India's Electronic Component Makers Outpaced by China on Costs
ECONOMY & POLICY

India's Electronic Component Makers Outpaced by China on Costs

The Indian auto electronic component industry faces several challenges, including low expenditure on research and development, reliance on importing components that are available locally, and a lack of manufacturing clusters. These issues have resulted in Indian manufacturers struggling with cost disadvantages compared to their Chinese counterparts. As global OEMs adopt the 'China Plus One' strategy and seek to source critical parts from outside China, India could potentially serve as a viable alternative. However, this will require addressing the significant cost disadvantages relative to China. Currently, even Vietnam offers automotive electronics parts at prices 7% lower than those in India.

India's heavy reliance on imports for local auto electronics needs is evident, with two-thirds of such parts coming from overseas markets. Consulting firm Grant Thornton has highlighted that India faces a cost disability of 7.5%?15% compared to Vietnam and China, respectively. The consultancy emphasized the benefits of manufacturing hubs, which include labor subsidies, corporate income tax reductions, interest subvention on working capital, and subsidies for machinery and equipment. Despite this, Indian component OEMs avoid the cluster approach and invest less than 3% of their revenue in R&D, compared to the 6-10% spent by global majors. Additionally, the limited linkage with homegrown IT companies for software solutions is another hindrance to the growth of India?s domestic electronic component industry.

India remains heavily dependent on China for all types of auto components, with nearly a third of total auto component imports last fiscal year coming from China. This trend has persisted for at least the last three years. In FY24, while imports amounted to Rs 1.73 lakh crore, exports reached Rs 1.75 lakh crore, marking the first time in three years that export turnover exceeded imports. Body/chassis, steering, and engine components constitute 41% of total auto component imports into India. Imports increased by 6.4% in FY24 compared to the previous fiscal year. Analysts at brokerage Motilal Oswal predict that India?s component makers will invest up to $7 billion in new capacities and technology upgrades in the future.

The Indian auto electronic component industry faces several challenges, including low expenditure on research and development, reliance on importing components that are available locally, and a lack of manufacturing clusters. These issues have resulted in Indian manufacturers struggling with cost disadvantages compared to their Chinese counterparts. As global OEMs adopt the 'China Plus One' strategy and seek to source critical parts from outside China, India could potentially serve as a viable alternative. However, this will require addressing the significant cost disadvantages relative to China. Currently, even Vietnam offers automotive electronics parts at prices 7% lower than those in India. India's heavy reliance on imports for local auto electronics needs is evident, with two-thirds of such parts coming from overseas markets. Consulting firm Grant Thornton has highlighted that India faces a cost disability of 7.5%?15% compared to Vietnam and China, respectively. The consultancy emphasized the benefits of manufacturing hubs, which include labor subsidies, corporate income tax reductions, interest subvention on working capital, and subsidies for machinery and equipment. Despite this, Indian component OEMs avoid the cluster approach and invest less than 3% of their revenue in R&D, compared to the 6-10% spent by global majors. Additionally, the limited linkage with homegrown IT companies for software solutions is another hindrance to the growth of India?s domestic electronic component industry. India remains heavily dependent on China for all types of auto components, with nearly a third of total auto component imports last fiscal year coming from China. This trend has persisted for at least the last three years. In FY24, while imports amounted to Rs 1.73 lakh crore, exports reached Rs 1.75 lakh crore, marking the first time in three years that export turnover exceeded imports. Body/chassis, steering, and engine components constitute 41% of total auto component imports into India. Imports increased by 6.4% in FY24 compared to the previous fiscal year. Analysts at brokerage Motilal Oswal predict that India?s component makers will invest up to $7 billion in new capacities and technology upgrades in the future.

Next Story
Real Estate

Varun Malik Joins ANAROCK as MD, Head of Capital Markets, APAC

ANAROCK Capital has appointed Varun Malik as Managing Director, Head of Capital Markets (APAC), marking a strategic move to expand its presence across Asia-Pacific. Based in Singapore, Malik will drive ANAROCK’s capital markets initiatives in the region.A real estate finance veteran, Malik brings over 18 years of experience in structuring complex cross-border transactions across South-East Asia and Australia. He has led debt and equity deals for REITs, fund managers, and developers, delivering strong returns and driving investor value.“We will redefine real estate capital solutions across ..

Next Story
Real Estate

Patra Chawl lottery held, 663 families allotted homes

Mumbai's Siddharth Nagar (Patra Chawl) Co-operative Housing Society members in Goregaon (West) saw their 15-year wait come to a close as MHADA conducted a successful computerised lottery for 663 eligible members under its redevelopment scheme.The Mumbai Housing and Area Development Board conducted the draw using the RAT (Randomised Allotment of Tenement) system at Sardar Vallabhbhai Patel Hall. The lottery, overseen by Mr. Milind Borikar, Chief Officer of Mumbai Board, ensured transparency by digitally allotting each member a building, wing, and floor.The project, located on Plot R-9, received..

Next Story
Infrastructure Transport

BLR Airport crosses 41 million passengers, 500,000 MT cargo

Kempegowda International Airport, Bengaluru (BLR Airport), has recorded key operational milestones in FY 2024-25, crossing 41.88 million passengers and handling 502,480 metric tonnes of cargo. This marks a year-on-year passenger growth of 11.6 per cent and a 14 per cent rise in cargo volumes.Domestic footfall reached 36.05 million, up 10 per cent, while international traffic saw a robust 25 per cent jump to 5.83 million, aided by Indigo’s global expansion and added frequencies by international carriers. BLR Airport now connects to 76 domestic and 33 international destinations, with Hanoi set..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?