Chinese in Auto component industry

As if the woes on both the domestic front as well as exports weren't enough, Indian auto component manufacturers now have to contend with large scale imports from China. As per a leading daily, imports of auto components from China have grown at a mind boggling compounded annual growth rate of 100% over the last few years and now poses a real threat to the Indian manufacturers. And any chance of competing vanishes into thin air when one considers the fact that the landed price of many of these components are on an average 35% lesser than components sourced locally. Particularly hit are those products where customisation is low and there is a significant after market like bearings and fasteners. Infact, Bharat Forge, India's largest manufacturer of forgings recently filed an application alleging that in the December 2008 quarter, Chinese imports accounted for the entire supply of a certain kind of auto components. It is on grounds such as these that the industry body ACMA is seeking a hike in import duties as they feel the current rate of 10% is on the lower side. The authorities indeed need to act fast.

Here comes another Chinese shocker. It's not just the auto component industry that is bearing the imports brunt. As per the RBI, China has emerged the largest source of India's imports over the last two years, accounting for a 10% share. Little wonder, items ranging from fabrics and nylon tyre chords to yarn and steel products have seen anti-dumping duties imposed on them by the government. The new found love for India does not have to do with the country's changed strategy. The fact remains that US and Europe, China's key export markets are in the doldrums and hence, the surplus production is finding its way into India. However, you as an investor need not be worried if the firm that you've invested in enjoys strong competitive advantages and makes products that do not have ready substitutes. But manufacturers of commodity products will surely have their hands full.

 

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