Import content in India’s most localised car would be at least 15%: Gurpratap Boparai3 min read . Updated: 21 Oct 2020, 10:12 PM IST
Even more developed nations that manufacture cars at a greater scale than India import critical parts and do not make everything on their own, argues Gurpratap Boparai, managing director, SAVIPL
Even as automobile manufacturers are looking to boost localisation under central government’s Atmanirbhar Bharat initiative, the top executive at Skoda Auto Volkswagen India Pvt Ltd (SAVIPL) believes that the domestic market has not reached a scale where localising every part makes a business case.
Even more developed nations that manufacture cars at a greater scale than India import critical parts and do not make everything on their own, argues Gurpratap Boparai, managing director, SAVIPL.
Edited excerpts from the interview:
How do you see the festive season panning out for Skoda Auto Volkswagen India?
The festive season is building up very well. In the build up to this festive season, our wholesales are matching up with our retail sales. So we are not over producing and stocking up but whatever we are producing gets shipped to the dealerships and sold in the market.
Are there still supply chain or Covid-19 related constraints in manufacturing?
Even as the suppliers have managed to ramp up production as per the OEM mandates, some covid-19 related constraints still exist. For example, the number of people with which we can operate a plant, restrictions on transportation, we still utilize 50% of bus capacity to transport them to work. So there are some logistical challenges but disruptions due to local lockdowns have disappeared.
Do you think availability of vaccines would drive consumer sentiments in the market? How complex is it to time new product launches in the market accordingly?
It is extremely difficult for any manufacturer to time its product launches anticipating surge in customer sentiments on the availability of vaccines. People may say so but these are industrial plans put in action years in advance. You can shift things only by a few weeks but not more than that because there are a number of things riding on that and you can’t really postpone launches just like that.
That said, work on new projects could be delayed. But whatever has been set in motion, it does not make economic sense to postpone or delay new product launches. On vaccines, given we have them by December, if 30 crore people are going to get vaccinated through 2021, that’s only one-fourth of our population; I don’t know that’s going to change the consumer sentiment.
However, I believe that the sentiments will improve when fewer people get seriously ill and get hospitalized. I think we are heading towards that. Atleast in the urban areas now the rate of infection is dropping.
More than sentiments, it is the overall economic growth that will determine the growth of the auto industry. The projection for next fiscal is 8% GDP growth, which is of course on a lower base of current fiscal. If we are able to sustain 8% GDP growth in FY2023 then I would say we are on a good track.
How important is ‘Make In India’ and ‘Atmanirbhar Bharat’ for Skoda as a group in India?
We have cumulatively exported half a million cars from India. This clearly means we firmly believe in the government’s Make In India vision. At the same time, not everything can be localized in the short to medium term. It’s a globalized world and there are competencies and competitive advantages for certain technologies in certain geographies. While it depends on how the geopolitics plays out, in an ideal world there should be free movement across boundaries.
In any case, we have high duties on completely built cars and I don’t know if levying more duty on components would help the cause of localisation. It is more about reaching a higher scale.
The Indian auto industry has not reached a scale where localizing everything makes sense. Even OEMs who make a million vehicles in India have not reached 100% localization.
Secondly, if you look at more developed nations that manufacture cars at a greater scale than India, even they import critical parts and do not make everything on their own.
How is the company coping up with supply chain issues, especially where it has to localise imported parts?
As far as it is about the current generation of cars, they are reaching a point where doing any further localization does not make any business case.
Under the new generation of cars (under India 2.0 project), from day 1, we will have a very high level of localisation, and we remain on track with that. The import content in the most localized car in India would be atleast 15%-18% including imported parts supplied by the vendors.