Society of Indian Automobile Manufacturers (Siam) has commissioned consultancy firm AT Kearney to study what the domestic auto industry terms the "threat perception from Chinese vehicle imports".
The draft report has found that the threat perception is higher in the case of both light and heavy commercial vehicles and of two-wheelers -- scooters and mobikes. The threat perception in case of passenger cars is otherwise low. The study takes into account that the existing high protectionist import duties will be brought down sooner or later.
Sources associated with the AT Kearney study said that in China, commercial vehicles were primarily indigenously manufactured, because of which the cost structure is pretty flexible. There is also a trend of technology migration from joint ventures to indigenous manufacturers making the business more competitive. And many Chinese manufactures have borrowed technology from Japan and worked on cheaper models through reverse engineering with greater competence compared with similar manufacturers in India.
On the other hand, passenger cars are largely manufactured by joint ventures where the cost structure is more standardised.
Besides, the commercial vehicle sector is expected to grow immensely over the next few years, the sources said. Commercial vehicle penetration as a population per $1000 of GDP is 0.65, which is nearly half of China's 0.13. In the UK, the population is a little over 3 per $1000 of GDP.
Backing this is the little investment which is going into the railways. Especially as the trend over the past few years suggests, there will be a lot of demand for road transportation and hence the demand for commercial vehicles will improve dramatically. Since Chinese manufactured trucks are produced with an enormous cost advantage, the threat to local players will be very high.
Siam director general Rajat Nandi said local companies might be soon bought over by bigger multinationals. Among the local manufacturers, Ashok Leyland has a tie up IVECO, a Fiat group company.
In case of two-wheelers, the society has already made a representation to the government on completely built unit imports. Companies, even multinational manufacturers, have raised concerns on several occasions about the advent of cheap bikes from across the border. Recently, two Chinese companies (one based in Hong Kong) have proposed to set up assembly lines in India and the volumes being proposed is mind boggling.
Nandi said AT Kearney was preparing the report for presentation at the society's annual general meeting in the first week of September. "It is a much larger issue since we are asking for an assessment of the global market," he said, adding, AT Kearney is also bringing in international experts to speak on the subject at the meet.
