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Photo: Reuters
Photo: Reuters

Auto vendors go vocal for local

The immediate focus is largely on localizing mechanical parts such as forged and machined components

MUMBAI : Automotive component suppliers in India have begun initial steps to de-risk their supply chains to further boost localization and reduce dependency on imports from China, said officials from six large tier-I suppliers.

This comes amid supply chain disruptions caused by the coronavirus pandemic that originated in China and the recent worsening of ties with the northern neighbour following a deadly border clash between soldiers of the two countries in June.

The immediate focus is largely on localizing mechanical parts such as forged and machined components and lightweight polymer-based parts, referred to by the officials as low-hanging fruits that could be localized in a short period.

However, the dependency on China for electronics and electrical parts, semi-conductor-based components, tooling and moulds, and some specific raw materials such as magnets (used in electric motors) and others will take time, said officials at three of the companies cited above.

Vinnie Mehta, director general at industry body Automotive Component Manufacturers Association of India (Acma), said parts required to meet Bharat Stage-VI emission regulations would see increased localization over the next few quarters. Such parts, including electronic fuel injection systems and catalytic converters, are currently sourced from China.

“The process of looking beyond China and to de-risk supply chains began as early as February (when supply disruptions began due to the coronavirus outbreak in China) and it is gradually gaining momentum. However, this cannot happen overnight," said Mehta.

“Certain automotive components are imported from China purely on the back of cost competitiveness and development capabilities. However, domestic capabilities need to be built to produce these parts. The auto industry, along with the concerned government departments, must work together to harness the low-hanging fruits beginning with the mechanical parts that can be localized first," Mehta added.

To be sure, while automakers have already started working with parts suppliers to localize parts ever since their production schedules got disrupted in January and February due to the shortage of parts supply from China, they believe that it will take at least 3-5 years to start local manufacturing of electronics and critical engine parts.

Suppliers of the driveline products such as differential bevel gears and electrical products including starter and alternator have plans to considerably reduce imports from China.

Vivek Vikram Singh, managing director and group chief executive at Sona Comstar, said that while the driveline business is fully localized, there are still some parts imported from China that are used in manufacturing electric motors.

“We have virtually no imports in our driveline business from China or anywhere. Chinese imports are largely in our electric motors business, where there is no availability of some parts such as magnets, some electronics and some other proprietary parts in India. These imports used to constitute 10-11% of our total material cost last year. This year, we have intensified our localization efforts and it now stands at 7% and our aim is to reduce it further to 2-3% in the next 3-4 months," Singh said.

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