Union Minister of Commerce and Industry Piyush Goyal on September 12 said the domestic automobile industry has grown by “leaps and bounds” and has become self-sufficient in a “ big way.” However, he said there are certain automobile manufacturers which continue to import components despite having alternatives in the domestic market. The minister said some stringent measures need to be taken to clamp down on imports.
“We still have certain companies, who by choice, prefer to import. We still have certain companies who may not be themselves importing and show a greater degree of indigenisation on their records. But the moment we go down one or two levels into their supply chain, we'll find them still dependent on imports often dictated by the parent companies (as to) from where this component supplier will source, the pricing at which will be sourced,” stated Goyal while addressing the 63rd SIAM annual convention in New Delhi.
While Goyal didn't specify the names of the OEMs and their countries of origin, he had indicated early this year at the Asia Economic Dialogue that two South Korean auto manufacturers have cost India “billions of dollars” in trade deficit. The minister had contended that since India has a Free Trade Agreement (FTA) with South Korea, it enabled companies like Hyundai and Kia to import certain components like high-grade steel for their cars liberally from the country of origin.
Reiterating his concern, Goyal added, “There is a question mark, on transfer pricing and whether you're getting a fair deal between two countries. And I would urge all the players of the auto industry to introspect on this. I personally believe at some point the government will also have to get into greater detail on this. It will be important for us also to know whether countries where Indian steel is not getting free access, or adequate market opportunities should be permitted to send steel into India, it's possible the government may have to take retaliatory action if we find that there are no equal opportunities on both sides.”
He also stated that such measures will be taken despite OEMs making huge investments in India. In his view, goods are available at very competitive prices and have very high quality within India.
In an oblique reference to the government's plans to curb exports from China, he stated, “Only because a particular company prefers to buy from their supplier, sometimes in a non-friendly country. While the investment comes from Country X, the components don't necessarily come from Country X, they come from another supplier of the parent company in a third country, which is certainly not what is helping the Indian economy. So I would rather have a company get a larger market share in India, who's also helping create jobs in India, helping create economic activity.”
However, he stated that he has no problem with importing a particular product if a similar quality product is not available in India. But he will be tempted to take stringent measures against companies that are not giving an equal opportunity to India.
Meanwhile, Goyal expressed satisfaction that the auto industry’s import dependencies have come down by two to three percent.
“Today, the middle class seeks value and pride in their automobile choices, driving significant market demand indigenously. We must encourage significant investment in electronic components and products made in India, boost R&D within our nation, and nurture domestic industries. We must also reduce our dependence on imports and should rather trust our localised capabilities within our own ecosystem,” Goyal stated.
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