Foreign automakers are seeking delays and exemptions to government's planned new quality rules for imported auto parts, arguing the regulations will increase costs, hurt sales and disrupt supply chains, sources with direct knowledge of the matter told Reuters.
Prime Minister Narendra Modi is keen to reduce imports to boost local manufacturing to make India more self-sufficient and enable it to play a bigger role in the global supply chain. That said, the move is seen mainly aimed at slashing the amount of lower-quality imports from China.
“There is short term pain but there is long term gain,” Commerce Minister Piyush Goyal told an auto convention last week, saying India has become a dumping ground for low-quality goods by not having standards similar to other countries.
New rules mandating stricter quality checks have been flagged in stages for various auto parts since early this year and tighter regulations for wheel rims could be introduced as soon as October, according to a draft government notice.
All automakers will have to comply, but foreign premium brands such as Daimler's Mercedes-Benz, BMW and Audi will suffer most as they have the highest ratio of imported parts, four auto executives told Reuters.
“It's just an additional compliance burden and will not lead to higher local production because the volumes for luxury are too small to achieve economies of scale,” said one of the executives.
The sources declined to be identified, citing sensitive negotiations with the government.