Business Overview (Introduction)

According to a report by research and rating agency Crisil, China more than tripled its share of Indian automobile part imports to 21 per cent in 2012 from 6 per cent in 2006. Europe is the largest exporter of automobile parts to India, accounting for 27 per cent of total imports.

About 60-65 per cent of the Chinese imports are critical parts like engine pistons, transmission drives, and steering and body components.

Imports from Asian countries especially China have been rising for the simple reason they make them cheaper the Crisil report said. The difference in price ranges from 20 per cent for low-value plastic components, springs and fasteners to 50 per cent for pistons and other engine components, the report added.

India's share of global automobile parts exports remained below 1 per cent over the last decade because component makers have not been able to catch up with other low-cost Asian destinations. Exports in 2015 are expected to be less than a quarter of the $33 billion target set by the Auto Component Manufacturers Association in 2003-04.

Raw materials are cheaper in China than in India, making imports more competitive. Indian automobile component makers have to import several grades of steel and aluminium, which escalates costs.

Capital expenditure in China, too, is lower because tools, dies and equipment are easily available and also due to lower automation. According to industry sources, Chinese companies set up facilities to make some engine components at less than a third of what it costs in India.

Automobile makers localize heavily only when a product is a runaway hit. Despite years of operation in India, some foreign companies do not have 85-90 per cent locally manufactured components in their vehicles.