Call to Ease Production-Linked Incentives and PM E-Drive Initiatives
With China’s recent restrictions on the export of rare earth magnets, the Indian auto industry is sounding the alarm over potential production disruptions. Major manufacturers, including Maruti Suzuki, Hyundai, and Tata Motors, have urged the government to relax domestic value addition norms under the production-linked incentive scheme. They are also seeking permission to import complete assemblies from China to mitigate the impact of supply chain issues. The industry warns that without immediate action, production could halt as early as mid-July.
Supply Chain Crisis
The auto industry in India is facing a significant crisis due to stringent export controls imposed by China on rare earth magnets. These magnets are essential components in various automotive applications, including electric motors, sensors, and ignition coils. The restrictions have left manufacturers scrambling for alternatives, as they are currently relying solely on their existing inventory. In a representation to the central government, industry leaders emphasized the urgent need for a relaxation of domestic value addition (DVA) requirements under the production-linked incentive (PLI) and phased manufacturing programs (PMP). They argue that such measures are crucial to maintaining production schedules and preventing a complete shutdown of operations.
Impact on Production and Costs
The auto manufacturers have expressed concerns that the inability to procure rare earth magnets will lead to severe disruptions in production. They predict that if the situation remains unresolved, certain vehicle models could cease production as early as June, with a complete halt expected by mid-July. This disruption not only threatens the launch of new models but also jeopardizes the entire value chain across passenger vehicles, two-wheelers, and commercial vehicles. Additionally, the industry warns that importing complete assemblies from China, while a temporary solution, will lead to increased costs and may not align with the specific requirements of vehicles produced in India.
Call for Domestic Production
In light of the ongoing supply chain challenges, the auto industry is advocating for measures to enhance domestic production of rare earth permanent magnets. They are urging the government to establish a complete domestic value chain and provide financial incentives to promising manufacturers. The industry suggests that encouraging local mining and production of magnets could significantly reduce dependence on Chinese imports. Furthermore, they recommend fostering public-private partnerships to set up rare earth processing facilities and magnet production clusters across India. Such initiatives could bolster self-reliance in the sector and mitigate future supply chain vulnerabilities.
Regulatory Hurdles
The auto industry is also grappling with a complex approval process for procuring rare earth magnets from China. Manufacturers must navigate a multi-layered system that includes obtaining final approval from China’s Ministry of Commerce. This bureaucratic challenge adds another layer of difficulty to an already strained supply chain. As the industry continues to face these hurdles, the urgency for a strategic response from the government becomes increasingly apparent. Without swift action, the repercussions could extend beyond production delays, affecting the broader automotive market and its associated supply chains.
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