A STUDY ON INTERNATIONAL TRADE OF AUTOMOBILE SPARE PARTSSubmitted in partial fulfillment of the requirements for Post Graduate Diploma in Management (PGDM) 2013-15

SUBMITTED BY PARAS PAREKHPGDM Roll No. (PG-13-30)

PROJECT GUIDEPROF. CHIRAG SHAH

IES Management College and Research CentreMumbaiDECLARATION

I hereby declare that this report, submitted in partial fulfillment of the requirement of the award for the Post Graduate Diploma in Management ( PGDM), to IES Management College and Research Centre is my original work and is not used anywhere for award of any degree or diploma or fellowship or for similar titles or prizes.

I further certify that I have no objection and grant the rights to IES Management College and Research Centre to publish any chapter/ project if they deem fit the journal/ magazine and newspaper etc.

Place: Mumbai SignatureDate: Name: - Paras Parekh PG-13-30

CERTIFICATE

This is to certify that project titled: A study on international trade of automobile spare partshas been submitted by Mr. Paras Kamal Parekh towards partial fulfillment of the requirements of the PGDM / PGDM (HCPM) course 2013 - 2015 and has been carried out by him / her under the guidance of Mr. Chirag Shah at the IES Management College and Research Centre.

The matter presented in this report has not been submitted for any other purpose in this Institute

._______________________ ___________________________ Guide : Director: Dr.Dinesh D. HarsolekarPlace : Place : Date : Date :

ContentsOBJECTIVE6ABBREVIATIONS7LITERATURE REVIEWS8OVERVIEW9GOVERNMENT INITIATIVES11ROAD AHEAD12EXPORTS13AFRICA AUTOMOBILE SPARE PARTS MARKET23OVERVIEW CHINA AUTOMOBILE MARKET26BARRIERS IN CASE OF AUTOMOBILE EXPORTS34MARKET GROWTH OF CHINA35REGULATORY OVERVIEW39DOCUMENTS REQUIRED40AUTOMOBILE SPARE PARTS SECTOR POLICY BY INDIAN GOVERNMENT42AUTO POLICY 2OO2:42FINANCIAL SUPPORT43R&D INCENTIVES FOR INDUSTRY AND PRIVATE SPONSORED RESEARCH:43MANUFACTURERS WITH AN IN-HOUSE R&D CENTRE:43AREAS BASED INCENTIVES:44INVESTMENT OPPORTUNITIES44TRANSMISSION & STEERING PARTS:44SUSPENSION & BREAKING PARTS:45EQUIPMENT:45METAL PARTS:45NATIONAL MISSION FOR ELECTRIC MOBILITY (NMEM) 2O2O:45REASONS TO INVEST46TYPES OF AUTO SPARE PARTS50TOP 10 INNOVATIONS IN AUTOMOBILE INDUSTRY IN 201451LIMITATIONS54

EXECUTIVE SUMMARY

The Indian automobile market is estimated to become the third largest in the world by 2016 and will account for more than 5 per cent of the global vehicle sales; India is expected to become the fourth largest automobiles producer globally by 2020 after China, US and Japan. Turnover of the Indian auto component sector stood at USD40.6 billion in FY201213; the industry is expected to reach USD 115 billion by FY202021. During 201112, the indigenization level of domestic players was around 95 per cent and foreign OEMs 6570 per cent; indigenization of foreign OEMs is expected to reach around 80 per cent by 2014.

In this project there is study of two main countries of automobile spare parts market. Also to find various opportunities for export and import of spare parts from overseas to India. There are also various case literatures of automobile spare parts such as news report and research report. There are also statistics mentioned to find opportunities in other countries. As it is estimated that India will be third largest country in production of automobile spare parts after China.

OBJECTIVE

The objective of the project is to identify the sector specific opportunities for Indian economy in Africa and China based on global trade of respective countries, overall economic relationship between India and Africa especially in bilateral trade and investment. The paper aims to analyze the dynamics of the potential sectors in Africa selecting some of the emerging markets and scrutinizing whether the export growth is due to rising demand, diversification of product basket or due to competitiveness. It will also explain the nature of barriers in those sectors and what could be a policy drive for Indian government to have a better market access. The project gives impetus to necessary strategic policy recommendations and potential interventions for the identified sector.

ABBREVIATIONS

OEM - Original Equipment ManufacturersPVs - passenger vehiclesCVs - commercial vehiclesM&HCV - Medium and Heavy Commercial VehicleCAAM - The China Association of Automobile ManufacturersCMS constant market shareFTA free trade agreement

LITERATURE REVIEWS

Literatures reviewed for this project are:- Global auto trade magazines. Various automobile news reports from news paper. Zig zag auto components magazine and there need is vehicles. ICRA`s report on automobile spare parts. Various other reports and research papers on this industry. Research papers on overseas automobile industry. Top gear magazines,etc.

OVERVIEW

The Indian auto components industry has experienced healthy sequential growth over the last one-and-a-half years, following a period of de-growth in 2008-09. The recovery could be attributed to factors such as strong buoyancy in the end-user industry; recovery of the global economy; improved consumer sentiment and return of adequate liquidity in the financial system. The revival of the auto industry was initially driven by the fiscal stimulus programme of the government. Nevertheless, the fact that the growth momentum has sustained even after withdrawal of such incentives in February 2010 highlights the strength of the underlying domestic demand. ICRA expects the trend of automobile sales volume growth, and in turn the auto ancillary business growth to hold over the short-to-medium term aided by strong underlying domestic demand across all automobile segments [comprising two-wheelers (2W), three-wheelers (3W), passenger vehicles (PVs) and commercial vehicles (CVs)], thrust on low-cost sourcing by Original Equipment Manufacturers (OEMs) and Tier-1 players based from developed markets, aggressive supply side push from automotive Original Equipment Manufacturers (OEMs) in the form of new model launches and expected continuation of facilitators like easy access to vehicle financing, notwithstanding possible challenges related to pressures on commodity prices, interest rate hardening and fuel price deregulation. While almost all segments of the automobile industry have posted a steady growth over the last 18 months, the recovery in the Medium and Heavy Commercial Vehicle (M&HCV) segment has been the slowest to gather momentum. The segment had also experienced the sharpest volume decline in 2008-09, which had translated into significantly lower off-take and losses for suppliers of M&HCV components - and had contributed to around 40% of rating downgrades in the universe of auto and auto component manufacturers downgraded by ICRA in 2008-09 and 2009-101. However, with domestic economic activity having gained traction, ICRA expects the M&HCV segment volumes over the near term to surpass the levels achieved in the predownturn period, which should result in improvement in the credit profiles of auto component suppliers dependent on this segment. On the whole, ICRA believes the Indian auto components industry is poised to sustain its revenue growth momentum over the short-to-medium term. However, the industry profitability may face pressures due to (a) Pricing pressures from OEMs, which in turn are entering into a phase of heightened competitive intensity constraining their pricing power; (b) Threat of rising commodity prices; (c) Likely higher cost of funds consequent to hardening of interest rates; and (d) Import from other low-cost locations. In addition, companies engaged in select product categories within the auto components industry are expected to incur large capex for enhancing production capacities to meet the growing demand, which could affect the capital structure and return metrics of such companies over the short term. However, in ICRAs view, the anticipated strong business growth should result in healthy cash accruals and enable such companies to tide over the short term pressures and emerge with a stronger credit profile over the medium term. Other risks to growth and profitability of the Indian auto components industry include increase in competition from other countries to capture business opportunities both in the international as well as domestic markets; uncertainty arising from currency volatility; and ability to acquire capabilities in tune with technological advancements. The industry efforts to mitigate the above risks along with policy measures of the government would determine the impact of the above risks on the auto components industry going forward.

Investments

The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period April 2000 November 2014 were recorded at US$ 11,351.26 million, as per data published by the Department of Industrial Policy and Promotion (DIPP).Some of the major investments made into the Indian auto components sector are as follows: Motherson Sumi Systems Ltd has acquired assets of German auto parts maker Scherer & Trier GmbH & Company KG, which includes two factories. The acquisition will be made through its Netherlands-based subsidiary Samvardhana Motherson Automotive Systems Group BV for Rs 285.10 crore (US$ 46.24 million). Nittan India Tech, the Indian subsidiary of the Japanese auto major Nittan Valve, has inaugurated its production unit at Sri City. Automotive supplier Uno Minda and Japans Toyoda Gosei Co Ltd have announced a joint venture (JV) partnership to manufacture and sell rubber hoses to automobile makers in India. The JV will be set up with a total investment of Rs 85.3 crore (US$ 13.83 million) in a phased manner. RSB Transmissions has signed a Technical Assistance Agreement with Jidosha Buhin Kogyo, Japan to manufacture and sell propeller shafts for SCV/SUV/LCV segment for the domestic and export market. Minda Corp Ltd has purchased 2 per cent equity from its Japanese joint venture (JV) partner Furukawa Group to increase its holding to 51 per cent in Minda Furukawa Electric Pvt Ltd (MFE). Honeywell Turbo Technologies has entered into an agreement with Tata Group to develop their first ever petrol turbocharged engine.

GOVERNMENT INITIATIVES

The Government of Indias Automotive Mission Plan (AMP) 20062016 has come a long way in ensuring the growth of this sector in the global market. It is expected that this sector's contribution to the GDP will double reaching a turnover worth US$ 145 billion in 2016 due to the governments special focus on exports of small cars, multi-utility vehicles (MUVs), two and three-wheelers and auto components. Also, the deregulation of FDI in this sector has helped foreign companies to invest in huge amounts in India.The government has instilled confidence in the market with assurance of positive policy changes. We hope that by the fiscal year 201415, capacity utilisation will go up to 90 per cent," according to Mr Harish Lakshman, President, ACMA.The Government of India is in talks with ACMA and several industry bodies to extend the current excise duties concession beyond December 2014. Under the scheme, excise duties have been reduced for the following segments: For small cars, motorcycle, scooters and commercial vehicles duty has been reduced from 12 per cent to 8 per cent. For mid-sized cars duty has been reduced from 24 per cent to 20 per cent. For large cars duty has been reduced from 27 per cent to 24 per cent.In recent news, it has been reported that Ms Elizabeth Thabethe, Deputy Minister of Trade and Industry, South Africa, accompanied by a delegation of 27 companies, met the delegates of Indian automakers for partnerships.

ROAD AHEAD

The rapidly globalising world is opening new avenues for the transportation industry, generating the need for more efficient, safe and reliable modes of transportation, which is subsequently adding to the auto component industrys growing opportunities.

According to a report by the Confederation of Indian Industry (CII), the Indian auto component industry is set to become the third largest in the world by 2025. Also, by that time, newer verticals and opportunities for component manufacturers will open up as the automobile market will shift towards electric, electronic and hybrid cars, and newer technologies will have to be adopted via systematic research and development.

By 2020, it has been estimated that nearly 90 per cent of vehicles on the road will be wired. While the connected car market is expected to touch US$ 600 billion, the automotive component industry is predicted to reach US$ 113 billion.

EXPORTSIndia's automobile exports have grown consistently and reached $4.5 billion in 2009, with the United Kingdom being India's largest export market, followed by Italy, Germany, Netherlands, and South AfricaAccording to the New York Times, India's strong engineering base and expertise in the manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing facilities of several automobile companies like Hyundai, Nissan, Toyota, Volkswagen, and Maruti SuzukiIn 2008, South Korean multinational Hyundai Motors alone exported 240,000 cars made in India. Nissan Motors plans to export 250,000 vehicles manufactured in its India plant by 2011. Similarly, US automobile company, General Motors announced its plans to export about 50,000 cars manufactured in India by 2011. In September 2009, Ford Motors announced its plans to set up a plant in India with an annual capacity of 250,000 cars, for US$500 million. The cars will be manufactured both for the Indian market and for export. The company said that the plant was a part of its plan to make India the hub for its global production business. Fiat Motors announced that it would source more than US$1 billion worth auto components from India. In recent years, India has emerged as a leading center for the manufacture of small cars. Hyundai, the biggest exporter from the country, now ships more than 250,000 cars annually from India. Apart from Maruti Exports' shipments to Suzuki's other markets, Maruti Suzuki also manufactures small cars for Nissan, which sells them in Europe. Nissan will also export small cars from its new Indian assembly line. Tata Motors exports its passenger vehicles to Asian and African markets, and is preparing to sell electric cars in Europe in 2010. The firm is planning to sell an electric version of its low-cost car the Tata Nano in Europe and in the U.S. Mahindra & Mahindra is preparing to introduce its pickup trucks and small SUV models in the U.S. market. Bajaj Auto is designing a low-cost car for Renault Nissan Automotive India, which will market the product worldwide. Renault Nissan may also join domestic commercial vehicle manufacturer Ashok Leyland in another small car project. While the possibilities for the Indian automobile industry are impressive, there are challenges that could thwart future growth. Since the demand for automobiles in recent years is directly linked to overall economic expansion and rising personal incomes, industry growth will slow if the economy weakens.

HOW CHINA IS AFFECTING GROWTH OF AUTO SPARE PARTS DEALERS IN NEW DELHI'S KAROL BAGHSwet Sarika, ET Bureau Aug 6, 2012, 02.51PM ISTDELHI: Auto spare parts dealers of Naiwala and Maharana Pratap market of Karol Bagh are witnessing slower growth as a result of stiff competition from Chinese products, high VAT of 12.5 percent and recession.Maharana Pratap market houses around 50 shops that deal in spare parts for four-wheelers, whereas Naiwala has more than 2,500 shops dealing in auto parts for two-wheelers and three-wheelers. In both these areas, repairing work comes in high volume. Also, in Naiwala one can buy second hand motorbikes of various companies.Anil Kukreja, president of Delhi Scooter Traders Association (DSTA), said that business has slowed down in the past 2-3 years. "One of the main reasons behind this slowdown is the slowing economy. Earlier, Delhi was the only distribution centre of spare parts but now every state has its own centre. Moreover, most of the states have to pay lower VAT than us and as a result they are prospering," he said.The president of the association further added, "Scooter and motorcycle should not be clubbed with car. This is a segment which pays 12.5 percent VAT. Scooter or motorcycle is not a luxurious item, and therefore, this should be put in the category of cycle and charged 1 percent VAT. The market has gone down in terms of business volume primarily because of 12.5 percent VAT."Huge competition has added fuel to the fire. "There is a lot of demand for Chinese products from wholesale buyers as well as retail. And, only thing that is keeping China ahead of us is that they have a strong support system in the form of government. Here, in India, policies like 12.5 percent VAT discourage traders," said Ashok Gera, general secretary of DSTA.This 40 year old market has more than 2,500 shops, out of which 1750 are registered with DSTA and 75 percent of its business is in the form of wholesale and the rest in retail. Every shop generates employment for 2-3 people directly and 4-5 people indirectly.Sahni Automobile, located in Maharana Pratap market, deals in car spare parts. "There are various reasons why customers prefer us over service centres of companies. First is the price factor. Service centres have a long list of expenditures. So, they sell auto parts at higher price to take care of their expenditures whereas that does not happen at our shops.Second, if a customer visits some service centre, he has only one option, i.e. the auto spare parts of that company whereas at our shops we have a host of products from different companies, which gives customers the option of picking the best from them," said Ravi Shankar Sahni, development manager, Sahni Automobiles. At the same time, "In the last two years, business has not progressed much." He added, "The fact that all the repairing work happens in front of customers and in much shorter period of time than service centres is another factor why customers come to our shop. Also, not all companies have their service centres. For example, it's very difficult to find centres of Nissan and Volkswagen. In such cases people prefer coming to us and buying spare parts of other companies." Sahni Automobiles, with the help of 10 employees, caters to 3000-4000 customers in a month, out of which 50 percent is retail customer and 50 percent is wholesale dealers.On asked about the business volume of this fraternity, he said, "No doubt business has been stagnant in the past few years, it has also diversified. As we deal in spare parts of big companies, there is a lot of competition from China." This company pulls a lot of customers from Karol Bagh, Patel Nagar, Jhandewalan, Paharganj, etc. Yash Khurana, owner, National Scooter Emporium, a shop located in Naiwala, said that slow business is making us work more. "We deal in Chinese products. I have my own brand, 'TWISS', I get its spare parts manufactured and packed in China."

The Chinese spare parts market is expected to undergo triple expansionOct 11th, 2011As the OEM organizations are becoming increasingly substantial in the aviation industry, the MRO service providers direct their focus towards the rapidly emerging Asian aviation markets. By 2030 the Chinese aircraft fleet is expected to increase three times; therefore there is no surprise that Locatory.com experts maintain that it will inevitably result in significant spare parts market growth.Locatory.com predicates that due to the old aircraft fleet widely operated within the country the existing aircraft will require more and more spare parts and equipment for maintenance and repairs. Although China hosts several major aircraft and parts manufacturers it might be still fairly difficult to maintain high quality standards. That is why in the short-run the growth will still be largely dependent on imported components.In the last ten years alone the Chinese aviation parts and components import market has grown four timesThe region is now expected to introduce large spare parts warehouses. Changing old aircraft fleet will result in increased aircraft part-out volumes as well as demand for prompt parts supply and delivery. In the last ten years alone the Chinese aviation parts and components import market has grown four times last year it was valued at an astonishing USD 1 billion. It will inevitably increase the demand for spare parts platforms in the developing regions, - commented the Locatory.com Vice-president for Development Dmitry Voskresensky.Within the next twenty years when China becomes the second largest market in the world, the regional airlines will be in need of 5 thousand new aircraft. According to the 2011 price catalogue they will amount to USD 6 billion. In the meantime, in four years time the number of airports should reach 230, the demand for aviation engineers and pilots 108 thousand and 73 thousand respectively by 2030. With the perspective to market growth rate, by 2030 the Chinese aircraft manufacturers are expected to join the four largest aircraft manufacturers in the world.

Indias antitrust ruling could unleash spare parts market13 October 2014 | Rachael Hogg While spare parts have been widely available from a variety of suppliers in Europe and the US for many years, India and China has traditionally been a very closed market. However, all this could be about to change.

Fines penalising carmakers in India for cornering the spare parts market may help unleash expansion in the aftermarket, as independent suppliers and retailers increase their operations. While Indian and global carmakers face threats to their margins and market share in part sales, some experts think that they could also benefit from the overall market growth if they have the right logistics and distribution to match part quality. At the end of August, the CCI (Competition Commission of India), the countrys antitrust regulator, fined 14 OEMs a total of 25.5 billion rupees ($421.8m), for limiting competition in the spare parts industry. The fine is calculated at 2% of average turnover. The antitrust commission claimed that the OEMs were involved in charging high prices, and having control over the spare parts and diagnostic tools market, which it claims has limited the growth of the spare parts market and prevented independent companies from providing aftersales services. Consulting firm IHS Automotive estimates that parts sold unofficially through independent retail channels rather than via OEMs and their dealerships currently account for around a sixth of Indias $6.6 billion aftersales components sector, but with the latest ruling, this could be set to increase. Anil Sharma, senior analyst at IHS Automotive told Automotive Logistics, that the opening up of an aftermarket from OEM control would be good news for the sector, although there were still legal battles ahead that could delay the process. The news is a huge positive for the evolution of the secondary or aftermarket which was largely controlled by automakers. Sadly, the push comes from the regulator rather than the OEMs, he said. CCI isnt the final authority and its decisions can be challenged, as is the case with this one. The litigation can be a long-drawn affair and it can take months, if not years, before the judgment is put into practice. If the regulator eventually succeeds, sales and production of generic components is expected to rise manifold. Mahindra and Tata have both appealed the decision, and Honda has said it will appeal the order too. The other OEMs involved are: BMW, Fiat, Ford, GM, Hindustan Motors, Maruti Suzuki, Mercedes-Benz, Nissan, Skoda, Toyota Kirloskar Motors, and Volkswagen. BMW and Mercedes-Benz have been given three weeks interim protection from the CCI order, and the same high court judge has granted a stay on the order against Maruti. In Europe and the US, spare parts are widely available from a variety of suppliers, but this has not been the case so far in India or China. Automotive and transportation senior research analyst at Frost & Sullivan, Anuj Monga explained to Automotive Logistics that this is because of the differences between the markets. Although many global OEMs are in India, few have a well-established aftermarket presence, and the Indian car market is relatively young when compared with developed nations. Recently, following in part the lead of Chinese regulators, who have recently hit OEMs with fines of up to 10% of annual revenue for spare parts fixing, authorities in India have started to try to make the competition fairer. The result of the limited market in both India and China has led in part to OEM control of availability, but has also helped to encourage a large counterfeit parts market to fulfill the demand for cheaper parts. According to Monga, counterfeit parts available at a fraction of the cost of the new parts currently dominate in both India and China. While Chinas crackdown has been going on since 2012, its authorities have ratched up fines recently. Accusations of monopolistic behavior have recently been made against carmakers such as FAW-Volkswagen and Mercedes-Benz, and many OEMs have now lowered their parts prices in response. A report by law firm, Dechert LLP, suggests that the Chinese governments attempts to enforce its antitrust and anti-corruption laws will continue into the future, and more OEMs will be hit with fines. More spare parts Experts now expect that the ruling in India, and its associated penalties, will pave the way for the independent market to take off further in India. According to Monga, there will be growth in the independent parts segment, and its impact will generally be positive for consumers, suppliers and, potentially, for OEMs if they can increase spare part availability and distribution. In the overall scheme of things, rise in the production and sale of non-certified generic components will have a positive effect, he told Automotive Logistics. Compared with other markets, Indian consumers keep their vehicles longer and will service parts extensively before replacing them, he added. With even easier parts availability, there will be more demand for replacement, and more benefit for the part providers. It is not necessarily bad news for the OEMs either, as certified and non-certified parts can co-exist, with consumers deciding where to purchase based on quality, availability and price. OEMs can also develop a parallel revenue stream and still expect a significant profit if they make parts more widely available, said Monga. Safety firstArguably the biggest concern about the rise in non-certified generic parts is safety, a point in which Monga suggested there are reasons to worry in India, given a highly fragmented supplier base for independent parts and the current availability of counterfeit parts. The concerns raised about the safety of these non-certified parts do hold a certain level of truth. Particularly in the Indian aftermarket, which is highly fragmented and has a large number of small players, there is a definite chance that the quality of some of these parts could be compromised, he said. While the CCI order has tried to make the competition fairer by making parts and related information accessible, it does little to outline any plans about how the quality of these parts could be maintained. However, Monga explained that while there are concerns, OEMs can also take the opportunity to educate customers about the benefits of certified genuine parts. IHS Automotives Sharma agreed. Automakers arent wrong in claiming that non-certified parts pose a safety threat in a market where regulations, consumer awareness and activism runs low, he said. However, it can be addressed through concerted efforts by automakers and regulators.

Besides safety, the anti-trust order could see OEMs take a hit on their profits, too. With wider competition from independent suppliers, carmakers will need to strike a balance between parts availability including faster, more efficient logistics and the right price. Companies could still reap revenues and hence profits if they are able to develop a tier wise distribution plan that creates much larger parts availability, said Monga. OEMs are taking note, with Monga saying that Maruti Suzuki, Hyundai and Ford are planning to increase the availability of spare parts in their aftersales networks. These are all very good signs for the aftermarket, as entry of OEMs will increase the competition, attract more players, and this in turn will benefit the consumers, he said. Also, if you look at the life of a vehicle in India and the average time a consumer keeps the vehicle, investments in aftermarket could go a long way in building stronger company-customer relationships. Monga also suggests that as the availability of generic parts increases in India, customers will become more educated and informed, and demand a higher level of quality, which could open up further opportunities for OEMs. Traditionally it has only been new car sales that have been seen as attractive markets [in India], but going forward, aftermarket opportunities will definitely attract new players here, said Monga. Also, with the growing influence of eRetail everywhere, we are seeing positive signs for the aftermarket distribution. Sharma agreed, suggesting that the overall market will benefit if the consumer is faced with a wider variety of quality parts. The natural course for the aftermarket is to allow a broader participation by manufacturers and then leave the buying decision to consumers, he said. This was not the case in India because automakers controlled availability of branded spares to their dealers, leaving independent service establishments out of the loop.

Fake auto parts on the rise in spares marketLijee Philip, TNN Aug 18, 2003, 01.15am ISTMUMBAI: The next time you buy a new timing belt/chain or a head or taillight assembly for your vehicle, remember, there is more than 37% chance that it's not genuine.Counterfeiting of auto components and their proliferation in the automotive spare parts market is on the rise, according to a study of the roughly Rs 13,000-crore industry.A National Council of Applied Economic Research (NCAER) study, commissioned by the Automotive Component Manufacturers Association of India (ACMA), says counterfeit auto parts constitute over 37% (37.6%) of the total market size of the 12 aftermarket auto parts chosen for the all-India study. The counterfeits are valued at Rs 1,459 crore.Vehicles running on spurious components have led to increased maintenance costs to the tune of Rs 4,032 crore while pollution has one up by 24% due to lower fuel efficiency. The report says that one reason spurious components thrive is because capital investment to manufacture spurious auto parts is very low.Says a component manufacturer based in Mumbai "expenditure incurred on manufacturing is low, especially where scrapped components are acquired and either 'touched-up' or re-conditioned and sold as new parts". Since these counterfeiters are riding on the reputation of the brand leader in the market, there is no brand building or marketing expense.The manufacturers of counterfeit auto parts do not pay taxes, unlike manufacturers making local or OE auto parts.As the counterfeit auto parts are sold at the same prices as OE components, it offers high profit margins to these players.This has dire consequences such as higher fuel consumption, increased pollution due to lower fuel efficiency, damage to vehicles, higher maintenance cost and finally, more road accidents due to poor performance of safety sensitive autocomponents.This unscrupulous trade also has an adverse impact on revenue collection by the Centre and states. The report says that the central government has been denied revenues of Rs 1,520 crore.

AFRICA AUTOMOBILE SPARE PARTS MARKET

Africa is now considered as a continent poised for economic growth, the reasons of which lies deep rooted in economic, resource and operational factors. Africa today is the 3rd fastest growing economic region in the world. The rate of urbanization is higher than India and lower than China. It is the continent which comprises of some of the world fastest growing economies. According to World Bank data, Africa is richer than India on the basis of GNI, and a dozen African countries have a higher GNI per capita than China. Africa offers among the worlds best investment prospects.

Also a shift of global economic power to emerging giants benefits Africa. Large economies such as China and India are seeking resources from Africa thus pushing up commodity prices internationally and providing investment opportunities in African countries. While barriers to entry in Africa are high, companies that develop strong distribution networks and acquire deep understanding of market forces can generate high margins. Sectors that offer investment opportunities include oil and gas, telecom, infrastructure and information technology. Two years ago Bharti Airtel acquired African assets of Kuwaiti Telecom firm Zain for US $10.7billion.

1. Companies that have evaluated market opportunity and understood consumer base are enjoying remarkable growth rates ranging from 30 to 60 percent year on year. As far as trade is concerned, Recently India has overtaken the US to become Nigerias largest export market. Nigerias exports to India are mostly crude oil and cashew nuts while India exports pharmaceuticals, machinery, electronics, and rice.2. Also Trade between Africa and the rest of the globe increased by 200 per cent between 2000 and 2011. Apart from the usual exports of oil, natural gas and minerals, the sale of African-manufactured goods is also increasing. Over the past ten years, African manufactured output has doubled.

Some of the fastest-growing economies in the world are now in Africa. The charts below shows the top 12 fastest growing economies in the year 2011 and it is evident from this table that many amongst them are African economies. Ghana, Liberia, Angola, Ethiopia Mozambique are growing faster than many Asian economies. In next few years some more African countries such as Niger, Zambia, Uganda, and Tanzania are expected to join the league.

Most of the African buyers are buying substantial quantities of automotive batteries, tyres, spare parts, ball bearings, water pumps and a host of electronic goods from Dubai for selling them at a profit in their own countries. "The African customers price-sensitive - they are looking for low priced goods and are not much concerned about the quality aspect," says Ahmed of Popular Tyres Trading, one of the largest stockists of tyres, tubes and batteries in the UAE. "Chinese tyres are in great demand in African markets as they are cheap and provide excellent value for money," he says.

With price taking the upper hand over quality for many buyers, the market for substandard spare parts will always exist. This is a demand that many manufacturers and dealers are all too keen to satisfy. While some of the cheaper spares are imported through the proper channels, there is also a significant area of parallel imports of spare parts. Illegal imports from neighbouring countries have been increasing at an alarming rate since 1991 when imports grew from Dhs 13 million to Dhs 51 million in 1994. A consequence of such imports is loss of income, loss of business, loss of reputation and credibility and deterioration of the brand image. This not only deprives the government of much needed income but also gives the illegal importer an unfair pricing advantage over the authorised agent. The used spare parts market in the UAE is as old as that of automobiles. In the last ten years, it has become a full-fledged multi-million dirham business involving a large number of small and large enterprises spread all over the country. Many such outlets also deal in used engines which they import from Japan and then re-export to many African and Asian countries, including Russia, India, Egypt, Iran and Pakistan. Second hand spare parts normally come from damaged cars sold by insurance companies and the rest from police auctions. These agents sell mechanical parts at 25 per cent of the price of new genuine parts but the body parts, which are in more demand, are often sold at around half the price of new ones. The rates, however, vary from part-to-part subject to the condition of the spare and the availability of that part in the market. Dealers of the genuine spares say that they dont feel any threat from the used spare parts market simply because new genuine parts are purchased by only those who can afford them and more particular about the trouble-free running of their cars. Some of the spare parts dealers consider used parts as direct competition to duplicate parts because of the price margin between the two are close than new genuine parts. People prefer buying used spare parts because they are genuine and are often in good condition. Every spare parts outlet may not provide the full range of used parts of all car models but together the market is capable of providing nearly 90 per cent of such parts. The majority of second hand spares end up in the local UAE market, with customers coming from nearby GCC states. On the other hand, almost the entire stock of imported used engines is re-exported. Used engines are in good demand in many African and Asian countries, especially those with big re-conditioned car markets. The diversified range of used mechanical and body parts of cars and engines has brought this business parallel to genuine and non-genuine new spare parts businesses as it offers big variety at affordable prices. Dubai has rightly developed a reputation as being a buyers market. a glance at the prices of various products confirms that no other place in the Middle East provides such a variety of goods at such low prices. The decisive factor is that over the decades, Dubai has developed a substantial community of retailers, a sophisticated import system and substantial warehousing for stock. This has lead to the emergence of a keenly competitive market that ensures that prices in Dubai are as much as 10 to 15 per cent lower than in neighbouring markets. Dubai continues to be number one for buying anything from second hand cars to automobile spare parts and ballbearings, says Pradeep Gupta of Ameeco Marketing, a leading supplier of ball and roller bearings. Analysts say sales of automobile spare parts and accessories in the Gulf has risen by 20-25 per cent in 1997 despite the sharp oil price fall in the year. Several reasons are cited for this development. One of the most extraordinary new trends in the UAE since the 1990s has been the explosion in the number of visitors from the republics of the former Soviet Union lured by the many ways money can be made in the Gulf. Enterprising Russians have been travelling to Dubai on specially-chartered flights to buy as many products as they can carry for re-sale at huge profits at home. An estimated 100,000 tourists from the former Soviet republics travel to the UAE each year. Each visitor is estimated to spend a minimum of $10,000 in local shops. More than a quarter of this goes on automobile spare parts and related products. As the spare parts trade to Africa gains in stature, there is bound to be new demands from within the African market. The UAE, with its strategic location and its well established distribution network, can reap rich dividends by catering to the increasing demand for automobile spares, ball bearings and lubricants in the fast developing markets of Africa.

OVERVIEW CHINA AUTOMOBILE MARKET

China became the worlds largest automobile producer and market in 2009 with annual sales of nearly 14 million vehicles. The market continues to expand in 2010. In the first nine months of 2010, automobile production reached 13.08 million units, a 36.1 percent increase from a year ago. The China Association of Automobile Manufacturers (CAAM) raised its forecast for annual sales to reach a record 17 million this year, matching the highest annual total ever reached in the United States. Industry growth has been primarily driven by rising domestic demand stemming from rising incomes, a growing middle class, and by supportive industry policies from the Chinese government. The Chinese automotive industry remains very fragmented. In addition, Chinese central government officials fear that unchecked expansion of China's auto industry encouraged by local authorities could harm the wider economy, and that excess capacity must be stopped. Hence, the central government continues to push for mergers and acquisitions (M&A) in the automotive industry which will support the emergence of a few leading national companies. Chinas weak R&D, domestic innovation and design capabilities are key challenges to its international competitiveness. With the governments encouragement, domestic firms have opted for strategic partnerships with foreign players, aiming to facilitate technology transfer and improve domestic design and engineering capabilities. The Chinese government has implemented a number of tax adjustments and subsidies for automobile purchases to encourage hybrid electric vehicles, pure electric vehicles and traditional vehicles of small engine displacement. Beijing has gradually introduced higher automobile emission standards for new vehicles. Plans to develop hybrid electric and pure electric vehicle production capabilities are part of a broader, environmentally friendly strategy to develop the auto industry. Market opportunities exist especially in the following areas: Developing domestic innovation capabilities (e.g. vehicle design and engineering, hybrid electric and pure electric engines, electric motors and electric controls) Productivity and quality upgrade (e.g. engines, transmissions, electronic control systems and safety systems) Mergers and acquisitions (both in China and in Israel) Clean transportation technologies Advanced manufacturing technologies Supply of essential automotive components/systems to OEMs (e.g. electronic control systems and safety systems)Chinas automotive market has the most growth potential in the world; per capita car ownership is still remarkably low at 4.78% and is expected to grow significantly. Domestic whole-vehicle manufacturers and automotive suppliers are still extremely fragmented (government-supported consolidation is imminent in the near future); challenges remain for domestic R&D and design. With government subsidies and tax incentives, China is aiming to establish an early footing in the production of low-emission and environmentally friendly automobiles. Component imports surged by 130% in the first half of 2010; 60% of imported components were drivetrains, engines or automotive body components.

On the basis of these two variables African countries have been placed and ranked in two dimensional scatter diagrams. The diagram is then divided into four quadrants based on the 'average of country data'. Hence the vertical line represents the average of country specific export values calculated from the export values of all selected countries.

Similarly, the horizontal line depicts the average growth of India's exports to all African countries. Thus, the scatter diagram is divided into four quadrants. The quadrant one represents a situation of high growth and high export value. These markets capture significant opportunity and they are matured. Second quadrant stands for high growth but low export value thereby govt. of India must identify them as potential markets and provide incentives for export growth. Third quadrant consists of low growth and low export value. These markets don't attract value to Indian products. Fourth high export value yet low growth or a decelerating saturated market. We need to maintain the market share there. So, competitive strategy like investment on brands, promotional activities are necessary. Some of such markets may be small in size and we need to keep this in mind while selecting such countries.

At the second stage, the paper concentrates on the dynamics of export growth of selected products in short listed countries through the above procedure. For this purpose Constant Market Share (CMS) model has been picked up. CMS analysis is a popular tool for analyzing changes in exports of a country. The intrinsic norm of this analysis is a country's export share in a given market should remain unchanged over time. However, in reality trade is dynamic and market share keeps on changing.

India-Africa Economic Relationship: Gaining Momentum

Indias trade with Africa has doubled in the past four years, from $24.98 billion in 2006 07 to $52.81 billion in 2010117. This steady upward path on the trade front is being supported by stronger investment ties, with Indian companies in Africa totaling $1.52 billion in 200910. With the leadership on both sides committed to providing a business friendly environment, bilateral ties are expected to continuously grow in scope and significance.

On Indias side, economic growth is inevitably pushing the country to expand its footprint across Africa, including sourcing raw materials and energy to sustain industrial activities at home as well as securing new markets and consumers abroad for its expanding array of manufactured goods and value-added services. And on the African side, high commodity prices and robust external demand have provided more space for national governments to consolidate gains from improved macroeconomic management at home. This has enabled greater private capital flows, faster debt relief, and allocating greater resources to enhancing non fuel exports. The political and economic developments have substantially improved business opportunities for the international community and consequently, both trade and investment in Africa indicate a growing trend.

Africa today represents one of the largest untapped potential for investment as it is one of the richest natural resource regions in the world. Further, Africa has a middle class that is larger than Indias, estimated at 350500 million, with a rising per capita income and greater propensity to trade and to invest. The continent is today the third-fastest growing economic region in the world and its rate of urbanization is higher than Indias.

Automobiles & its components:

With a growing population and improved economies in most African countries, demand and investment in the automobile industry is improving. The sector could but it lacks the necessary technology to fully exploit its potential. Among Africaneconomies, South African auto manufacturers have shown great success and it isexpected that some other markets can also be tapped for production and then to gain access to other African countries. To nurture the sector, Africa will need to have policies that promote the development of technology and skilled manpower, and meaningful investment in research and development.

As a growing industry, the prospect in automobiles sector looks bright and provides attractive opportunities for investors. In many African markets, imported vehicles from emerging economies such as China, India are fast replacing the second hand Japanese made car market. Component industries are also growing at a fast pace. Because of the strong growth in middle class income group people and that of premium group segment, overall demand of automobiles, be that a car or a bike attained great heights. It has been speculated that Africa sells nearly 2.5 million bikes every year and that is the reason Indian firms are interested in African markets to a great extent.

There is huge potential in these markets for automobiles and automotive parts business. African market offers the same opportunities for untapped growth that were available in China before it grew to its current status as the worlds largest car market, and this is perhaps what attracts Chinese brands to the region. India is one of the emerging nations which both have both huge production capacity and internal market. It is one of the fast moving developing nations which are considered as upcoming hub of production of automobiles and auto spare parts.

Changes in the design of models and use of technology have made Indian automobile industry compete in the global market. This sector has been growing exponentially over the last 5-7 years. Despite the down turn, the Indian automotive industry has been amongst the first few manufacturing sectors to recover. With the opening up of the sector, FDI is pouring in. Many foreign automobile giants also outsource critical components from India. During 2009, India exported vehicles to more than 40 countries.

The new challenge in front of the industry is to manage the growth and develop a strategic foresight looking into evolving competitive paradigm of the industry globally. Considering its strength Indian industry can excel through product diversification, technology absorption and modification and exploring export opportunities in countries such as in Africa.

Fast growth is visible in all segments in last few years. Major export markets for Indian automobiles in the African region are Nigeria, Egypt, Tanzania, Kenya and Sudan. In 2011-12, Maruti Suzuki India Limited shipped 17,247 cars to this North African country of Algeria, making it the Indian company's largest export market14.

In terms of value in 2008, Indias export to Africa was slightly less than US$ 1 billion but in 2011, the figure reached hopping US$2.45 billion. As mentioned earlier, along with traditional African markets several new markets experienced high import growth from India.

Indian companies existence in Africa:

a) Tata Motors entered South African market in 2004 to open two production facilities to make small cars but its original intention was to take advantage of European Unions Free Trade Agreement (FTA). Tata motors would use this to assemble and export its cars to European markets as its competitors like Toyota, Volkswagen and Ford were already doing. With the growing demand of cars within the country itself, the company targeted both local and international market. The distribution and marketing of Tata cars in South Africa was handled by Accordian Investments Ltd., Joint Ventures between the Imperial Group, Ukhamba Holdings (Pty) Ltd. and Tata Africa.

b) Mahindra and Mahindra entered the African market as Mahindra SA into JV with Renault on the terms that it will be the first right hand driver automobile manufacturer of its low cost Logan car.

c) Maruti Suzuki Udyog Limited (MUL) took the advantage of right hand drivers in South African markets to start its business in African subcontinent and is setting up its plant there. Maruti sells its product in number of African nations and makes parts and components available there. Against the reconditioned Japanese cars, new Indian vehicles with the availability of parts have been found a good strategy in these countries.

d) In two wheeler market, Chinese companies give tough competition to India. Countries like Ethiopia, Algeria the potential gain for China is significant. Indian companies like Bajaj, TVS and Hero Motors Corp are aiming to set up assembly plants in Africa in the near future, but as of now they are catering to the growing demands through exports only.

Auto Ancillary Industry:

The spine of the automobile industry is its suppliers of auto components and accessories which is also an exclusive industrial segment. The total market size of the Indian auto components industry is estimated at over Rs 700 bn. The sector comprises 500 medium and large players, and also includes 5,000 units (Tier 2 & Tier 3) in the small scale sector.

There are 50 leading companies in the organized sector which account for a major share of the total output. The number of items produced exceeds 25,000. Having gained global recognition, the Indian auto components industry exports are growing at a rapid speed. The exports crossed the Rs 10 billion mark in 1996-97 and have progressively risen to a level of Rs 145 billion in 2007-08.

Globally speaking, the competitive edge of the Indian players is the low labour cost. The Indian prices are estimated broadly to be 10 to 25% less than the world market prices but are much higher when related to some specific items, where better material inputs and technology are involved.

Source: Automotive Component Manufacturers Association of India

Companies such as Delphi, Bosch, produce components in India both for domestic and export market. The auto component suppliers are now emerging as systems suppliers with capacity to design and develop critical parts. The large labour cost advantage translates into an overall cost advantage of 20-30% over the Japanese producers, despite lower labour productivity.

Moreover, innovative capacity, good patent protection, capability of technology diffusion etc. provide a significant opportunity to Indian firms in becoming part of global value chain and also develop technology base in India. Major Indian auto component players such as Bharat Forge, Amtek Auto, Sona Group are now actively exporting to global giants.

The rapid industrialization and modernization currently sweeping through many African countries has resulted in an increased demand for capital goods such as machinery, lubricants, spare parts, ball bearings and other mechanical goods and accessories. Competition heats up as manufacturers of auto components engage in battle to gain market supremacy in Africa.

Taking the case of tyres, the African continent is one of the fastest growing markets for the global tyre industry. The rapid growth of the middle class in many African countries has pushed demand for automobiles to an all-time high in turn creating a growing market for all kinds of tyres: passenger car tyres, off-theroad tyres, industrial tyres, agricultural tyres, truck, bus and trailer tyres as well as motorcycle and bicycle tyres. Competition is fierce among traditional European players with Chinese and other Asian players. India is also seeking market entry vigorously in many of the African countries. Same is the case for many other accessories.

Nigeria, Egypt, Tanzania, Kenya, etc are major markets of India. However, several new markets experienced significant high growth in recent times such as Algeria, Togo, Cameroon, Ghana, etc. To shortlist the countries as described in methodology section, we have compared mean export value and mean export growth of Indian exports in major African markets. The details are given in Table 6. The export market in Africa is clearly divided into two groups:

One with high value but relatively low growth and other high growth but small in terms of market size. Hence, India requires strategizing African market considering this unique phenomenon. Big markets are important and India needs to diversify its product basket persistently in these markets to keep the current growth buoyant. In smaller economies, India needs to continuously test the market focusing into nature of local demand so that it remains ahead of other competitors.

BARRIERS IN CASE OF AUTOMOBILE EXPORTS:

Excessive documentation requirements for the purpose of customs clearance in Africa. Port delay and custom valuation procedures are stringent. Opportunity is there to negotiate tariff with some countries also. Luxury tax for car with bigger engine is high in some countries. If India plans to export SUV, this requires to be negotiated. High Non tariff barriers exist in most of the African nations. For eg. Passenger vehicles may only be imported into Egypt within 12 months of the year of production. Government to government discussion may be encouraged to facilitate Indian exports further. High tariff rates are applied on some components. Other duties are also prevalent. For example, in Nigeria, National automotive council levy of 20% are charged on automotive product. Technology collaboration, R&D centre development after sale service etc. requires attention. Setting up business is costly.

MARKET GROWTH OF CHINA

Primarily fueled by domestic and partly by foreign demand, Chinas rapidly expanding automotive industry has outpaced the nations already impressive GDP growth rates in recent years. Domestically, rising incomes and encouragement from the Chinese government for the urban population to obtain drivers licenses have spurred the demand for passenger vehicles.

The booming passenger vehicle market has led to a soaring demand for automotive components. Internationally, automotive manufacturers faced with decreasing margins and profitability have sought out more affordable supply chain solutions, looking to China as a potential source for lower cost automotive components.

Unlike developed markets for passenger vehicles, where growth in demand has been largely stagnant, Chinas domestic demand for new automobiles has skyrocketed in the past years. Strong car sales in China in 2009 pushed the auto market to the largest in the world, and 2010 is set follow the positive trend.

Import

Positive demand growth for automobiles and components has not only caused domestic industry development, but has led to increased attention from leading foreign automotive manufacturers eager to expand into the rapidly growing market. Foreign automotive manufacturers have also been encouraged by lower import tariffs, which have been lowered for whole vehicles from 70-80% to 25% since China joined the World Trade Organization (WTO). Import tariffs on Semi-Knocked-Downs (SKDs) and Complete-Knocked-Downs (CKDs) have dropped from 50% to 25%, while import tariffs on vehicle components have dropped from 15% to 10%.

Chinas automotive import growth was slowed due to weaker demand caused by the global economic crisis of 2009. Annual total import were USD 33.1 billion in 2009, representing a year-on-year increase of only 5.34%. Assisted by government incentive programs and Chinas economic recovery, Chinas auto import total bounced back from a sluggish 2009, surging by 130% to USD 27.22 billion in the first half of 2010. Imported European luxury cars had a remarkable 237.2% increase in 2010 compared to the same period the previous year.

Chinas automotive component imports grew to USD 12.7 billion in the first half of 2010, a 90% increase over the same period of 2009. Drivetrain, engine and automotive body components accounted for over 60% of the total component imports (see chart). More than 80% of the imported components came from Japan, German, Korea, and the United States.

The main groups of imported automotive components to China can be divided into three categories:

Japanese and Korean OEMs and Tier I suppliers: Generally these companies tend to only use suppliers from their country of origin. For example, Toyota typically sources components from Japanese JVs or Wholly Owned Foreign Enterprises (WFOEs) on the mainland, or directly imports from Japan. Such practice tends to result from strict quality requirements, cultural compatibility and logistical concerns.

German OEMs and Tier I suppliers: These companies typically import components in the areas where Chinese suppliers are weak (e.g. safety systems for high-end passenger cars).

The US and French OEMs operating in China have not increased their automotive component imports as much as their peers for different reasons. US OEMs have steadily increased their sourcing from local Chinese suppliers for vehicles manufactured in China to stay competitive, and French OEMs are facing a shrinking market share in China.

Chinese OEMs are emerging buyers of imported automotive components, especially in the segments of hybrid and electric vehicles and Chinese-brand luxury vehicles.

Export

The impact of the economic crisis in 2008-2009 forced many multinational companies to reduce their sourcing of automotive vehicles and components from China. According to CAAM, China exported a total of 369,600 units in 2009 worth USD 5.19 billion, which was down by 46% from 2008.

Chinas auto exports rebounded as the global market recovered in 2010, with 250,100 vehicles exported in the first six months (up 55.93% year-on-year). Passenger vehicle exports surged 115.93% to 116,500 units, while commercial vehicle exports increased 25.50% to 133,900 units. Algeria, Vietnam and Egypt were the major whole-vehicle export destinations in the first half of 2010.

The auto components export growth has witnessed even more impressive growth than whole-vehicles. Exports increased 54.11% to reach USD 18 billion in the first half year of 2010, with drive system components exceeding 50% of the total by value. More than 50% of the components were exported to the USA, Japan, South Korea, Germany and the United Kingdom.

Industry Consolidation

China is determined to restructure its automotive industry, with the hopes of changing the market from many fragmented manufactures to two or three dominant domestic firms. According to the State Councils regulations released in early September 2010 which called for greater industrial consolidation, the automobile industry was at the top of the list of targeted sectors. The State Council set the goal of reducing the number of major automakers who are responsible for 90% of domestic sales output, from 14 to 10.

Under the plan two or three companies would dominate the industry, responsible for producing more than three million vehicles annually, while four others would have annual output capacity of 1.5 million units.

The State Council named the following four groups as potential industry heavyweights, urging them to take advantage of consolidation opportunities: FAW; Dongfeng; SAIC and Changan. Additionally, it named four regional leaders that it encouraged to consider regional consolidation: Beijing Automobile; Guangzhou Automobile; Cherry and Sinotruck. All of these companies are passenger vehicle manufacturers with the exception of Sinotruck which manufactures heavy-duty trucks (sales of over 125,000 units in 2009).

Industry analysts predict that the coming wave of M&As within the automotive sector could see a deal that breaks the USD 1 billion mark, more than doubling the largest deal to date which was the USD 450 million purchase of General Motors' Nexteer steering components unit by a joint venture established by Beijing's Tempo Group and the Beijing government. Global Expansion

As the leading automotive market, China automakers are accelerating global transformation to increase their presence in the overseas market. Zhejiang Geely Holding Group (one of Chinas largest independent carmakers) recently completed its acquisition of Ford Motors Volvo brand for USD 1.5 billion. This is an indication that Chinese automakers have begun to recognize the power of strong brand reputation. Geelys Volvo bid is the largest takeover in Chinese auto industry and will provide a pattern for Chinese carmakers to expand aboard and acquire companies with a strong reputation. Beiqi Foton, Chinas leading commercial automaker followed Geelys step and announced its global expansion plan. This includes setting up a production base in Russia by 2012 with an annual capacity of 100, 000 vehicles and building five other plants in Brazil, India, Russia, Mexico and Thailand before 2015.

REGULATORY OVERVIEW

Government tariffs on automotive imports are in compliance with WTO rules, but minimum capital barriers still exist for foreign investors. The government has created some incentives to spur R&D partnership, and regulations for foreign distributers have been eased somewhat.

The government has plans to implement higher auto emissions standards for new cars in China. So far four regions have implemented China IV emission standards (Beijing, Shanghai, Nanjing and Guangdong Province).

The Chinese government views the development of the new energy vehicle industry in China as a top priority and has introduced a wide range of subsidies and policies in its favor.

Chinas automotive industry supply chain is very broad with many components such as import and export, manufacturing, environmental protection, technology upgrades and quality control. As such, the industry is regulated by a range of government organs, both at the national and sub-national level.

DOCUMENTS REQUIRED

Certificate of Insurance: This document indicates the type and amount of insurance in force on a particular shipment for loss or damage while in transit. It is sometimes referred to as Marine insurance, but may cover the entire voyage.Certificate of Inspection: Some customers will require a pre-shipment inspection to satisfy their own requirements or local regulations, according to an industry, government, or carrier specification. Neutral organizations specialize in these types of certifications, whereby an inspector checks the goods in question prior to shipment. Sometimes an inspector can look at a sample, but other times inspection must occur when the goods are packaged to issue a certificate.Certificate of Free Sale: This form may be required by the importing country to ensure that the goods offered for entry comply with domestic requirements for sale in the U.S. It is often required for agricultural, medicinal, or cosmetic products and can be issued by the VEDP or U.S. FDACertificate of Authentication: An original document that has been notarized may require authentication by the Secretary of the Commonwealth. An Apostille certificate will be issued according to the country (language) of destination, confirming the status of the notary who has witnessed the original document.Documentary Letters of Credit (L/C): A letter of credit is a document issued by a bank committing to pay the seller/exporter a stated amount of money on behalf of the buyer/importer as long as the specific terms and conditions are met. Of all shipping documents, errors or making changes to the L/C are the most costly and time consuming because of the risk of payment in error.Certificate of Origin (C/O): A document prepared by the original manufacturer and certified by a quasi-official authority - such as a Chamber of Commerce - stating the items country of origin. Most countries that require a C/O will accept a generic C/O as long as all of the required data elements are given. However, some countries, like Israel, have a special green C/O form that must be used. To take advantage of duty free provisions in a U.S. Free Trade Agreement, be sure to use the particular C/O that addresses the rules of origin criteria for each country.Ocean Bill of Lading (OBL): The Ocean B/L is an invoice, and may be issued as a clean bill of lading, meaning the carrier certifies that the goods have been received without visible damage. An On-Board B/L may be issued when the goods are received into the carriers port facility, basically confirming the cargo will be sailing.Dock (or Warehouse) Receipt: The dock or warehouse receipt is issued by a warehouse supervisor or port officer and certifies that the goods have been received by the shipping company. This document is used to transfer accountability when goods are moved by the domestic carrier to the port of embarkation and left with the international carrier. At this time, the carriers Bill of Lading is also signed by both parties and copies are issued accordingly.Packing List: A packing list is prepared by the shipper and is a detailed breakdown of the items within a shipment. It may also include any special marks for identification. For example, the customer may want ABC XX in blue letters on the side of the packaging. For insurance claims and tracking purposes, it helps to describe what is in each package.

AUTOMOBILE SPARE PARTS SECTOR POLICY BY INDIAN GOVERNMENTAUTO POLICY 2OO2: Automatic approval for 100% foreign equity investment in auto components manufacturing facilities. Manufacturing and imports in this sector are exempt from licensing and approvals.AUTOMOTIVE MISSION PLAN 2OO616: Setting up a technology modernization fund focusing on small and medium enterprises. Establishment of automotive training institutes and auto design centers, special auto parks and virtual SEZs for auto components.NATIONAL AUTOMOTIVE TESTING AND R&D INFRASTRUCTURE PROJECT (NATRIP): A total of USD 388.5 Million to enable the industry to adopt and implement global performance standards. Focus on providing low-cost manufacturing and product development solutions.DEPARTMENT OF HEAVY INDUSTRIES & PUBLIC ENTERPRISES: USD 200 Million fund to modernize the auto components industry by providing an interest subsidy on loans and investment in new plants and equipment. Provided export benefits to intermediate suppliers of auto components against the Duty Free Replenishment Certificate (DFRC).NATIONAL MISSION FOR ELECTRIC MOBILITY (NMEM) 2O2O: The National Mission for Electric Mobility 2020 was launched on 9 January, 2013 for foster adoption of electrical vehicles (including hybrid vehicles), and their manufacture in India to encourage reliable, affordable and efficient xEVs that meet consumer performance and price expectations through government industry collaboration for promotion and development of indigenous manufacturing capabailities, required infrastructure, consumer awareness and technology, helping India emerge as a leader in the xEVs two-wheeler and four-wheeler market in the world by 2020, with total xEV sales of 6-7 Million units. It is estimated that there will be excellent demand in India for low cost xEVs that are suited for safe short-distance urban commute (average 50-100 km/trip), and are rugged enough to perform reliably through the most hot climatic conditions that also see torrential monsoon rains for 3-4 months of the year.

PILOT PROJECTS OF ELECTRIC VEHICLE: Department of Heavy Industry (DHI) is launching pilot projects on electric vehicles in Delhi and subsequently in other metros and other cities all across the country with a dual purpose of demonstrating and educating the people about the benefits of adopting clean and green mode of transportation. It will provide the viability gap funding through subvention to support the extra cost of acquisition and operation of these vehicles by state governments or designated bodies. In the first phase, a pilot project to provide last mile connectivity to Delhi Metro by electric passenger vehicles has been approved.FINANCIAL SUPPORTKEY PROVISIONS OF THE 2O14-2O15 UNION BUDGET: Excise duty is being exempted on parts of tractors removed from one or more factories of a tractor manufacturer to another factory of the same manufacturer for manufacture of tractors. Any of the following two deductions can be availed:1. Investment allowance (additional depreciation) at the rate of 15% to manufacturing companies that invest more than INR 1 Billion in plant and machinery acquired and installed between 01.04.2013 and 31.03.2015 provided the aggregate amount of investment in new plant and machinery during the said period exceeds INR 1 Billion.2. In order to provide a further fillip to companies engaged in the manufacture of an article or thing, the said benefit is an additional deduction of 15% of cost of new P&M, exceeding INR 250 Million which is acquired and installed during any previous year ending up to 31.3.2017.R&D INCENTIVES FOR INDUSTRY AND PRIVATE SPONSORED RESEARCH: A weighted tax deduction is given under section 35 (2AA) of the Income Tax Act. Weighted deduction of 200% is granted to assess for any sums paid to a national laboratory, university or institute of technology, or specified people with a specific direction and that the said sum is used for scientific research within a program approved by the prescribed authority.MANUFACTURERS WITH AN IN-HOUSE R&D CENTRE: Weighted tax deduction of 200% under Section 35 (2AB) of the Income Tax Act for both capital and revenue expenditure, incurred on scientific research and development. Expenditure on land and buildings is not eligible for deduction. Concessional excise duty of 6% extended to March 31, 2015 for manufacturers supplying batteries to producers of electrically operated vehicles. Exemption from basic customs duty on lithium-ion automotive batteries that are used in the manufacture of hybrid and electric vehicles.STATE INCENTIVES: Apart from the above, each state in India offers additional incentives for industrial projects. Incentives are in areas like subsidized land cost, relaxation in stamp duty exemption on sale and lease of land, power tariff incentives, concessional rate of interest on loans, investment subsidies, tax incentives, backward areas subsidies and special incentive packages for mega projects.EXPORT INCENTIVES: Export promotion capital goods scheme. Duty remission scheme. Focus product scheme, special focus product scheme and focus market scheme.AREAS BASED INCENTIVES: Incentives for units in SEZ/NIMZ as specified in respective Acts or setting up projects in special areas like the North-east region, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.

INVESTMENT OPPORTUNITIESENGINE & ENGINE PARTS: New technological changes like turbochargers and common rail systems. Outsourcing to gain traction in the short to medium term.TRANSMISSION & STEERING PARTS: Replacement market share in sub-segments such as clutches is likely to grow due to rising traffic density. The entry of global players is expected to intensify competition in sub-segments such as gears and clutches.SUSPENSION & BREAKING PARTS: The segment is estimated to witness high replacement demand, with players maintaining a diversified customer base in the replacement and OEM segments besides the exports. The entry of global players is likely to intensify competition in sub-segments such as shock absorbers.EQUIPMENT: Companies operating in the replacement market are likely to focus on establishing a distribution network, brand image, product portfolio and pricing policy.METAL PARTS: Manufacturers are expected to benefit from the growing demand for sheet metal parts, body & chassis, fan belts, pressure die castings, hydraulic pneumatic instruments in the two-wheeler segment. Leading players in the sheet metal parts sub-segment are in the process of expanding their customer base.NATIONAL MISSION FOR ELECTRIC MOBILITY (NMEM) 2O2O: The Government of India has launched a National Mission for Electric Mobility (NMEM) 2020 in 2013 to foster adoption of electrical vehicles (including hybrid vehicles), and their manufacture in India. It is estimated that there will be a huge demand in India for low cost hybrid and electric vehicles (xEVs) that are suitable short-distance urban commutes (averaging 50-100 kms per trip) and rugged enough to perform reliably in the summer and in the monsoon season in India. It is estimated that sales for such vehicles would amount to 6-7 Million units by 2020.

REASONS TO INVEST An emerging global hub for sourcing auto components. Geographically closer to key automotive markets like the ASEAN, Japan, Korea and Europe. Cost competitiveness. Fourth largest producer of steel in the world. Cost of making steel significantly lower than competitive nations. Slated to become the second largest steel producer by 2015. Several global Tier-I suppliers have announced plans to increase procurement from their Indian subsidiaries.

THE CURIOUS CASE OF SPURIOUS SPARE PARTS AND INDUSTRY MONOPOLY

Oblivious to most car owners in the country, a pitched battle is being fought by 17 car manufacturers in India and some proponents of free market economy that may alter in some significant quantum, the shape of the after sales aspect of owning an automobile in the country. The moot point is the alleged monopoly of the car industry on spare parts and the Competition Commission of India stands as the judge in the matter. Its a multi layered problem with varied repercussions. Here is how.Availability of spurious spare parts is an age old problem that plagues this sector. While the automotive production is itself pretty organised, a few jugaads here and there notwithstanding, the upkeep of these cars is largely in the hands of an unregulated and highly unorganised industry. In any town in India, big or small, there is always a friendly neighbourhood automotive market that can fix any car at any price.Any price? Almost. Some even claim they can assemble a car at a cost that will be less than half of a new car. How do they manage that? Partly through ingenuity. The mechanics are often sparsely educated and without any mechanical or technical degrees. But are street smart and tech savvy nevertheless. There is no way to quantify their skill but it is no less than any shop floor worker in any car factory. The labour cost then is a major saving.Secondly there are no overheads. No advertisements, no principles of cleanliness or hygiene to cater to. No threat of a rebound should the quality of service offered is inconsistent. Which, mostly it is. And lastly, due to use of cheap and at times spurious spare parts.Estimates suggest that currently, the proportion of spurious sales amounts to Rs 5,300 crore accounting for 30-35% of the total demand for replacement parts in the country. The replacement market itself is currently valued at Rs 16,500 crore and is poised to grow significantly with the increasing population of vehicles in the country. The impact of this is multifarious across the Government, customers and manufacturers.The Government sees a loss of revenue in the form of excise, duties, VAT and other local taxes. This amount is estimated at approximately Rs 4,250 crores as per ICRA Management Consultancy services. The manufacturers suffer not just from loss of sales and revenue but also brand image as the spurious auto component makers copy the markings of leading brands, to perfection, making it difficult for the customer to make out the difference. And ultimately the customers suffer as these fake parts have a much shorter life causing further damage to the vehicle.More importantly, spurious parts are often unsafe and unreliable. It can contribute to accidents and to the loss of life or limb. This is however just one side of the story. There is another angle to it which is far more irksome for the domestic industry.In an intensely competitive domestic car market, dealers these days make more money through after sales and service than direct sale of a new car. So he is happy to see you walk into his showroom and drive out in a car but happier when every 6-8 months you pay a visit to get your car serviced. In just 2 such visits he will milk out more dough from you than whatever little he had to cede while trying to sell you the car by way of discounts.The company earns in the process too. The dealers are encouraged to only use authorised spare parts which are almost always priced higher than what they should. It is a classic case of branding really. A Honda Accord will do as much as a BMW 3 series but you need to pay more for latter because of the branding. The companies get a share of this. For example, Marutis branded accessories and spare parts for example is a constant source of revenue for them. The parts that are sold are high on quality and durability too but that is an unintended benefit. And there is no guarantee that a duplicate part is always, by nature, defective too.An unbranded duplicate part costs less and hence finds favour with your neighbourhood mechanic whose sole attractiveness is his pricing. But that is not always the only reason. Even if he wants to get a branded original part, it is difficult for him to do so thanks to a vicious circle devised by the industry to keep them out of business. Every time he gains a customer, a dealer loses one and so does the company. If hordes of car owners start relying on the local mechanics, the sustenance of dealers themselves would be endangered.It makes sense then for the car companies to not allow component makers to sell parts directly in the open market as that would mean free supplies to these mechanics. And the lack of these parts would mean there would always be demand for duplicate parts. A chicken and egg situation really. Even some of the organised standalone service networks, a relatively new phenomenon in India, like the one started by ex Maruti CEO Jagdish Khattar is a victim of this kind of veiled monopoly of spare parts.Should the CCI rule in favour of the 17 car companies, it would mean a legal ratification of this monopoly. For you, it would mean higher cost of service and one that is sure to go up arbitrarily in future. Should they choose to rebuff them instead and rule in favour of allowing parts to be sold in the open market, the sundry mechanics are likely to prosper and car dealerships would have a bigger problem at hand. And the propensity of bargain hunters in India is such, that cheaper duplicate parts would still find a market with these stand alone garages. So while you can get your car serviced at very competitive rates, you can never really tell if it is safe and secure at all times.There is no easy answer to this then. Perhaps a mix of both would be required. Embolden the car companies and their dealers but do not allow them to monopolise it. And encourage sale of branded spare parts at least to stand alone organised service stations. A little bit of reform should not harm anybody.

TYPES OF AUTO SPARE PARTS

The different types of Auto spare parts are:1. Auto Electrical Parts Starters, Armatures, Commutators, Field Coils, Starter Bendix Drives, Alternators, Rotors, Stators, Housings, Flash Relays, Carbon Brushes2. Nuts & Bolts Hub Bolts, T- Bolts, Washers, Nuts, U-Bolts3. Transmission Parts Gears, Tie-Rod Ends, Ball Joints, U-J Cross4. Brake Parts & Rubber Components Brake Hoses, Fuel Lines, Engine Mountings, Supports, Brake Pipes, Fuel Injection PipesTOP 10 INNOVATIONS IN AUTOMOBILE INDUSTRY IN 2014

1. Google Driverless Cars

On the onset of winter break, on December 23, Google announced its first fully functional driverless car, which is ready for testing on public roads. Prior to this, the Internet giant developed various prototypes that lacked on different fundamental and functional aspects. The latest prototype has all the important elements like headlights, steering and brakes. The company have also created a self-driving system with sensors and computers that can be fitted to SUVs like Lexus. This new technology will not only be a breakthrough in tough traffic congestion but sensing technology can also increase road safety. Countries such as the UK and US are working on laws to allow driverless cars 2. Automated Manual Transmission (AMT)

In the 2014 Delhi Auto Expo, where more than 70 vehicles were launched, one that pundits hailed as the most important was Maruti Suzuki's Celerio, the first affordable mass segment gearless hatchback. Celerio comes with AMT (automate manual transmission) sourced from Magneti Marelli, component arm of Fiat. AMT is an electro-hydraulic mechanism for automating manual transmission, which derives from Formula 1 It has a hydraulic system and an electronic system. The electronic transmission control unit helps in engaging and disengaging the clutch and gear through an electronic actuator. It also has a sports mode, which enables drivers to move to the manual shifting of gear to increase and decrease the gear ratios with plus and minus either through gear knob /joystick or the steering. In India, AMT is currently available in three cars Celerio, Alto K10 and Tata Zest. 3. V2V Communications In February, US National Highway Traffic Safety Administration announced that it will begin taking steps to enable vehicle-to-vehicle (V2V) communication technology for light vehicles. This technology would allow vehicles to "talk" to each other and ultimately avoid many crashes altogether by exchanging basic safety data, such as speed and position, ten times per second, to improve safety. It uses 'ad hoc network', where every car is free to associate with any other car available in the network and share equal status. V2V, which is also known as VANET (vehicular ad hoc network), is a variation of MANET (mobile ad hoc network). Many automobile manufacturers including are BMW, Audi, Honda, General Motors, Volvo and Daimler working and developing this technology to improve safety, overcome blind spots and avoid accidents. 4. Pre-Collision Technology Top carmakers such as Ford and Hyundai have developed a pre-collision assist and pedestrian detection technology. Besides helping the driver detect blind spots, this technology also alerts the driver when he/she is not paying attention on the road. And if the driver falls asleep and does not respond to the warning, then the system applies the brakes on its own. The driver assist system has two types of sensors. One is millimetre-wave radar located inside the front grille, and the other is a monocular camera mounted on the upper, inside part of the windshield. Its collision mitigation braking system delivers an audio and visual warning when there is a risk of a head-on collision.If the driver fails to react, the car will automatically begin breaking itself to prevent or reduce the severity of a crash. This technology will debut in 2015 with Ford Mondeo in Europe. Hyundai would introduce it in.5. Smart Cars After smartphones, we will soon have smart cars around. In June 2014, Google launched its 'Android Auto', telematics software that can be connected to car dash board for infotainment. It also enables the driver to access GPS, maps, streaming music, weather, and a host of other applications. A slew of carmakers including Abarth, Acura, Alfa Romeo, Audi, Bentley, Chevrolet, Chrysler, Dodge, Fiat, Ford, Infiniti, Jeep, Kia, Maserati and Volvo will offer Android Aut.. Earlier, at the Geneva Motor Show in March, Apple announced its 'CarPlay' software, which allows devices running on the iOS operating system to function with built-in display units of automobile dashboards. Carmakers like BMW, Daimler, JLR, Honda and Hyundai have installed it in their cars. Infotainment manufacturers like Pioneer & Alpine too have shown interest in Carplay from Apple. 6. Ford Aluminium Truckn 2014, Ford unveiled the first aluminium-bodied full-size pickup, rolling out aluminium version of its popular F-150 from its Dearborn plant. It is 700 pounds or about 318 kg lighter than the steel-bodied version, making it a more fuel-efficient and nimbler pickup. The F-150 has been the best-selling vehicle in the US for 32 straight years. Last year, Ford sold nearly 100,000 more full-size pickups than General Motors. Aluminium isn't new to the auto industry, but this is the first time it will cover the entire body of such a high-volume vehicle 7. Start- Stop Technology Hero MotoCorp introduced its first bike with start-stop technology, Splendor iSmart, in March 2014. The company calls it i3s technology which is also known as Idle Start and Stop System. i3s is a green technology that automatically shuts the engine when idling and turns it on, when needed, with a simple press of the clutch, giving more mileage in congested cities.8. Bus Powered by Human WasteIn November, the world witnessed the first ever bus to run on human waste on the roads of Britain. According to researchers, the bus can provide a sustainable way of fueling.The 40-seater Bio-Bus, which runs on gas generated through the treatment of sewage and food waste, helps to improve urban air quality as it produces fewer emissions than traditional diesel engines. The bus can travel up to 300 km on a full tank of gas. 9. Land Rover's Invisible CarIn April, Tata -owned JLR introduced a new technology to give drivers a digital vision of the terrain ahead by making the front of the car 'virtually' invisible. The technology named Transparent Bonnet enables a driver climbing a steep incline or manoeuvring in a confined space to see an augmented reality view capturing not only the terrain in front of the car but also the angle and position of the front wheels. The cameras located in the vehicle's grille capture data used to feed a head-up display, effectively creating a 'see-through' view of the terrain through the bonnet