Indian automakers eyeing China as export hub

China could soon emerge a key export hub for Indian automakers, who are grappling with higher costs and fewer incentives back home.

TVS Motor Company recently said that it was planning to shift a large part of its export basket to China. Bajaj Auto already despatches the 100cc Boxer from its Chinese assembly facility to Africa; and is now keen on enhancing this activity.

From the company's point of view, its experience in the quality, cost and delivery department in China has been more than impressive. In terms of quality, it is ‘top-class'. There is a comfortable 25-30 per cent advantage in cost, and ‘absolutely no issue' on the delivery side.

What is especially critical is that there is a price difference of nearly 50 per cent between the Bajaj Boxer and a Chinese bike heading overseas. It is $500-600 free on board for the Boxer, but it is only $300-400 for locally-made China motorcycles.

Even assuming that of the $200 difference, $100 is a result of competitive pricing, the balance clearly stems from benefits that Chinese manufacturers enjoy.

As observers say, it is obvious that the Government supports its industry in China. The situation is increasingly turning the converse in India where big exporters are irked by the Centre's planned move to withdraw the duty entitlement passbook (DEPB) scheme by September. Here, they are reimbursed the duty paid on imported raw material used in products exported.

“It is not as if we want any special benefits or subsidies. I do not need a crutch for support. But why place a boulder on my shoulders?” Mr Rajiv Bajaj, Managing Director of Bajaj Auto, said.

His company is the largest exporter of two- and three-wheelers from India. While shifting the entire production to China is clearly not a pragmatic option, the levels of sourcing could increase significantly in the short term.

Reports have also been doing the rounds that Mahindra & Mahindra could be inclined to follow a similar strategy for its tractor export business thanks to the fact that it already has a strong foothold in China. Not so long ago, Hyundai had big plans to ship i20 from India to overseas but changed the base to Turkey because the cost structure was not working out in its favour.

Within the manufacturing industry, the levels of disillusionment are increasing rapidly. Concerns have already been conveyed to the Government that Indian companies are investing more overseas because conditions back home are just not conducive any longer. Sources say that as this trend gathers momentum, the think-tank in Delhi may have to do some serious introspection on the road ahead.

“It possibly has not sunk in with policymakers that the manufacturing sector has been playing a key role in creating jobs. Today, these slots will be exported and there will be more employment generated in China and other countries. All this is happening at a time when a slowdown is quite likely in India,” an industry official said.

COMMENT NOW