Prime minister Narendra Modi's China visit likely to boost auto component trade

The automotive component bilateral trade between India and China is likely to get a major fillip when Indian prime minister Narendra Modi visits China later this month.  

Prime minister Narendra Modi is to hold bilateral meetings with the Chinese top leadership and participate in business events between May 14-16. With the prime minister taking the message of ‘Make-in-India’ – a national programme aimed at promoting local manufacturing and exports – to other countries, industry sources say the China visit will help improve the auto component sector trade between the two countries.

Although at present there is a trade imbalance, domestic component makers believe that the government’s Make-in-India programme will attract many Chinese companies in the near future.

In 2014, India-China trade stood at US$ 65.50 billion but the trade surplus is hugely tilted in China’s favour. China’s investments in India or imports from India are miniscule compared with other countries. But the trend seems to be changing after Chinese president Xi Jinping visited India in September last year. His India visit saw Chinese companies make commitments to make US$ 20 billion investments in the Indian manufacturing and infrastructure sectors.

The status on this investment commitment is likely to be discussed during the Indian prime minister’s talks with Chinese counterparts, a government official told Autocar Professional.  A cross-section of the Federation of Karnataka Chamber of Commerce Industry (FKCCI) members said that both India and China should shift their focus from an import-export relationship to that of investment as it is time for many Chinese auto component makers to set up production units to address the need of their Indian customers.

In 2013-14, India imported US$ 2,672 million worth of auto components from China while it exported parts worth a meagre $ 314 million. However, the export volume has trebled in the past four years from $ 103 million in 2009-10.

Leading global events like Automechanika Shanghai, the world’s second largest auto aftermarket trade fair, have further increased the interest of component suppliers in both countries. It may be noted that as many as 39 Indian component manufacturers participated at Automechanika Shanghai under the auspices of the Confederation of Indian Industry (CII) and the Automotive Component Manufacturers Association of India (ACMA) in two dedicated India pavilions.

Likewise, ACMA Automechanika New Delhi 2015, held in February, saw participation from over 200 Chinese companies, many of whom have evinced interest in setting up joint venture plants in India as it will help them supply cost-efficient products to their Indian customers.

ACMA last year conducted a study with the support of the Union Ministry of Commerce to understand and explore the opportunities in the Chinese automotive market. The findings reveal that the export opportunity for ‘Made-in-India’ components has been estimated at $ 20 billion; of this, the ‘addressable opportunity’ is about $ 7.5 billion.

Components such as pistons, con rods and other small engine hardware, cam and crankshafts, lighting and signalling equipment and shock absorbers feature in the ‘addressable opportunity’ list.