German automobile manufacturers such as Mercedes Benz, BMW, Skoda Auto Volkswagen could be facing adverse impacts in its domestic operations in the weeks to come as a result of India's restriction on import of certain types of tyres from China.
Most of the automobile manufacturers use a certain type of pneumatic tyres for their premium vehicles which are not manufactured in India domestically because of the low volumes. To avoid the possibility of a halt in production which could place the companies in huge financial debt and credibility problem, a meeting with the Indian government and the German Embassy had been conducted last week as per the request of the German automobile manufacturers.
In the month of June, tensions at the border of India and China escalated quickly which forced the Director General of Foreign Trade to restrict the import of certain types of tyres which meant that the automobile companies will require licenses to import such tyres into India. The problem is that most of the manufacturers have not yet received the license to import certain tyres.
Due to the limited volumes of vehicles manufactured, the premium and luxury passenger vehicles have components imported compared to the mass market of manufactured vehicles in the Indian market which domestically manufactures its components instead of importing. Also, some manufacturers depend on global sourcing model instead of establishing localised units which depends on the potential to export and opportunities that exists in the domestic market.
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It seems that the government is not clear about how and when the licenses should be given which means that the delay in the decision making could impact the production of vehicles by the earlier mentioned manufacturers. The limited inventory that the manufacturers have is also a huge issue that stands in the automobile manufacturers path.
Also for the manufacturers, one of the major problems that has been there for quite some time is the impact of COVID-19 which had reduced the number of vehicles produced. In addition to the impact that the pandemic had on the manufacturing of vehicles, the delay could also result in huge financial loss.
The German automobile manufacturers are at the edge of their seats since they are curious to know about the decision that the government would consider after hearing them out.
