the first half of this financial year to nearly 2.42 million units. Exports grew 16% in the last financial year to 4.04 million units, according to Siam.
With the introduction of the more stringent Bharat Stage VI (BS-VI) emission norms from 2020 and new safety norms from 2019, the standards of vehicles produced in India are likely to be on par with those in developed markets. Hence, the government believes it is imperative to promote India as a global manufacturing and export hub for automobiles.
“In the years to come, automobile exports to the developed markets will decrease since demand there has softened due to a host of factors," said Puneet Gupta, associate director at IHS Markit, a market research firm. “Also, more focus on exports to markets like ASEAN (the 10 nations of the Association of South East Asian Nations), Latin America and West Asia makes sense since vehicles manufactured in India can cater to the demand in those geographies. Also, with the introduction of BS-VI emission norms, diesel vehicle sales in India will reduce substantially. Manufacturers can then use the capacity for exporting the vehicles."
Commerce minister Suresh Prabhu, during a speech at Siam’s annual convention on 6 September, hinted at such a move.
“Our automobile exports are increasing despite global headwinds and we need a concrete action plan to promote our exports. Only 8% of our exports go to Africa and we need to change this. We are also trying to ensure that the component industry’s interests are also taken care off," said Prabhu.
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