Auto Component Sector May See More Localization

Avishek Banerjee Apr 23, 2020

A major localisation drive is anticipated across the entire manufacturing ecosystem in the medium term feels Vinnie Mehta, Director General, Automotive Component Manufacturing Association of India (ACMA). “Most economies would look inwards henceforth and probably an emergent scenario would be regions with self-sustaining supply chains, in that sense there is a great opportunity for deep localisation. The Indian components and the vehicle industry will need to work collaboratively on this. We also need to aggressively market ourselves (as a nation) as several companies would like to consider a base other than China or even exit China. There cannot be any room for complacency or else the opportunity will be lost,” Mehta told BW Businessworld.

“Indeed, most automotive companies, across the globe, would try to reduce their overdependence on China, and here in lies the opportunity,” Mehta added.

For the record, the Indian auto component industry exports a quarter of its production annually, i.e. $15 billion. The US and Europe account for over 60 per cent of Indian exports. “We need to play our cards well to grab this opportunity. Having said that, at this juncture while we are locked-down, China is almost fully functional, so this may not happen immediately,” cautioned Mehta.

Also, Mehta added, the government needs to come to industry’s aid to ensure that our pricing is competitive, especially in light of the high costs the Indian industry has to suffer on account of capital, logistics, power and others.

Mehta underlined the fact that without the support of Central Government, many of auto components manufacturers will face closure and will be forced to down the shutters impacting lives and livelihoods. So what does the automotive component industry need from the government? “We have requested the government for the following key interventions: Support for Working Capital, relaxation of borrowing norms and statutory payments. We also need the norms for NPA recognition should be eased by extending moratorium on payment of principal and interest by at least one year among others,” he added.