A STUDY ON INTERNATIONAL TRADE OF AUTOMOBILE SPARE

PARTS
Submitted in partial fulfillment of the requirements for
Post Graduate Diploma in Management (PGDM)
2013-15

SUBMITTED BY

PARAS PAREKH
PGDM Roll No. (PG-13-30)

PROJECT GUIDE
PROF. CHIRAG SHAH

IES Management College and Research Centre

Mumbai

DECLARATION

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my original work and is not used anywhere for award of any degree or diploma or fellowship or for
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Name:- Paras Parekh

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towards partial fulfillment of the requirements of the PGDM / PGDM (HCPM) course 2013 - 2015 and
has been carried out by him / her under the guidance of Mr./Ms.________________________ at the IES
Management College and Research Centre.

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EXECUTIVE SUMMARY
The Indian automobile market is estimated to become the third largest in the world by 2016 and will
account for more than 5 per cent of the global vehicle sales; India is expected to become the fourth largest
automobiles producer globally by 2020 after China, US and Japan. Turnover of the Indian auto
component sector stood at USD40.6 billion in FY201213; the industry is expected to reach USD 115
billion by FY202021. During 201112, the indigenization level of domestic players was around 95 per
cent and foreign OEMs 6570 per cent; indigenization of foreign OEMs is expected to reach around 80
per cent by 2014.

OBJECTIVE

The objective of the project is to identify the sector specific opportunities for Indian economy in Africa
and China based on global trade of respective countries, overall economic relationship between India and
Africa especially in bilateral trade and investment. The paper aims to analyze the dynamics of the
potential sectors in Africa selecting some of the emerging markets and scrutinizing whether the export
growth is due to rising demand, diversification of product basket or due to competitiveness. It will also
explain the nature of barriers in those sectors and what could be a policy drive for Indian government to
have a better market access. The project gives impetus to necessary strategic policy recommendations and
potential interventions for the identified sector.

ABBREVIATIONS

ICRA OEM - Original Equipment Manufacturers

PVs - passenger vehicles
CVs - commercial vehicles
M&HCV - Medium and Heavy Commercial Vehicle
CAAM - The China Association of Automobile Manufacturers
CMS constant market share
FTA free trade agreement

LITERATURE REVIEWS
Literatures reviewed for this project are:

Global auto trade magazines.

Various automobile news reports from news paper.
Zig zag auto components magazine and there need is vehicles.
ICRA`s report on automobile spare parts.
Various other reports and research papers on this industry.
Research papers on overseas automobile industry.

Overview
The Indian auto components industry has experienced healthy sequential growth over the last one-and-ahalf years, following a period of de-growth in 2008-09. The recovery could be attributed to factors such
as strong buoyancy in the end-user industry; recovery of the global economy; improved consumer
sentiment and return of adequate liquidity in the financial system. The revival of the auto industry was
initially driven by the fiscal stimulus programme of the government.
Nevertheless, the fact that the growth momentum has sustained even after withdrawal of such incentives
in February 2010 highlights the strength of the underlying domestic demand. ICRA expects the trend of
automobile sales volume growth, and in turn the auto ancillary business growth to hold over the short-tomedium term aided by strong underlying domestic demand across all automobile segments [comprising
two-wheelers (2W), three-wheelers (3W), passenger vehicles (PVs) and commercial vehicles (CVs)],
thrust on low-cost sourcing by Original Equipment Manufacturers (OEMs) and Tier-1 players based from
developed markets, aggressive supply side push from automotive Original Equipment Manufacturers
(OEMs) in the form of new model launches and expected continuation of facilitators like easy access to
vehicle financing, notwithstanding possible challenges related to pressures on commodity prices, interest
rate hardening and fuel price deregulation. While almost all segments of the automobile industry have
posted a steady growth over the last 18 months, the recovery in the Medium and Heavy Commercial
Vehicle (M&HCV) segment has been the slowest to gather momentum.
The segment had also experienced the sharpest volume decline in 2008-09, which had translated into
significantly lower off-take and losses for suppliers of M&HCV components - and had contributed to
around 40% of rating downgrades in the universe of auto and auto component manufacturers downgraded
by ICRA in 2008-09 and 2009-101.
However, with domestic economic activity having gained traction, ICRA expects the M&HCV segment
volumes over the near term to surpass the levels achieved in the predownturn period, which should result
in improvement in the credit profiles of auto component suppliers dependent on this segment.
On the whole, ICRA believes the Indian auto components industry is poised to sustain its revenue growth
momentum over the short-to-medium term. However, the industry profitability may face pressures due to
(a) pricing pressures from OEMs, which in turn are entering into a phase of heightened competitive
intensity constraining their pricing power;
(b) threat of rising commodity prices;

(c) likely higher cost of funds consequent to hardening of interest rates; and
(d) import from other low-cost locations.
In addition, companies engaged in select product categories within the auto components industry are
expected to incur large capex for enhancing production capacities to meet the growing demand, which
could affect the capital structure and return metrics of such companies over the short term.
However, in ICRAs view, the anticipated strong business growth should result in healthy cash accruals
and enable such companies to tide over the short term pressures and emerge with a stronger credit profile
over the medium term.
Other risks to growth and profitability of the Indian auto components industry include increase in
competition from other countries to capture business opportunities both in the international as well as
domestic markets; uncertainty arising from currency volatility; and ability to acquire capabilities in tune
with technological advancements. The industry efforts to mitigate the above risks along with policy
measures of the government would determine the impact of the above risks on the auto components
industry going forward.

Introduction
Africa is now considered as a continent poised for economic growth, the reasons of which lies deep
rooted in economic, resource and operational factors. Africa today is the 3rd fastest growing economic
region in the world. The rate of urbanization is higher than India and lower than China. It is the continent
which comprises of some of the world fastest growing economies. According to World Bank data, Africa
is richer than India on the basis of GNI, and a dozen African countries have a higher GNI per capita than
China. Africa offers among the worlds best investment prospects. Also a shift of global economic power
to emerging giants benefits Africa. Large economies such as China and India are seeking resources from
Africa thus pushing up commodity prices internationally and providing investment opportunities in
African countries. While barriers to entry in Africa are high, companies that develop strong distribution
networks and acquire deep understanding of market forces can generate high margins. Sectors that offer
investment opportunities include oil and gas, telecom, infrastructure and information technology. Two
years ago Bharti Airtel acquired African assets of Kuwaiti Telecom firm Zain for US $10.7billion.
1. Companies that have evaluated market opportunity and understood consumer base are enjoying
remarkable growth rates ranging from 30 to 60 percent year on year. As far as trade is concerned,
Recently India has overtaken the US to become Nigerias largest export market. Nigerias exports to India
are mostly crude oil and cashew nuts while India exports pharmaceuticals, machinery, electronics, and
rice.
2. Also Trade between Africa and the rest of the globe increased by 200 per cent between 2000 and 2011.
Apart from the usual exports of oil, natural gas and minerals, the sale of African-manufactured goods is
also increasing. Over the past ten years, African manufactured output has doubled.
Some of the fastest-growing economies in the world are now in Africa. The charts below shows the top 12
fastest growing economies in the year 2011 and it is evident from this table that many amongst them are
African economies. Ghana, Liberia, Angola, Ethiopia Mozambique are growing faster than many Asian
economies. In next few years some more African countries such as Niger, Zambia, Uganda, and Tanzania
are expected to join the league.
China became the worlds largest automobile producer and market in 2009 with annual sales of nearly 14
million vehicles. The market continues to expand in 2010. In the first nine months of 2010, automobile
production reached 13.08 million units, a 36.1 percent increase from a year ago. The China Association of

Automobile Manufacturers (CAAM) raised its forecast for annual sales to reach a record 17 million this
year, matching the highest annual total ever reached in the United States.
Industry growth has been primarily driven by rising domestic demand stemming from rising incomes,
a growing middle class, and by supportive industry policies from the Chinese government.
The Chinese automotive industry remains very fragmented. In addition, Chinese central government
officials fear that unchecked expansion of China's auto industry encouraged by local authorities could
harm the wider economy, and that excess capacity must be stopped. Hence, the central government
continues to push for mergers and acquisitions (M&A) in the automotive industry which will support the
emergence of a few leading national companies.
Chinas weak R&D, domestic innovation and design capabilities are key challenges to its international
competitiveness. With the governments encouragement, domestic firms have opted for strategic
partnerships with foreign players, aiming to facilitate technology transfer and improve domestic design
and engineering capabilities.
The Chinese government has implemented a number of tax adjustments and subsidies for automobile
purchases to encourage hybrid electric vehicles, pure electric vehicles and traditional vehicles of small
engine displacement.
Beijing has gradually introduced higher automobile emission standards for new vehicles. Plans to
develop hybrid electric and pure electric vehicle production capabilities are part of a broader,
environmentally friendly strategy to develop the auto industry.
Market opportunities exist especially in the following areas:

Developing domestic innovation capabilities (e.g. vehicle design and engineering, hybrid electric
and pure electric engines, electric motors and electric controls)

Productivity and quality upgrade (e.g. engines, transmissions, electronic control systems and
safety systems)

Mergers and acquisitions (both in China and in Israel)

Clean transportation technologies

Advanced manufacturing technologies

Supply of essential automotive components/systems to OEMs (e.g. electronic control systems and
safety systems)

Chinas automotive market has the most growth potential in the world; per capita car ownership is still
remarkably low at 4.78% and is expected to grow significantly.
Domestic whole-vehicle manufacturers and automotive suppliers are still extremely
fragmented (government-supported consolidation is imminent in the near future); challenges
remain for domestic R&D and design.
With government subsidies and tax incentives, China is aiming to establish an early footing in
the production of low-emission and environmentally friendly automobiles.
Component imports surged by 130% in the first half of 2010; 60% of imported components
were drivetrains, engines or automotive body components.

On the basis of these two variables African countries have been placed and ranked in two dimensional
scatter diagrams. The diagram is then divided into four quadrants based on the 'average of country data'.
Hence the vertical line represents the average of country specific export values calculated from the export
values of all selected countries.
Similarly, the horizontal line depicts the average growth of India's exports to all African countries. Thus,
the scatter diagram is divided into four quadrants. The quadrant one represents a situation of high growth

and high export value. These markets capture significant opportunity and they are matured. Second
quadrant stands for high growth but low export value thereby govt. of India must identify them as
potential markets and provide incentives for export growth. Third quadrant consists of low growth and
low export value. These markets don't attract value to Indian products. Fourth high export value yet low
growth or a decelerating saturated market. We need to maintain the market share there. So, competitive
strategy like investment on brands, promotional activities are necessary. Some of such markets may be
small in size and we need to keep this in mind while selecting such countries.
At the second stage, the paper concentrates on the dynamics of export growth of selected products in
short listed countries through the above procedure. For this purpose Constant Market Share (CMS) model
has been picked up. CMS analysis is a popular tool for analyzing changes in exports of a country. The
intrinsic norm of this analysis is a country's export share in a given market should remain unchanged over
time. However, in reality trade is dynamic and market share keeps on changing.
India-Africa Economic Relationship: Gaining Momentum
Indias trade with Africa has doubled in the past four years, from $24.98 billion in 2006 07 to $52.81
billion in 2010117. This steady upward path on the trade front is being supported by stronger investment
ties, with Indian companies in Africa totaling $1.52 billion in 200910. With the leadership on both sides
committed to providing a businessfriendly environment, bilateral ties are expected to continuously grow
in scope and significance.
On Indias side, economic growth is inevitably pushing the country to expand its footprint across Africa,
including sourcing raw materials and energy to sustain industrial activities at home as well as securing
new markets and consumers abroad for its expanding array of manufactured goods and value-added
services. And on the African side, high commodity prices and robust external demand have provided
more space for national governments to consolidate gains from improved macroeconomic management at
home. This has enabled greater private capital flows, faster debt relief, and allocating greater resources to
enhancing non fuel exports. The political and economic developments have substantially improved
business opportunities for the international community and consequently, both trade and investment in
Africa indicate a growing trend.
Africa today represents one of the largest untapped potential for investment as it is one of the richest
natural resource regions in the world. Further, Africa has a middle class that is larger than Indias,

estimated at 350500 million, with a rising per capita income and greater propensity to trade and to
invest. The continent is today the third-fastest growing economic region in the world and its rate of
urbanization is higher than Indias.
Automobiles & its components:
With a growing population and improved economies in most African countries, demand and investment in
the automobile industry is improving. The sector could

but it lacks the necessary technology to fully

exploit its potential. Among African

economies, South African auto manufacturers have shown great success and it is
expected that some other markets can also be tapped for production and then to gain access to other
African countries. To nurture the sector, Africa will need to have policies that promote the development of
technology and skilled manpower, and meaningful investment in research and development.
As a growing industry, the prospect in automobiles sector looks bright and provides attractive
opportunities for investors. In many African markets, imported vehicles from emerging economies such
as China, India are fast replacing the second hand Japanese made car market. Component industries are
also growing at a fast pace. Because of the strong growth in middle class income group people and that of
premium group segment, overall demand of automobiles, be that a car or a bike attained great heights. It
has been speculated that Africa sells nearly 2.5 million bikes every year and that is the reason Indian firms
are interested in African markets to a great extent.
There is huge potential in these markets for automobiles and automotive parts business. African market
offers the same opportunities for untapped growth that were available in China before it grew to its
current status as the worlds largest car market, and this is perhaps what attracts Chinese brands to the
region. India is one of the emerging nations which both have both huge production capacity and internal
market. It is one of the fast moving developing nations which are considered as upcoming hub of
production of automobiles and auto spare parts.
Changes in the design of models and use of technology have made Indian automobile industry compete in
the global market. This sector has been growing exponentially over the last 5-7 years. Despite the down
turn, the Indian automotive industry has been amongst the first few manufacturing sectors to recover.
With the opening up of the sector, FDI is pouring in. Many foreign automobile giants also outsource
critical components from India. During 2009, India exported vehicles to more than 40 countries.

The new challenge in front of the industry is to manage the growth and develop a strategic foresight
looking into evolving competitive paradigm of the industry globally. Considering its strength Indian
industry can excel through product diversification, technology absorption and modification and exploring
export opportunities in countries such as in Africa.

Fast growth is visible in all segments in last few years. Major export markets for Indian automobiles in
the African region are Nigeria, Egypt, Tanzania, Kenya and Sudan. In 2011-12, Maruti Suzuki India
Limited shipped 17,247 cars to this North African country of Algeria, making it the Indian company's
largest export market14.
In terms of value in 2008, Indias export to Africa was slightly less than US$ 1 billion but in 2011, the
figure reached hopping US$2.45 billion. As mentioned earlier, along with traditional African markets
several new markets experienced high import growth from India.

Indian companies existence in Africa:

a) Tata Motors entered South African market in 2004 to open two production facilities to make
small cars but its original intention was to take advantage of European Unions Free Trade
Agreement (FTA). Tata motors would use this to assemble and export its cars to European
markets as its competitors like Toyota, Volkswagen and Ford were already doing. With the
growing demand of cars within the country itself, the company targeted both local and
international market. The distribution and marketing of Tata cars in South Africa was handled by
Accordian Investments Ltd., Joint Ventures between the Imperial Group, Ukhamba Holdings
(Pty) Ltd. and Tata Africa.
b)

Mahindra and Mahindra entered the African market as Mahindra SA into JV with Renault on the
terms that it will be the first right hand driver automobile manufacturer of its low cost Logan car.

c) Maruti Suzuki Udyog Limited (MUL) took the advantage of right hand drivers in South African
markets to start its business in African subcontinent and is setting up its plant there. Maruti sells
its product in number of African nations and makes parts and components available there. Against
the reconditioned Japanese cars, new Indian vehicles with the availability of parts have been
found a good strategy in these countries.

d) In two wheeler market, Chinese companies give tough competition to India. Countries like
Ethiopia, Algeria the potential gain for China is significant. Indian companies like Bajaj, TVS and
Hero Motors Corp are aiming to set up assembly plants in Africa in the near future, but as of now
they are catering to the growing demands through exports only.

Auto Ancillary Industry:

The spine of the automobile industry is its suppliers of auto components and accessories which is also an
exclusive industrial segment. The total market size of the Indian auto components industry is estimated at
over Rs 700 bn. The sector comprises 500 medium and large players, and also includes 5,000 units (Tier 2
& Tier 3) in the small scale sector.
There are 50 leading companies in the organized sector which account for a major share of the total
output. The number of items produced exceeds 25,000. Having gained global recognition, the Indian auto
components industry exports are growing at a rapid speed. The exports crossed the Rs 10 billion mark in
1996-97 and have progressively risen to a level of Rs 145 billion in 2007-08.
Globally speaking, the competitive edge of the Indian players is the low labour cost. The Indian prices are
estimated broadly to be 10 to 25% less than the world market prices but are much higher when related to
some specific items, where better material inputs and technology are involved.

Source: Automotive Component Manufacturers Association of India

Companies such as Delphi, Bosch, produce components in India both for domestic and export market.
The auto component suppliers are now emerging as systems suppliers with capacity to design and develop
critical parts. The large labour cost advantage translates into an overall cost advantage of 20-30% over the
Japanese producers, despite lower labour productivity.
Moreover, innovative capacity, good patent protection, capability of technology diffusion etc. provide a
significant opportunity to Indian firms in becoming part of global value chain and also develop
technology base in India. Major Indian auto component players such as Bharat Forge, Amtek Auto, Sona
Group are now actively exporting to global giants. The rapid industrialization and modernization
currently sweeping through many African countries has resulted in an increased demand for capital goods
such as machinery, lubricants, spare parts, ball bearings and other mechanical goods and accessories.
Competition heats up as manufacturers of auto components engage in battle to gain market supremacy in
Africa.
Taking the case of tyres, the African continent is one of the fastest growing markets for the global tyre
industry. The rapid growth of the middle class in many African countries has pushed demand for
automobiles to an all-time high in turn creating a growing market for all kinds of tyres: passenger car

tyres, off-theroad tyres, industrial tyres, agricultural tyres, truck, bus and trailer tyres as well as
motorcycle and bicycle tyres. Competition is fierce among traditional European players with Chinese and
other Asian players. India is also seeking market entry vigorously in many of the African countries. Same
is the case for many other accessories.
Nigeria, Egypt, Tanzania, Kenya, etc are major markets of India. However, several new markets
experienced significant high growth in recent times such as Algeria, Togo, Cameroon, Ghana, etc. To
shortlist the countries as described in methodology section, we have compared mean export value and
mean export growth of Indian exports in major African markets. The details are given in Table 6. The
export market in Africa is clearly divided into two groups:
One with high value but relatively low growth and other high growth but small in terms of market size.
Hence, India requires strategizing African market considering this unique phenomenon. Big markets are
important and India needs to diversify its product basket persistently in these markets to keep the current
growth buoyant. In smaller economies, India needs to continuously test the market focusing into nature of
local demand so that it remains ahead of other competitors.
Barriers in case of automobile exports:

Excessive documentation requirements for the purpose of customs clearance in Africa.

Port delay and custom valuation procedures are stringent.
Opportunity is there to negotiate tariff with some countries also.
Luxury tax for car with bigger engine is high in some countries.
If India plans to export SUV, this requires to be negotiated.
High Non tariff barriers exist in most of the African nations. For eg. Passenger vehicles may only
be imported into Egypt within 12 months of the year of production. Government to government

discussion may be encouraged to facilitate Indian exports further.

High tariff rates are applied on some components. Other duties are also prevalent. For example, in

Nigeria, National automotive council levy of 20% are charged on automotive product.
Technology collaboration, R&D centre development after sale service etc. requires attention.
Setting up business is costly.

MARKET GROWTH OF CHINA

Primarily fueled by domestic and partly by foreign demand, Chinas rapidly expanding automotive
industry has outpaced the nations already impressive GDP growth rates in recent years. Domestically,
rising incomes and encouragement from the Chinese government for the urban population to obtain
drivers licenses have spurred the demand for passenger vehicles.
The booming passenger vehicle market has led to a soaring demand for automotive components.
Internationally, automotive manufacturers faced with decreasing margins and profitability have sought out
more affordable supply chain solutions, looking to China as a potential source for lower cost automotive
components.
Unlike developed markets for passenger vehicles, where growth in demand has been largely stagnant,
Chinas domestic demand for new automobiles has skyrocketed in the past years. Strong car sales in
China in 2009 pushed the auto market to the largest in the world, and 2010 is set follow the positive trend.
Import
Positive demand growth for automobiles and components has not only caused domestic industry
development, but has led to increased attention from leading foreign automotive manufacturers eager to
expand into the rapidly growing market. Foreign automotive manufacturers have also been encouraged by
lower import tariffs, which have been lowered for whole vehicles from 70-80% to 25% since China
joined the World Trade Organization (WTO). Import tariffs on Semi-Knocked-Downs (SKDs) and
Complete-Knocked-Downs (CKDs) have dropped from 50% to 25%, while import tariffs on vehicle
components have dropped from 15% to 10%.
Chinas automotive import growth was slowed due to weaker demand caused by the global economic
crisis of 2009. Annual total import were USD 33.1 billion in 2009, representing a year-on-year increase of
only 5.34%. Assisted by government incentive programs and Chinas economic recovery, Chinas auto
import total bounced back from a sluggish 2009, surging by 130% to USD 27.22 billion in the first half of
2010. Imported European luxury cars had a remarkable 237.2% increase in 2010 compared to the same
period the previous year.
Chinas automotive component imports grew to USD 12.7 billion in the first half of 2010, a 90% increase
over the same period of 2009. Drivetrain, engine and automotive body components accounted for over
60% of the total component imports (see chart). More than 80% of the imported components came from
Japan, German, Korea, and the United States.

The main groups of imported automotive components to China can be divided into three categories:
Japanese and Korean OEMs and Tier I suppliers: Generally these companies tend to only use suppliers
from their country of origin. For example, Toyota typically sources components from Japanese JVs or
Wholly Owned Foreign Enterprises (WFOEs) on the mainland, or directly imports from Japan. Such
practice tends to result from strict quality requirements, cultural compatibility and logistical concerns.

German OEMs and Tier I suppliers: These companies typically import components in the areas where
Chinese suppliers are weak (e.g. safety systems for high-end passenger cars).

The US and French OEMs operating in China have not increased their automotive component imports
as much as their peers for different reasons. US OEMs have steadily increased their sourcing from local
Chinese suppliers for vehicles manufactured in China to stay competitive, and French OEMs are facing a
shrinking market share in China.
Chinese OEMs are emerging buyers of imported automotive components, especially in the segments of
hybrid and electric vehicles and Chinese-brand luxury vehicles.
Export
The impact of the economic crisis in 2008-2009 forced many multinational companies to reduce their
sourcing of automotive vehicles and components from China. According to CAAM, China exported a
total of 369,600 units in 2009 worth USD 5.19 billion, which was down by 46% from 2008.
Chinas auto exports rebounded as the global market recovered in 2010, with 250,100 vehicles exported
in the first six months (up 55.93% year-on-year). Passenger vehicle exports surged 115.93% to 116,500
units, while commercial vehicle exports increased 25.50% to 133,900 units. Algeria, Vietnam and Egypt
were the major whole-vehicle export destinations in the first half of 2010.
The auto components export growth has witnessed even more impressive growth than whole-vehicles.
Exports increased 54.11% to reach USD 18 billion in the first half year of 2010, with drive system
components exceeding 50% of the total by value. More than 50% of the components were exported to the
USA, Japan, South Korea, Germany and the United Kingdom.

Industry Consolidation
China is determined to restructure its automotive industry, with the hopes of changing the market from
many fragmented manufactures to two or three dominant domestic firms. According to the State Councils
regulations released in early September 2010 which called for greater industrial consolidation, the
automobile industry was at the top of the list of targeted sectors. The State Council set the goal of
reducing the number of major automakers who are responsible for 90% of domestic sales output, from 14
to 10.
Under the plan two or three companies would dominate the industry, responsible for producing more than
three million vehicles annually, while four others would have annual output capacity of 1.5 million units.

The State Council named the following four groups as potential industry heavyweights, urging them to
take advantage of consolidation opportunities: FAW; Dongfeng; SAIC and Changan. Additionally, it
named four regional leaders that it encouraged to consider regional consolidation: Beijing Automobile;
Guangzhou Automobile; Cherry and Sinotruck. All of these companies are passenger vehicle
manufacturers with the exception of Sinotruck which manufactures heavy-duty trucks (sales of over
125,000 units in 2009).
Industry analysts predict that the coming wave of M&As within the automotive sector could see a deal
that breaks the USD 1 billion mark, more than doubling the largest deal to date which was the USD 450
million purchase of General Motors' Nexteer steering components unit by a joint venture established by
Beijing's Tempo Group and the Beijing government.
Global Expansion
As the leading automotive market, China automakers are accelerating global transformation to increase
their presence in the overseas market. Zhejiang Geely Holding Group (one of Chinas largest independent
carmakers) recently completed its acquisition of Ford Motors Volvo brand for USD 1.5 billion. This is an
indication that Chinese automakers have begun to recognize the power of strong brand reputation. Geelys
Volvo bid is the largest takeover in Chinese auto industry and will provide a pattern for Chinese
carmakers to expand aboard and acquire companies with a strong reputation. Beiqi Foton, Chinas leading
commercial automaker followed Geelys step and announced its global expansion plan. This includes
setting up a production base in Russia by 2012 with an annual capacity of 100, 000 vehicles and building
five other plants in Brazil, India, Russia, Mexico and Thailand before 2015.
REGULATORY OVERVIEW
Government tariffs on automotive imports are in compliance with WTO rules, but minimum capital
barriers still exist for foreign investors. The government has created some incentives to spur R&D
partnership, and regulations for foreign distributers have been eased somewhat.
The government has plans to implement higher auto emissions standards for new cars in China. So far
four regions have implemented China IV emission standards (Beijing, Shanghai, Nanjing and
Guangdong Province).

 The Chinese government views the development of the new energy vehicle industry in China as a top
priority and has introduced a wide range of subsidies and policies in its favor.
Chinas automotive industry supply chain is very broad with many components such as import and
export, manufacturing, environmental protection, technology upgrades and quality control. As such, the
industry is regulated by a range of government organs, both at the national and sub-national level.

DOCUMENTS REQUIRED

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Dock (or Warehouse) Receipt: The dock or warehouse receipt is issued by a warehouse supervisor or
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and left with the international carrier. At this time, the carriers Bill of Lading is also signed by both
parties and copies are issued accordingly.
Packing List: A packing list is prepared by the shipper and is a detailed break down of the items within a
shipment. It may also include any special marks for identification. For example, the customer may want
ABC XX in blue letters on the side of the packaging. For insurance claims and tracking purposes, it
helps to describe what is in each package.

LIMITATIONS
Most of the information for this project is taken from secondary research. Practical application was not
possible while doing this project. Market size, future growth, demand and supply, etc. were on basis of
various literature, magazines, news reports and research reports, the practical touch to this aspects was not
possible i.e. having the actual field experience was missing. Had a talk with one of the exporter of
automobile spare parts Mr. Mohammad Bhatti, who is also an intermediate supplier to companies like
Maruti Suzuki (India) Ltd., Mahindra and Mahindra, Tafe, New Holland, Kirloskar, etc.- various
problems were discussed like payment default of parties, duplication of original spare parts, pricing
manipulation, quality degradation, etc. Sample survey was not possible for carrying out this project. Was
also in constantly touch with one of the person who is retailer vendor of automobile spare parts from last
42 years, so it was easy to figure out things that how real market works.