Chinese auto cos eye India as low-cost export hub.

Chinese automobile and component manufacturers are queuing up to drive into the Indian market, second only to their own in pace of growth, with the intention of using it as a low-cost export base.

The Indian automobile industry posted its best-ever performance in May with a 30% growth in car sales on new launches and increased consumer spending.

Chinese companies like SAIC, Foton, FAW, Chery, Geely and Great Wall have lined up everything from light minivans to cars, heavy-duty trucks and buses for introduction in India. While some of them, like SAIC and FAW are routing their India entry through their global alliance, others are on the lookout for Indian partners.

Chinese companies have historically operated through joint ventures, says Frost and Sullivan transportation and automotive senior director VG Ramakrishnan.

GM India, for instance, will introduce models from its three-way alliance in China with SAIC and Wuling. SAIC, which has a joint venture with General Motors in China, has bought 50% of the US company’s Indian subsidiary, General Motors India.

Apart from minivans and light commercial vehicles from the Wuling range, GM is looking at introducing trucks from its other Chinese JV partner, FAW. “We have selected a few light commercial vehicles for introduction in India. We are open to other options that could make sense down the road,” said Karl Slym, president, GM India.

Foton is another Chinese company eyeing an opportunity in India. It intends to invest around $200 million for a 100,000-unit factory using locally-sourced components.

In its proposal to Indian suppliers, Foton said it will introduce not just its tractor trailors and heavy duty trucks from the Auman and Aumark range but also pick-ups and SUVs. Medium-sized and small vans will be assembled locally, said the presentation.

Chery, Geely and Great Wall are in advanced talks with ICML, the car division of tractor-maker Sonalika, said a person with direct knowledge of the development. ICML’s CEO Deepak Mittal, however, refused to comment.

The automobile companies, which have the advantage of low cost and scale, are looking at India as their Asian hub. The GM-SAIC alliance, which that has expanded to include India, will also look at other important Asian markets to replicate the alliance model.

“SAIC and GM both bought equal stakes in a holding company in Hong Kong which now owns GM India. Later we will expand this model to markets like Thailand, Indonesia and Malaysia,” said Joseph YH Liu, executive vice president, Shanghai General Motors.

Indian regulations should not pose a major hurdle to Chinese companies, according to a Chennai-based consultant who did not wish to be named. Given the fact that Chery Automobile sells around 5 lakh Chery QQs in about 11 countries, clearing motor vehicle norms in India is not an issue. Besides, China’s commercial vehicle norms are stricter than India’s, he said.

However, patents are a cause for concern, points our Mr Ramakrishnan of Frost & Sullivan, referring to the recent controversy generated by Chery QQ, which is allegedly a design copy of GM’s Spark.

Apart from India’s rapidly growing automobile market, with car sales tipped to be close to 3 million in the current fiscal, Chinese companies also want to use India as a lower cost but higher quality export base, a model that Maruti and Hyundai have successfully adopted.

“SAIC wants to sell vehicles in India and learn how to build and source a vehicle in India which will give it cost competitiveness in export markets,” said Mr Liu. “India can be a good base for all of Asia, except China,” adds SAIC spokesperson Judy Xiangjun Zhu.

Vehicle makers are not the only ones looking out for an India opening. Component companies too are looking for potential partners. For instance, earlier this month, Yapp Zoom Automotive Systems, a 51:49 joint venture between Yangzhou-based Yapp Automotive Parts and Mumbai’s Zoom Developers, began production at its plastic fuel tank manufacturing facility at the Ford New Suppliers Park.

Yapp Zoom Automotive has confirmed business from Ford for its Fiesta and Figo models. It is also the 100% supplier for VW (Polo) and Skoda (Fabia) and is in advanced level talks with other vehicle makers.

Source :- economictimes.indiatimes.com/news