New Delhi: Indian automobile manufacturers are staring at yet another disruption in manufacturing as delivery of spare parts from China is getting delayed due to enhanced inspection of consignments at Indian ports, three people aware of the developments told Mint.
Carmakers usually carry stock of around two months, but due to the lockdown in April and May most of them couldn’t import adequately.
Indian authorities have imposed strict checking of Chinese consignments in the aftermath of the border standoff, which claimed the lives of 20 Indian soldiers. Indian automakers import crucial engine and electronic parts like fuel injection systems, catalytic converters, alloy wheels and other semiconductor based parts from China and if the delay continues then most of them will face further trouble in ramping up production, the people cited above said.
Parts like lithium-ion cells and battery packs and electric motors are also mostly imported from China.
According to the first person mentioned above M G Motor India Pvt Ltd has consignments stuck at Chennai and Vishakhapatnam ports and the company is likely to face some trouble with production schedule in coming weeks if the situation doesn’t get resolved.
“MG Motor is one of the many companies who are concerned about the potential impact of the current scenario at the ports. In the last couple of months most vehicle manufacturers couldn’t import adequate parts. Subdued demand in the domestic market though will provide some comfort to the auto makers," added the person.
Tata Motors Ltd, is another automaker that is facing issues related to the spare parts for its electric vehicles due to congestion at the ports, said the second person mentioned above.
“The production of electric vehicles at Tata Motors is also likely face some disruption due to the current impasse and the same is expected with the internal combustion engine vehicles as well. Most of the other manufacturers will also face the same in the coming weeks if the situation is not resolved. The auto sector is better placed, though, compared to pharmaceuticals or electronics sector, but the impact here will be felt with a lag, if the delay continues. Most manufacturers are now in the middle of ramping up production post lockdown," said the person requesting anonymity.
"We have very few components that are imported directly from China. These usually include Cast wheels, machine parts and forgings. We are de-risking ourselves by building inventory and developing alternate sources quite rapidly. However, some of our suppliers have significant exposure to China and the impact of immediate restriction on import of parts from that country is being assessed," said a spokesperson of Hero MotoCorp.
If the Indian authorities continue with their inspection of Chinese goods, with the limited manpower at the ports, manufacturing operation of companies like Tata Motors, Mahindra and Mahindra, Bajaj Auto, Hero MotoCorp, TVS Motor Company, Hyundai Motor India Ltd and others are likely to be impacted. This, because some of the components, directly or indirectly, are imported from China.
Most of these manufacturers are still trying to sort out issues in their supply-chain, in order to ramp up production close to the pre-Covid-19 levels.
Industry body Society of Indian Automobiles Manufacturers reached out to the centre, last week, to resolve the current situation at the ports, according to the third person mentioned above.
"Inordinate delays in clearance due to congestion at ports could eventually impact manufacturing of vehicles in India. The industry is piecing itself together as growth is limping back; any further disruption at this juncture is best avoided," said Rajan Wadhera, President, SIAM.
In February, when factories in China were shut due to covid, vehicle makers such as Hero MotoCorp Ltd, TVS Motor Co. Ltd, Tata Motors Ltd, Mahindra and Mahindra Ltd, Hyundai Motor India Ltd and others had to cut production by 10% or more due to shortage of imported spares from China.
According to industry experts the impact is unlikely to be as adverse this time, unless the government resorts to an increase in tariff on import of parts from China.
The automotive value chain is a highly complex, integrated and interdependent one, and non availability of even a single component can lead to stoppage of the vehicle manufacturing lines, said Deepak Jain, president, Automotive Component Manufacturers Association of India (ACMA).
“Post the lockdown, production in the component industry is gradually picking up in tandem with growth in vehicles sales, it is therefore in the best interest of the industry and the economy that any further disruptions are best avoided," added Jain.
Spokespersons of Tata Motors and TVS Motor Company didn’t want to respond to queries sent by email on Sunday. Queries to Hero MotoCorp, MG Motor India, Hyundai Motor India ltd and Mahindra and Mahindra Ltd remained unanswered.
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