Auto components PLI to accelerate growth, sector's export potential

By Rohit Vaid

New Delhi, Mar 21 (IANS): The Centre's plan to introduce a production linked incentive scheme for the automotive components industry can accelerate the overall sectoral growth in the country.

Accordingly, industry watchers contend that the major manufacturing push will on one hand make the industry more ‘globally competitive' while on the other reduce import dependency,

"The to be announced scheme has a long term vision to make the domestic industry more ‘price competitive'," Automotive Component Manufacturers Association of India (ACMA) Director General Vinnie Mehta told IANS.

"This will enable the industry to gain more global share of the export market as well as reduce imports and in the long term increase the average localisation levels in automobiles made in India."

At present, on average, vehicles produced in India sport 70 per cent of local components while the rest are imported.

Besides, cheap imports have created a ‘grey market' with spurious products.

"The intent of the scheme is to incentivise incremental production. The industry and the OEMs are looking forward to it," he said.

"We have identified a few areas such as tooling, electronics and steel in which local content can be increased."

Currently, India imports over $15 billion worth of components annually whereas it exports a little above $14 billion.

According to Sridhar V, Partner, Grant Thornton Bharat LLP, the incentive under the scheme should cover components like ADAS, charging infrastructure, battery packs, automotive electronics, apart from encouraging incremental investments in the existing set of components we have expertise.

"Some of the key value add components like engine and transmission parts, gearboxes interiors, brake systems, motors etc are also areas to focus on," he said.

On the likely boost to exports under the scheme, Pallavi Bhati, Senior Analyst, India Ratings and Research cited that until last year the industry was benefitting from the MEIS scheme which provided incentives to exporters.

Since the scheme was discontinued and the details under the RoDTEP scheme are awaited, the industry is looking for incentives that are at least equally or more beneficial.

"PLI scheme should help the industry with the much-needed impetus," Bhati said.

"While the details are not yet available, it (PLI scheme) should help in making Indian auto component industry more competitive globally and aid the industry in developing as an alternative source of supply for global auto manufacturing."

On reducing import dependence, Bhati pointed at that currently India imports 24 per cent of its auto components requirements in addition to a part of its raw material requirements.

A large part of the electric and electronic requirements, at both domestic and global scale, are generally imported.

"A deep localisation would require setting up the industries for manufacturing of auto components as well as domestic raw material supply chains," Bhati said.

"Hence, deep localisation is unlikely in the near term. It could be achieved over the long term provided resource availability does not prove to be a constraining factor."




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