Adopting protectionist policies may not work well with Chinese strategy of aggressive manufacturing and export
Auto components manufacturer, Uno Minda, announced Wednesday that it has entered into a technical license agreement with China’s Suzhou Inovance Automotive Co for the production of electric vehicle (EV) components, which would include charging control unit, inverter, motors and electric drive systems. Tata Motors is also reported to be importing components for its EVs from China. However, it is unclear whether these components are originating from Chinese companies or Tata Autocomp’s manufacturing facilities in China.
On the other hand, Arvind Goel, managing director and chief executive of Tata AutoComp Systems, said, “We came forward to develop EV components and made prototypes for the EV battery packs long before Tata Motors launched Nexon. Today, as a technology and component supplier, we manufacture not just battery packs and motors but a slew of localised EV components.” Tata Motors started out by partnering with two EV companies in China – Gotion Hi Tech and Prestolite Electric – from whom they acquired the technological know-how.
Another Indian auto components manufacturer, Sona Comstar, which also has a manufacturing facility in China, plans to take advantage of the EV revolution within the Chinese market itself. Sona Comstar managing director and group chief executive, Vivek Vikram Singh, recently said that their strategy is to “try to get as many customers as possible. It doesn’t matter where they make it, it doesn’t matter what their nationality is. You try to get in and try to sell them as many of your products as you can.”
Countries world over are adopting protectionist trade policies against China. The Inflation Reduction Act of the United States hugely favours domestically manufactured EVs; the United Kingdom and European Union’s Trade and Cooperation Agreement mandates that in 2027, 55 per cent of an EV’s overall value and 65-70 per cent of EV batteries must originate in the UK or EU. Until 2027, 40 per cent of an EV’s overall value and 30 per cent of batteries must be UK / EU content, it added.
These instances present that the usual tactics of adopting protectionist policies like the ones mentioned here may not work well with the Chinese strategy of aggressive manufacturing and export.
However, in the wake of such strict import regulations and high tariffs, the Chinese EV makers are looking to strike deals with their industry compatriots. Earlier this year, Volkswagen and BMW pledged more than $5 billion to boost research and manufacturing in China, the news agency Reuters reported. “In 2023, almost 29 per cent of cars made by German automakers were sold in China,” the agency wrote citing trade data.
There are investments from Chinese EV makers in Europe as well, it noted. Xpeng, an EV manufacturer from China, entered the French market in May this year and there were encouraging remarks from Nio’s founder at the opening of their showroom in Amsterdam.
India’s EV components manufacturers, like their industrial counterparts across the world, demonstrate that the way to flourish amid the hugely cost competitive Chinese goods and their extremely agile manufacturing industry, is not to close the doors on them, but to dive right in and compete, cooperate and learn. Global industry consortia, seamless cross-border supply chains and most of all, disconnecting trade from politics need to be the way forward.
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