Even as calls to boycott 'Made in China' products and do business without China, grow louder, auto manufacturers and component makers in India have sounded a word of caution. They said that a knee-jerk reaction to the current situation could be detrimental to the fortunes of an industry that is highly dependent on the Asian nation due to the huge competitive advantage it offers in terms of cost and speed. India’s $120 billion auto industry sources 8-20 per cent of its annual requirement from China, according to industry estimates.

“China offers competitive advantage in terms of speed and costs,” said Rajiv Bajaj, managing director at Bajaj Auto. While it is possible to find alternatives and concurrently also produce locally, it will be a long drawn strategy and cannot be done overnight, said Bajaj.

“As a global company we need experiences from various markets across the globe in order that our understanding is complete. It doesn’t matter whether we are making or selling. For that reason, I don’t see us moving away (from China) as of now,” he said.

Bajaj Auto and its suppliers source components, including alloy wheels and transmission components worth Rs 1000 crore from China.

In spite of 10 per cent duty and a higher logistic cost sourcing from China is cheaper than procuring the same part in India and on an average leads to savings of 12-15 per cent for companies, said industry officials.

Deepak Jain, president, auto component manufacturers association (Acma) echoed Bajaj. “As an industry we need to have a very measured approach and not resort to knee-jerk reaction," he said.

“Any knee-jerk reaction will only hurt us and not China. We cannot suddenly say from tomorrow we have to increase import duty to 25 per cent,” said an official at a large auto company, oncondition of annonymity.

India’s auto component industry imports components worth $17 billion annually, of this about $4.5 billion or 27 per cent comes from China, said Jain. “While we need to be self reliant, it’s a long term journey,” he added.

The outbreak of Covid-19 in China in January exposed the danger of relying too much on one region. Since then there’s a de-risking strategy in place at most companies. All companies are therefore, looking at “China plus one strategy,” said Jain, adding that India currently doesn’t have the competitiveness in terms of scale and cost which China has. "We need a sustainable supply chain. We have seen through the Covid experience the complex and integrated nature of supply chain,” he added.

A top official at an auto company, who declined to be identified, said, developing a second supplier source would happen in a big way, adding that the industry sourcing from a single source was fraught with risks.

“More and more companies are going to look at two sources – from two different countries. Even in India I will not want to source all parts from one region,” he said. But he was quick to add that it would not be done in a hurry and be done only after normalcy is restored post the pandemic.

“The nationalistic feeling will not last beyond two months. After that we’ll all get back to buying everything from agarbattis and toys to chappals. It will not lead to long term change in buying habits,” said the official cited above.

Experts agree that matching China’s scale and costs will be a long drawn effort. "Given the huge reliance India’s industries have on China, finding an alternative source that can offer the same scale and cost will take several years,” said an analyst at a consulting firm. "While it’s an opportunity for the auto component makers, there has to be a nuanced approach. It will require joint efforts by the auto makers, suppliers and regulators," he added.