Auto sector for incentives to OEMs, parts makers

‘Schemes should not hurt exporters’

The auto sector on Friday pitched for incentives to encourage domestic value-addition to leverage on the $25-billion import substitution opportunity, cautioning that such schemes should not ‘cannibalise’ the existing exporters by incentivising new players.

The representation was made during a webinar on production linked incentive (PLI) schemes attended by various government officials, including those from the Department for Promotion of Industry and Internal Trade (DPIIT) and the Niti Aayog. In their presentation on behalf of automobile manufacturers and automobile component makers, Society of Indian Automobile Manufacturers (SIAM) president Kenichi Ayukawa and CII Manufacturing Council chairperson Baba Kalyani noted that there was a need to incentivise, encourage and support Indian auto OEMs and auto component companies to develop on a global scale and create large Indian MNCs.

The industry noted that the PLI scheme is required for the component as well as the auto industry as it was not sufficiently competitive today globally. “The reasons and areas causing non-competitiveness, including higher costs and lack of technology need to be quickly identified,” it noted.

In the presentation, the representatives added that the industry aspired to achieve 2x growth in exports by 2025-26, with auto components contributing $30 billion to exports and auto OEMs about $19 billion.

To achieve this, it is imperative to enhance competitiveness of the Indian auto component sector via reduction in cost of land, labour, capital, logistics and regulation, developing industrial infrastructure, increasing availability of skilled resources and setting up high-technology automotive clusters.

The industry recommended that investments in technology development, R&D and innovation should be incentivised along with a need for long-term, stable, mutually agreed technology and a regulatory roadmap to encourage localisation.

“MSMEs are the backbone of the entire automotive value chain; scheme should enhance their competitiveness and incentivise technology development. An integrated and focused approach on building/promoting ‘Brand India’,” the presentation added.

The industry noted that component exports are presently under 1.5% of global trade. The target of increasing exports by three times can be achieved if MNCs shifted to India and Indian companies became competitive and are able to develop appropriate technology, it said. It added that the auto and component industry was very sensitive to volumes and a sustained high growth of domestic demand would significantly help competitiveness and attract MNC investment.

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