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ETAuto Originals: Will China fade away on the Indian automobile turf?

China is the single largest nation impacting Indian auto business, as it’s the biggest destination for sourcing and international purchase. Besides, fresh direct investment now is coming only from cash-rich Chinese automakers, who’s next target for inorganic growth is India that carries the potential to emerge as the largest globally in the times to come; next only to China, currently the largest in the world.

New Delhi: The skirmish with China could severely impact Indian automobile sector that is increasingly sourcing from the neighbour to remain cost competitive and has witnessed steady increase in imports over the past few years to quench its needs for quality technical components and critical spare parts.

China is the largest partner with regard to components and electronic parts imports, which is double of Europe and almost three fold to the US shipments each year. It has not just increased its presence unequivocally, but is on a constant spree to expand its presence on extremely competitive pricing, stringent scheduling and the quality quotient.
Going ahead it’s only going to increase the dependence on the Indian automakers, especially the indigenous Tata Motors and Mahindra & Mahindra that are strapping their latest vehicles with more and more of these essential components, coming from China.

“We don’t import because we like to, but because we have no choice.”

RC Bhargava, Maruti Suzuki Chairman

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Another trend that has caught the attention in the market is the lateral entry of Chinese automakers to India passenger vehicles market and electric buses business with as many as half-a-dozen brands and companies already marking their presence or soon heading for debuts.

The moneyed Chinese carmakers like SAIC that owns MG Motor India, Great Wall Motors, Changan, Geely Automobile, BYD, Beiqi Foton, are known brands in the market and many are close to entry.

The recent incidents at the border have made many of these already skeptical of their presence here in the market. Most of the Chinese players are currently keeping a low-profile to avoid any market backlash. This comes after China has been onely blamed for plunging the world into a complete mess with the globally fast spreading pandemic, now called Covid-19 that continues to plague the world economy and has hit India too pretty hard.

“It’s more than a challenge for the Chinese in India. Unlike telecom, they would be looking at new vistas in the mobility world that are quite challenging with global competitors from Japan or South Korea currently holding the fort,” says Arun Malhotra industry veteran and former Managing Director with Nissan Motor India. “I believe that the Chinese will go for a wait and watch mode to ascertain the situation on the ground before they plan any substantial move.”

Also, as they (Chineses) grow their business around the Indian market many of their suppliers and vendors are trying to set up shops in India to help bigger OEM’s operate smoothly and establish long-term operations. These have also gone slow in the recent past.

According to multiple sources in the market there has been a rush of many component and auto parts makers from China to assist their bigger OEM’s and also tap the Indian market.

World’s largest China has huge ambitions in Indian auto market

Most of the Chineses would become viable only when their retail operation business materialises, but till now only a few have been able to do that so far, making the large pipeline of investments unviable as of now.

Chinese sells close to 25 million passenger vehicles according to OICA, the international automotive body in 2019, the highest in the world for any country.

As a motoring journalist it was only in 2008, when I witnessed that the American financial crisis plunged the entire world into a major economic whirlwind, but China on its inherent strength emerged to the top of the automobile world given its manufacturing prowess and the steadily rising per capita income.

While most markets plunged and the American tumbled to less than half in terms of vehicle sales and lost its top mantle, the Chinese market doubled to almost unachievable 18-20 million unit sales by the year 2010. Remember India less than 2 million units-a-year in the same year, has barely been able to reach 3.4 million passenger vehicles that too in FY’2019.

China never looked back since then. And soon after its manufacturing might was capitalised by the Indian automaker, who began sourcing from China in a big way. From a few millions the automotive sourcing business fired into multi-billion dollar imports and has been surging since then.

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