Japanese car makers to source more components locally

A view of an auto component unit

Japanese car makers such as Maruti, Toyota and Honda are working to help their suppliers increase the localisation content in components to mitigate the increasing cost of imports. Apart from engine and safety related components such as air bags, many of these companies also import a significant amount of steel.

Some of them are also changing their export currency so as to suffer lower foreign exchange losses.

Maruti Suzuki has said that it will buy more components locally to offset any adverse impact of foreign currency fluctuations. “Of the 22 per cent components that we import as a value of our net sales, 12 per cent is imported by us and the remaining by our suppliers. So, we will work with our vendors in localising those components imported by them,” explained Mr Ajay Seth, Chief Financial Officer, Maruti Suzuki India. However, the company does not foresee any major shift in its sourcing pattern for steel as certain grades of steel for cars are not available in quantity and quality in the domestic market.

While till now, the company incurred losses on account of the dollar-rupee fluctuation, from this year, with its exports mainly to Europe, it will have an advantage. “Exports will now be in euro. So, we would have a better position moving forward,” he told Business Line.

Toyota Kirloskar Motor’s Deputy Managing Director, Mr Hiroshi Nakagawa, said, “Currently, Indian currency is weak. Japanese yen is strong. Our counter measure is very clear. We would like to increase the localisation in our cars this year.” Both Honda and Toyota have 50-75 per cent of parts sourced locally while the balance is imported.

A spokesperson for Honda said its import costs had risen by 30 per cent in the past eight months with the rupee depreciating vis-À-vis dollar by 16 per cent and the yen strengthening against the dollar by 10.5 per cent. European car companies seem to be less impacted as the volatility in the rupee against the euro has not been sharp.

“While we do have a strong localisation plan for our models, we are less impacted due to our hedging policy and a relatively lesser fluctuation in rupee vis-a-vis the euro,” said Mr Ashutosh Dixit, GM, Sales, Skoda India.