Will The Entry of Chinese Cars Change The Indian Automobile Industry?

Publish On: 10 Jul, 2019 12:10 PM | Updated   |   SJ Desk  
Will The Entry of Chinese Cars Change The Indian Automobile Industry?

In the present, the international market in India is reaching new heights and is expected to turn into one of the most powerful automotive industries in the world. There is expected to be a shift from oil-driver automobiles to cobalt in the near future. With the new automotive companies entering into the automobile industry, we are likely to witness an emergence of fresh regulations and trials. The most prominent automobile industries in the world are undoubtedly in China, and this is where it gets its power. China is also working toward creating and providing electricity-driven cars. Since China has one of the largest cobalt reserves, it has a competitive advantage.

The Indian automobile Industry generated an FDI of USD18.41 bn since the last 17 years. This enticed China to step into the Indian automobile sector and establish its prominence there as well. The automotive industry has seen a downward fall in demand in the last two years. Due to this loss in demand, Chinese auto manufacturers are required to put in more investment and materials in order for the demand to surge again. Other countries, such as Argentina and Brazil also have an abundance of reserves of important raw material that they can use to their benefit.

Even though countries like Germany, US, and Japan stay dominant in the world automotive industries, we are yet to witness the effects of other countries, such as India, gaining a distinction in this specific industry. The worth of the automobile sector over the world surpassed USD2.4 trillion. In some countries, the automobile industry is one of the biggest and most powerful contributors into raising the GDP. In India, many benefits are derived due to the shifts in the automation industry. However, there are numerous challenges that the manufacturers have to face prior to seeing this growth.

The primary challenge faced by manufacturers in the Indian automobile industry is the significant lack of reserves for electrification of vehicles. The country is nowhere near securing enough cobalt and lithium to move towards electrification. There are also GST taxes, up to 28%, on such imports. Some countries, like Argentina, reached out to the Indian automobile industry to aid it in providing crucial raw materials and reserves, but no visible progress can be seen from both ends. India is also facing lack in reserves of Cobalt, and this can only be found in some parts of the country, like Nagaland.

However, despite the crucial state, the emergence of Chinese vehicles into the Indian automobile industry is still considered a significant ‘threat’ due to the fact that it will take over the local and international market. With electrified cars in high demand, Chinese industries will have high importance in the global market due to their progress towards electrification. They have all the resources to surge the manufacturing process and meet the demand in minimal time. Some Chinese car companies like Volvo cars, have been in India since years and are operating on a luxury niche.  This company has the majority of its raw materials imported from China.

Some Chinese bus-makers are setting their foot in the industry. They have partnered up with the Gold Stone Group, that is based in Hyderabad. These electric vehicle makers have made significant investments of over Rs 200 crores. The price of a single bus amounts up to 2 crores and the majority of the raw material input is imported from China. Another high-rated company, known as the BYD Company, has provided the Chandigarh Transport with low floor AC electrically powered vehicles. One of China’s biggest automotive manufacturers, the SAIC Motor Corp has established a new enterprise in India known as the ‘MG Motor India.’ They are also planning to open a factory in Gujarat and have invested an amount of Rs 2000 crore towards this project.

The integration of the Chinese and Indian automobile industry is expected to bring a surge in demand and increase the trade within the country. India is keen about regulating safety laws, on a yearly basis. This is due to the consistent occurrences of accidents. Statistics show that seventeen people decease within an hour’s time due to car accidents. Their biggest concern towards the integration is the quality of the material and vehicle parts that are coming in from China and being used in the car industry. A research conducted by the industry showed that 30% of vehicle parts found in the market were inauthentic and risky. The industry also imports tires from China; Chinese companies hold over 36 BIS licenses for supplying tires.