Indian automakers, under pressure to produce vehicles that meet the new stringent emission norms, are now grappling with the ripple effects of the tense border standoff between India and China.
Imports of key spare parts from China are critical for manufacturing vehicles that can meet BS-VI emission norms, but deteriorating relations between the two neighbours have heightened uncertainty about whether they can do so. India is mulling a broad range of curbs on Chinese imports.
Critical parts, mostly electronics and engine-related parts, have to be imported as Indian component makers lack the capability to produce them. Apart from that, the ones made in China are also cheaper.
While China remains the hub of vital global supply chains, the coronavirus pandemic that originated in the Chinese city of Wuhan had prompted India to look at ways to gradually reduce its dependence on China. But Beijing’s aggressive behaviour along the border has led India to consider immediately decoupling its economy from China.
Still, it’s unlikely that Indian firms will be able to quickly wriggle free from China’s vice-like grip on supply networks. In February, when factories in China were shut due to covid, vehicle makers such as Hero MotoCorp Ltd, TVS Motor Co. Ltd, Tata Motors Ltd, Mahindra and Mahindra Ltd and others had to cut production by 10% or more due to shortage of imported spares from China.
With relations between both countries souring since then, most automakers are now devising ways to locally produce some of these critical spare parts. However, these plans could take 3-5 years to be implemented, industry executives said.
Some imports from China are of spare parts that are used for making finished goods since they are not available elsewhere, and even if they are, then at a higher cost, said R.C. Bhargava, chairman, Maruti Suzuki India Ltd. “A lot of electronic parts which go into a car cannot be made in India. Those are not available in India but I cannot complete a car without those parts. But then, there are lots of things that can be made in India. We should now look at how to improve the quality and cost competitiveness of Indian products," said Bhargava.
The auto industry was pushed into upgrading to BS-VI standards in just three years and this did not allow it to build supply chains in India, said Rajesh Menon, director general, Society of Indian Automobile Manufacturers.