Aftermarket to have mandated standards in 3 years: Rattan Kapur

The Automotive Component Manufacturers Association of India (ACMA), with over 750 members, works to develop a globally competitive Indian auto component industry and strengthen its role in national economic development. ACMA also promotes business through

Q: What are your thoughts on the BSIV and BSVI emission norms?

Kapur: The industry is ready for BSIV norms. The problem of fuel availability has already been sorted out. Most of the Indian companies have adopted BSIV technologies. I feel BSIV is very good for India and the industry is ready for it. But the 2020 deadline for BSVI emission norms seems too optimistic.

Q: Many multinational companies are expanding base in India. How do the Indian auto component players collaborate with them to progress towards BSVI norms?

Kapur: It will happen sooner than expected. Not only the Indian market is opening up, the world is also increasing its shopping list from India. Over a period of time, India has proved that the market has matured to a great extent on the quality aspect of its products. So there has been a rising acceptability of Indian products even in difficult markets like Japan and Germany. So it will be just a matter of time that the whole world will accept us. Exports will be an important part of the business plan to most of the companies. Out of our total exports of $13-15 billion, nearly 25% goes to the US.

Q: Give us a brief of the recentlypublished study on aftermarket from ACMA?

Kapur: The study clearly reflects the growth trajectory of auto aftermarket in the country. As per the study, the aftermarket in India stands at around $8 billion and is expected to exceed $13 billion by 2020. As per the Indian government’s Automotive Mission Plan 2026, the set target is $32 billion (by 2026). So, clearly we are looking at aftermarket to scale up very sizeably in the coming years. I think it is becoming a part of everybody’s portfolio. It is a de-risking portfolio to spread so I think it is an important market and it is here to stay.

Q: The growth looks satisfying but the unorganised sector still continues to be a sizeable market. How is ACMA gearing up to manage this?

Kapur: There are 2 aspects to it. A big chunk of the unorganised market has great entrepreneurial spirit. As long as those companies produce genuine, safe and good quality products, there should be no issues. The challenge comes when the unorganised sector produces substandard items. This largely happens because India is a very price sensitive market. At every price point, you can find a market segment.

Unfortunately, the challenge is that India has not mandated the standards of the products to be sold in the aftermarket. If you had standards that were made compulsory then you would also have a mechanism in place for the implementation of the standards and you would make sure that everybody is compliant. When we supply to the vehicle industry, as component manufacturers we have to adhere to the auto industry standards. Nobody will take the risk of making the vehicle unsafe. We have been talking to the government for 3 years now, that we have to make standards mandated for the aftermarket. Hopefully, in the next 3 years, we should have that mandated. The government today is very serious. The new Motor Vehicle Act is very serious about safety. The Union Road Minister Nitin Gadkari also is very focused on safety. We are in active dialogue with the government.

Q: Counterfeiting still hurts automotive industry. How are you planning to curb it?

Kapur: When we did a study 5 years ago, we had mentioned that the counterfeit market was as high as 36%. Now it has come down to 5%. When we did the earlier study, the term counterfeiting was used in a very broad manner. But this time, we have made the definitions of counterfeiting more tight. Counterfeit is really the spurious and added to that is the 30% of the unorganised sector. So, essentially the earlier chunk that was 36% of counterfeit is now split and represented as 5% which is just the counterfeit and the rest 30% largely substandard products. If you look at it, the proportion has not changed much. It is still a long way to go to curb substandard and counterfeit products.

Q: You talked about tight definitions. What is the role of ACMA in defining it?

Kapur: The market is evolving fast and we are also understanding the market. Earlier the term counterfeit also

included substandard products. These are generally available from mom and pop’s brand names from various markets like Paharganj and Kashmere Gate. But now, it only refers to fake products, which do not comply with the Copyright Act and with IP Act and are made from substandard material. We have now bifurcated it, where spurious is just the fake. The substandard and other local products come out of lesser known brands from very small units. China is also dumping products into India.

They can be curbed only with mandated standards and at the customs they should show proof of compliance with the standards. Otherwise it is difficult to curb them. So the standards play an important role.

Q: What was the impact of demonetisation on the auto component industry?

Kapur:

There are some industries that survive any kind of pressure for example the four-wheeler industry. But twowheelers and agri-equipment sector lost a big chunk of revenue. The major hit on sales was from the rural areas where major transactions are done through cash. Due to demonetisation there were no buyers in such markets. But the demonetisation policy will go a long way in eradicating malpractices from the industry. Currently, various players come to the market, sell their products at cheaper prices in cash and then disappear. So it becomes very difficult for us to trace these people.

There will have to be tighter ways for coming into the market. When they would be mandated to raise invoices, traceability rises and once it rises, it would be much easier to know these people and regulate the market. Many a times they end up killing taxation structure, killing industry also. I think everybody in the market has accepted it and is happy that such a move has come across the board. I think from this fiscal year, everything will be back to normal.

Q: What was the impact on the aftermarket?

Kapur:

When we look at it from the aftermarket perspective, the transactions in different markets were different. In the north, cash transactions are over 50%, south was less than 20%, in the rest were somewhere in between. Depending upon the amount of cash transactions, the markets were differently hit. With cash flows getting improved, I don’t think there are any more issues pertaining to market vibrancy. It is back to normal. The government and bankers today know who are doing the cash transaction. We at AMCA are also pushing for digital transactions. We organised seminars at Automechanika as to how to promote digital transactions and e-payments. We all have to make that effort.

Q: What are your thoughts on the North East India market?

Kapur:

That is a very vibrant market, especially from a commercial vehicle point of view. Because of the hilly terrain, the wear and tear of vehicle is more. So the maintenance of vehicles will become a huge hub over there. The North East India market will become very big and Assam can be a focal point for warehousing to serve better the 7 sister states and beyond. Materials from across India will move there. There are roads which go up to Myanmar, and even to China.

Q: GST is all set for the roll out. Your thoughts.

Kapur:

When an industry makes a product, it is not just made and assembled there. While a complete product is developed, the product travels across various states. Imagine the amount of paperwork involved in terms of sales tax and excise involved. GST will go in a big way in eradicating these problems from the market. We have been struggling for a very long time in using physical methods like conducting raids. We collectively conduct almost 500 raids every year but that happens only at the retail level. And we are not able to penetrate beyond. We might have reached up to the distribution level but not till the manufacturer. But with such methods, we will be able to reach up to the manufacturing level as well and curb it. I only hope that GST comes at 18% or lower. If it comes above it, surely it is going to hurt the industry. This is because it may speed up counterfeiting and price cuts. Once the prices go up, then again under cutting and under selling without legal papers come back. When there is