At a time when other automobile multinationals are discovering the benefits of India as a low-cost sourcing base, Honda Siel Cars India has decided to stop exports of spares from India. |
The Japanese company, which used to export components for the Honda Civic to the UK and for the old City to Thailand, recently stopped all exports to the UK. |
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"Component exports are not a priority for Honda in India. The focus area for them now is to meet the enhanced demand for Honda cars in the country. Even when it comes to sourcing the person who is doing it has a lot of options such as India or Thailand," said a source close to the company. |
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The company, which has been struggling to meet the demand for its flagship City, increased its production from 132 units to 150 units a day this month. The new Honda City, which was launched last year, still runs up a waiting list of around 1-2 months. |
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Industry observers point out that after stopping exports from India, Honda could now take a complete turn and import components from its Thailand facility. The company is already importing control panels and power trains for the Accord from Thailand. |
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The City comes with 70 per cent local components. Though the company has expressed its commitment to indigenise the car further, sources close to the company say that in future Thailand could play a big part in Honda's sourcing plans. |
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Even before the Indo-Thai free trade agreement (FTA) was actually inked many industry watchers had predicted that it would come as a blow to the domestic component industry. |
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"Besides being a low cost base for raw materials and labour the Thailand government's proactive role in luring big multinationals through a host of industry-friendly regulations will find most auto major considering the Thailand option more seriously," said an auto analyst. |
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Currently, there are five major components that fall within the tariff lines of the FTA and by 2010 there will be zero duty on export of components between the two countries. |
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