NEW DELHI: Domestic operations of Germany’s premium automobile manufacturing companies -- Mercedes Benz, BMW, Skoda Auto Volkswagen -- could be adversely impacted in the coming weeks as a consequence of India’s decision to put restrictions on import of certain type of tyres to reduce its dependence on China, two people directly aware of the development told Mint.
Most of these premium vehicle manufacturers use a certain quality of pneumatic tyres which are not manufactured in India due to low domestic volumes. To avert a possible halt in production, these German companies have come together to seek help from Germany’s Ambassador to India to resolve this issue. A meeting in this regard between government and German embassy officials took place last week.
In June, as border tensions with China soared, the Director General of Foreign Trade put import of certain types of tyres under restricted category which means auto companies will now need licenses to import such tyres in India. Most of these manufacturers are yet to get a license.
Most of the premium or luxury passenger vehicle manufacturers have significant quantities of imported content compared to the mass market ones, due to limited volumes of such vehicles in the Indian market. Also, most of these companies follow a global sourcing model for their factories across the globe and a decision to localise manufacturing of components depends on the opportunities in the domestic market and potential to export.
According to the first person mentioned above, the government is not yet clear when and how the licenses will be given and this delay can impact the production of vehicles of these manufacturers since most of them have limited inventory.
“Most of these premium vehicle manufacturers are reeling under the impact of covid -19 which has dragged volumes to the bottom. Now, delay in production might cause financial problems. The situation is serious, otherwise they wouldn’t have gone running to the Germany embassy for help. Import of Chinese tyres is a problem in the after sales market that too at the lower end of the spectrum," added the person requesting not to be named.