The supply chain reliance on China needs to be taken care of, also the Union Government of India needs to take cognizance of the risks of dependence on foreign manufacturers.
The latest Global Trade Research Initiative (GTRI) report mentions that China’s dependence on EV components and other materials will increase as India announces low tariffs on electric vehicles (EVs).
The GTRI reports also shared concerns about the trade dominance of China in the auto sector as a more than quarter of India’s auto component imports already come from China.
And with the new easing of import tariffs Chinese firms will dominate the Indian auto manufacturing firms.
Alongside, the GTRI report shared concerns that apart from the Indian auto and EV sector high tariffs are strangulating the Micro, Small & Medium Enterprises (MSME) sector. The MSME sector currently is facing challenges in procuring parts and also having innuendo on exports.
India’s average tariffs are among the highest in the world which economists have pointed it as among the reasons for the lower competitiveness of the Indian manufacturing sector.
GTRI said that the imports could go up primarily as Chinese EVs are facing anti-subsidy investigations in the large markets such as the European Union and the US.
The recent decision to lower tariffs would, therefore, be a relief for Chinese firms scouting for markets amid declining exports in the US and EU.
“India’s decision to allow Chinese car makers in India and cutting import tariffs on electric vehicles (EVs) will benefit Chinese manufacturers directly or indirectly being the dominant suppliers of EV batteries. Supply chain dependence on China will sharply increase even when non-Chinese companies ( Tesla, Vinfast) set shop in India,” GTRI said.
“Just one joint venture between SAIC Motor (owner of the MG brand) and India’s JSW Group aims to sell over 1 million new energy vehicles by 2030. The SAIC Motor Corporation Limited, is a Chinese state-owned automotive design and manufacturing company headquartered in Shanghai, China,” the report said.
The new EV policy released allows the import of completely built-up (CBU) cars at a 15 per cent import duty.
Currently, the customs duty on cars imported as CBUs is 60 per cent or 100 per cent, depending on engine size and whether the cost, insurance, and freight (CIF) value is higher or lower than $40,000.
Where the car costs $40,000 or more, the duty is 100 per cent; a cheaper car attracts 60 per cent. However, the maximum number of e-4W allowed to be imported at the reduced duty rate has been capped at 8,000 per year.
The automobile industry in India contributes 7.1 per cent to the country’s GDP, up from 2.8 per cent in 1992-93. The industry also accounts for over 50 per cent of India’s manufacturing GDP. It provides direct and indirect employment to over 19 million individuals.
The large-scale entry and market dominance of Chinese automakers into India will impact the domestic auto/EV manufacturers, firms working in EV value chain space, and battery development, GTRI added.
Inputs are taken from the THE INDIAN EXPRESS
