IEC 2025 - Tariff Wars And Low R&D Spends Are A Concern For India, Says ACMA's Vinnie Mehta

Speaking at the India Economic Conclave 2025, Vinnie Mehta, Director General, ACMA (Automotive Component Manufacturers Association) shared his insights on the restructuring of global supply chains, the 'China Plus One' strategy moving from concept to implementation and India's role in this shift. Mehta shed light on lessons that the industry learned from the pandemic, the effect of global tariff wars on Indian auto component exports and the barriers that are preventing Indian companies from taking big risks in R&D.

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At IEC 2025, Mehta highlighted how the pandemic had exposed India's supply chain vulnerabilities and how minor components can potentially

stall entire production lines.'Interestingly, in the industry, we would do something like an ABC analysis. Something that is most expensive, you would want to secure it the most. But here you realized that a 30-cent semiconductor or an IC could hold your production line to a ransom. It's like, you lose a nail, you lose the war, right? So, what it taught us is that we should not even think that the smallest or the most insignificant of things are not important. So you need to do a very thorough analysis of your entire supply chain, make sure your vulnerabilities are plugged.' Mehta said at the Forum.

Further highlighting the rise of global protectionism and recent tariffs from the US and Mexico, Mehta noted how such tariff wars are having a severe impact on the domestic auto component industry. Mehta pointed out, 'From our auto component industry's perspective, we are a hugely export-dependent industry. Our turnover last year was USD 80 billion. Of that, USD 23 billion is what we export. That is almost a third of our production that gets exported. Both the US and the European Union are very important markets, each accounting for USD 7 billion of our exports. To the US specifically, in FY24, we exported USD 6.6 billion worth of auto components and now we are saddled with two tariffs. Almost half of the components attract the penal tariff of 50 percent, which is the penal tariff. He also highlighted how Global Capacity Centres (GCCs) such as Bosch and ZF may have invested in establishing large engineering centres in India, but the Intellectual Property (IP) remained non-Indian in most cases.

Speaking on the India vs China debate, the Director General of ACMA noted that in a realistic comparison of scale, while India has the benefit of high quality, it is still far behind in manufacturing scale. 'If today they are number one, we are definitely number two. But look at the scale, they make 30 to 35 million cars every single year. We make 5 million cars. They are 6.5 to 7 times larger in terms of their car market size alone.' Mehta said while highlighting the massive lead that China has due to its early start in EVs.

Another major bottleneck that was highlighted at the forum was the barrier to investment being currently faced due to the high cost of capital when compared to competing countries such as China, Japan and the US. Mehta pointed out how costs on capital are acting against Indian companies from taking big risks on Research and Development (R&D). 'Something that we need to look at very deeply to stay competitive, is that the technology spend in the Indian auto component industry is very minuscule. We spend just about 0.7 percent of our turnover on R&D. I'm not talking about the outliers. There are definitely outliers who do 4 to 5 percent or even more on their R&D spend. But that element, 0.7 percent, is the same as what we in the country spend as a percentage of our GDP on R&D. I guess the industry needs to up its quotient on R&D to stay competitive. We need to move very, very quickly into productization.' Mehta said at the IEC 2025 Forum.

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