The Hindu Business Line : Auto components imports surge, exports dip

New Delhi, Nov 2 India may be reckoned competitive on the global map with regard to exports of auto components, but on the home front it is imports that are showing a higher growth. Contrary to popular perception, the latest figures from Directorate General of Commercial Intelligence & Statistics reveal that India is a net importer of auto components.

As per the latest official data for the year ended March 2007, India’s auto components imports have increased at a compounded annual growth rate of 31 per cent in 2003-06, faster than the country’s exports which grew by 29.7 per cent in the same period. In the financial year 2006-07, India’s imports reported a surge of 34 per cent CAGR as against exports at 16 per cent.

The imports mainly include wheel rims, ball bearings, gears and gearing components. However, some of the imported products are those that are either not manufactured in the domestic market like airbags or need high technology inputs.

The DGCIS data reports that except for the US and Canada, in the case of countries like China, Japan, Korea and Thailand, India’s imports have exceeded its exports. Among the major countries from which India imports auto parts, Korea emerges the largest followed by Japan, China and Thailand.

“Though China does not emerge on the top slot, the pace at which imports are surging, it could very well surpass other countries. The cost disadvantage that the Indian industry has to confront in terms of high power, raw material and infrastructure is about 10-15 per cent vis-À-vis Chinese competitors,” said Mr A.K. Taneja, President, Sriram Pistons & Rings.

Apart from these challenges, the inverted duty structure makes the import of raw material costlier than importing the finished product, putting the industry at a disadvantage, he explained.

The trend is expected to be compounded with the current appreciation of the rupee, with the Auto Component Manufacturers Association of the belief that the components exports graph would continue to move south.

“With companies having long term contracts with vehicle manufacturers, so far physical exports have not shown a slump. But with the dollar depreciating, companies signing new contracts would be affected with competition from other countries. This would further slow down exports,” said the ACMA, Director General, Mr Vishnu Mathur. At the same time, the rupee appreciation has made imports attractive which would lead to continuing trend of high imports, he pointed out.

However, the silver lining on the horizon is the plans announced by global majors to further enhance their sourcing from the country. General Motors has announced sourcing of components worth one billion by 2010, while BMW is in the process of setting up its international purchasing office in India.

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