Indian incentive rattles component industry

While times are getting tighter for the SA automotive industry in export incentives, the Indian authorities have introduced a new scheme intended to boost their exports of automotive components. Although there is a bit of global gloom in the financial markets, the Indian automobile sector is smiling. With the clumsily-named market-linked focus market scheme (ML-FMS), exporters of auto parts – such as brake linings, gear boxes, drive axles, shock absorbers, radiators, silencers, exhaust pipes, steering wheels, and gaskets – can earn duty credit of 1.25% of their free on board (FOB) value. This for exports to Argentina, Brazil, Japan, South Korea, Iran, Russia – and SA. What does this mean for the SA component manufacturing market – a sector which is already under strain from the rand weakening, and SA vehicle sales in a steep decline? Will we see SA auto part distributors rushing off to buy cheaper, Indian-made components? It’s not going to have a dramatic impact on the local parts makers, according to Stewart Jennings, CEO of the PG Group, and chairman of the National Association of Automotive Components and Allied Manufacturers (Naacam). “But every little bit rattles the component industry,” he told FTW. “We need more protection.” This, he added, is justified by the fact that Naacam figures show that – for built-up motor cars in SA – 60% of the parts in each car is still imported and 63% of new cars are imported. “The rest of the world just plays on SA’s good nature,” Jennings said.