Work towards more localisation or we will think of increasing import duty: Nitin Gadkari to Auto Industry

The government will increase customs duty on the import of automotive components if domestic automakers do not seriously work towards increasing localisation, Union Minister for Road, Transport and Highways (MoRTH) said on Thursday.

Reiterating that the industry “needs to stop imports,” Gadkari said that automotive component makers need to develop good alternatives to imports at reasonable costs.

“I am requesting to [Sic.] auto manufacturing companies to take it (localisation) very seriously. Otherwise, for import of components we will think on the direction to increase more custom duty on that,” the minister said. “So, this is the time for the industry to support ‘Make in India’ movement.”

He was speaking at the 6th Automotive Component Manufacturers Association of India (ACMA) Technology Summit.

The centre has already increased basic customs duty on the import of automobile components this year. The finance minister announced a hike in the import duty on several auto parts like electricals, toughened glass and engine components among others from 7.5-10% to 15% to support the domestic industry.

While it will incentivise automakers to localise more in the mid- to long-term, in the short-term it would result in a cost increase for automobile manufacturers, especially premium and luxury carmakers who rely more on imports for these components.

“It is because of the strong capabilities of the components sector that the vehicle industry in India has been able to achieve localisation levels of around 70%. I urge both the vehicle and component manufacturers to increase localisation of components to the maximum. My expectation is to make it 100%,” Gadkari said via video conferencing.

To support the automobile industry, the government is also working on framing the final vehicle scrappage policy and on resolving issues related to shortage of raw materials such as steel to encourage replacement demand and ease production challenges, Gadkari said.

While vehicles sales in some segments have recovered post the Covid-induced lockdown, on the business front challenges continue due to shortage of steel and semi-conductors, said Kenichi Ayukawa, managing director at Maruti Suzuki and president of Society of Indian Automobile Manufacturers (SIAM).

In the first 10 months of the ongoing fiscal year, passenger car sales are behind by 6 years, two-wheelers by 7 years and commercial vehicle/three-wheelers sales have receded even further, he said. Vehicle and component makers needs to focus on quality, research and development (R&D) and maximise localisation to return to normalcy, he added.