Rating agency ICRA said the Japan calamity is unlikely to have an immediate impact on India’s auto and auto ancillary industry. This calamity may not effect Indian automotive industry in immediate term but will surely have a medium and long term effect. A cost push inflation can effect the profits of some original equipment manufacturers. Several challenges that may arise in future includes disruption in supplies of vehicles and vehicle assemblies to India, cost pressures arising from appreciation of the Japanese yen, delays in model launches and delays in investment by Japanese companies in the Indian market.
These challenges adds to the difficulties arising out of increasing trend in the prices of raw materials, especially steel, rise in interest rates and the increase in customs duty on pre assembled engine and gearbox. The Indian subsidiaries and OEM’s of Japan, in the segments of two wheeler and commercials vehicles are found to be moderately dependent on imports. As per the rating agency ICRA, the extent of import dependence in passenger cars is, however, a function of the scale of operations of these OEMs.
Few days after the calamity, the production at the sites of automotive OEMs and auto ancillaries in Japan were stopped, ICRA believes that these events are unlikely to adversely impact automotive production in India in the immediate term as the various Indian importers maintain sufficient stocks. Along with monitoring developments, the Indian auto ancillaries and the OEMs are also checking on alternative locations for sourcing electronic components.