Auto component makers in India are looking to shore up exports and cut down imports as they seek to reduce vulnerability to currency swings and become self-reliant.
Top officials at various auto component firms said exports, which anyways have been intrinsic to the overall strategy, would increase at a rapid pace over the next two to five years. They, however, would continue to import high volume, low value parts since making them in India is financially unviable given the high logistics and power costs.
F R Singhvi, joint managing director at Bangalore-based Sansera Engineering said his firm, a manufacturer and supplier of critical engine parts and aggregates to auto companies, was looking to increase the share of exports in its revenue to a third by FY22 from the current 28 per cent.
“To me, being atmanirbhar means higher exports and lesser imports. You cannot make everything in India as it’s not viable,” said Singhvi. "High volume, low value parts that can be sourced from countries like China at a cost which is 1.5 times less than India, will always be imported as India cannot match the scale and costs of that country," he pointed out, citing an example of alloy wheels that are imported by automakers in large numbers.
“We would rather focus on developing know-how of local production of technology intensive parts that are in high demand in both domestic and global markets,” said Singhvi.
The plans to accelerate local procurement and boost exports come amid the clarion call given by Prime Minister Narendra Modi to make India Atmanirbhar. It is also being fuelled by the geopolitical tensions with China, which has been one of the key import destinations for manufacturers across several sectors.
India’s auto component industry imported parts worth Rs 1.09 trillion in fiscal 2019-20 against Rs 1.23 trillion a year ago. It constituted 31.2 per cent of the turnover, according to Auto Component Manufacturers Association (Acma). Exports for the same period stood at Rs 1.02 trillion against Rs 1.06 trillion a year ago, accounting for 29.4 per cent of the turnover.
Ashok Taneja, president and managing director at Shriram Pistons & Rings (SPR), says the company has been working towards becoming self-reliant for a while now.
At the crux of the strategy is to become a “globally competitive supplier and a supplier of choice for the OEMs (original equipment manufacturers) globally.” His firm that presently gets a fourth of its revenue from exports is looking at increasing it to 30 per cent in the next three years.
SPR, he added, has been working towards achieving sustainable cost competitiveness. A sharper focus on R&D, design, development and testing has helped the firm generate intellectual property rights (IPR). “We are not harvesting but creating technology,” said Taneja.
As supply chains shift, India could expand its share in the global auto component trade to 4 to 5 percent by 2026, emphasizing a targeted export expansion and import substitution program for key components, McKinsey said in a recent report titled “Shaping the new Normal.” Tier one suppliers could work closely with Tier two suppliers to build the necessary technological and manufacturing capabilities, it said.