[EV NXT]

Originally Posted by fhdowntheline

Well, there is some context to it.

Of course there is.

Maths allowed Einstein to “explain the theory of gravity mathematically” in the early 1900’s while Newton “discovered” it in the late 1600’s. And thats why maths didn’t help Einstein “discover” gravity only “explain” it. Its part of his general theory of relativity. I think we will be taking the thread OT if we discuss this further.

[ruzbehxyz]

The two car makers are neither circumventing, nor breaking any extant rule or law by engaging in such liberal component imports from their parents at cheaper prices, that they prefer rather than manufacturing them here in India.

This statement answers it all, isn’t it ?

Every car manufacturer be it Indian or non Indian is up for some serious business and to make maximum profits. Every Rupee or dollar saved in the factory or manufacturing process, can work out to hundreds of rupees on the road.

[subuiyer]

Originally Posted by anjan_c2007

https://m.timesofindia.com/city/pune...w/98243833.cms

Originally Posted by Stribog

...This was aimed very clearly (to me at least) at Indian manufacturers who even for a 10 paise arbitrage will import rather than buy local.

It appears he used the two auto names and countries (Korea and Japan) as examples while the remark was part of what seems to be a message to the broader Indian businesses - majority of whom clearly preferring to import even on small arbitrage rather than give preference to domestic sources. He has called out that it is the people of those countries that display nationalistic tendencies by preferring local products, while their govts or laws don't have import/trade barriers.

Media world over has a knack of picking and choosing for headlines, they don't want to bother readers with the context.

[OffRoadFun]

I think most of the posts here are oblivious of the context.

India has FTA with Korea/Japan and despite the word "Free", the expectation is the trade works for both the sides. And I think it has not worked for India as expected. Specifically, Indian Steel is cheaper than Korean/Japanese domestic steel but as pointed out by him, Indians never become the vendor due to nationalistic ( which is mild word, some 5 letter word starting with r is more apt in my opinion, having worked with Koreans) preferences. So even though in theory the trade is free and your product's landed cost is cheaper in Korea/Japan, it does not sell. It's similar to initial days when Japan opened up its domestic auto market for US big three (when Japan's car's were not universally superior necessarily), no US car maker could make any headway in sales. Free trade it was in theory.

Yes, by having India as manufacturing base and exports mitigates some of it and that's probably the reason FTA is still continued, at the cost of other Indian industries like steel, agricultural products etc. The idea for FTA is to boost other industries too.

Korea/Japan never play fair.

[Stribog]

Originally Posted by subuiyer

It appears he used the two auto names and countries (Korea and Japan) as examples while the remark was part of what seems to be a message to the broader Indian businesses - majority of whom clearly preferring to import even on small arbitrage rather than give preference to domestic sources. He has called out that it is the people of those countries that display nationalistic tendencies by preferring local products, while their govts or laws don't have import/trade barriers.

Media world over has a knack of picking and choosing for headlines, they don't want to bother readers with the context.

Precisely, but I wouldn't blame the media for this. Takes 2 mins to read(this article) and get the context beyond the clickbait.

It's entirely on us, the consumers for falling for clickbait

[AutoNoob]

Originally Posted by Stribog

This was aimed very clearly (to me at least) at Indian manufacturers who even for a 10 paise arbitrage will import rather than buy local.

Originally Posted by subuiyer

the remark was part of what seems to be a message to the broader Indian businesses - majority of whom clearly preferring to import even on small arbitrage rather than give preference to domestic sources. He has called out that it is the people of those countries that display nationalistic tendencies by preferring local products, while their govts or laws don't have import/trade barriers.

While I somewhat agree to the message given by the Minister to 'Indian businesses', I disagree with portrayal of Indian automobile companies as someone importing for even smallest of the margins.

For automobile industry, to import or to make locally, is a complex decision. Definitely cost is a big factor, however, there are other considerations as well like RM supply chain issues, workmanship and quality, labour and local political issues.

From what I know, from friends in the industry, every company tries to maximize profit by localization. But if local production doesn't have economies of scale, the cost benefit is not available. So, for limited volumes (particularly for technology/ electronics components), total cost of import may still be less than proposed domestic production.

Hyundai KIA are no charity organizations. Over the years they have done lot of localization (manufacturing of child components and/ or final assembly). I am sure the decision was based on cost merit analysis. Similar process is followed by almost all auto manufacturers.

I cannot comment on other sectors and their decision making process. The message from minister may be more appropriate to those.

Media world over has a knack of picking and choosing for headlines, they don't want to bother readers with the context.

True. Infact I got this news as whatsapp forward from a friend. He read the headline and tried to bash Hyundai KIA. I went through the full article and explained the context. I think there should be strict guidelines and penalties to deter media from publishing misleading headlines. Freedom of Speech is the Fundamental Right of the fourth pillar of democracy, but Constitution doesn't permit misuse of this right.

[ashokabs]

I agree this is barking up the wrong tree. Indian consumer has gained from competition and yes there are also exports. If we want foreign company to set up export oriented businesses they need to understand the local culture and conditions. It helps to have a domestic market. Tatas and Maruti are now giving more value for money thanks to pressure of competition from Hyundai and Kia.

[gauravanekar]

Originally Posted by OffRoadFun

Yes, by having India as manufacturing base and exports mitigates some of it and that's probably the reason FTA is still continued, at the cost of other Indian industries like steel, agricultural products etc. The idea for FTA is to boost other industries too.

Korea/Japan never play fair.

Having worked in auto industry for 12 years, 1/3 of which in a Japanese company, I can vouch for this.
Why would anyone buy Panasonic refrigerators for office pantry in India where the market share of Panasonic is miniscule, sometimes even stationery is imported from Japan. Many such capital expenditure in India is sent back to their homeland through buying preferences.

It is not only capital expenditure, one of the blatant method is every Japanese national's India visit is bankrolled by Indian subsidiary, even when the said engineering is visiting Indian plant for the purpose of learning.

The cost associated with getting parts designed at homeland R&D center is exorbitant as well. We Indians don't protect ourselves in a similar way. There was nothing objectionable in what the minister said.

[neerajku]

I have no data to prove what I am saying but I will be really surprised if export oriented countries like Korea, Japan Vietnam etc are driven by nationalist flavour in their commercial decisions. First among equals, may be, but prefer cheaper better foreign import over more expensive poor quality local? Certainly never. This will not be correct. They could not have become en expert power house with such Swadeshi policies for sure.
The nationalistic fervour, flavour whatever he referring to was the 60s and 70s for them driven by war issues and protectionist measures of those days. Surely not now. Culture, food, ways of doing business, governance, regulations, lot more to do but surely a long road traversed so far. We have to serious look at what we make rather than blame others for not buying from us.

[aadya]

No politics in Team BHP so obviously can't comment on this. Can somebody clarify "Electoral Bonds" are considered politics?

[JediKnight]

Originally Posted by neerajku

I have no data to prove what I am saying but I will be really surprised if export oriented countries like Korea, Japan Vietnam etc are driven by nationalist flavour in their commercial decisions...We have to serious look at what we make rather than blame others for not buying from us.

I have dealt with Koreans for decades now. The Korean government is hyper nationalistic and all their economic policies are geared towards that. All the Korean giants that you see now would not have existed had it not been for the direct intervention of their government.

An average Korean on the street is very nationalistic as well, where as the average Indian guy is an self optimizing opportunist.

To make something of quality for today's complex manufacturing process it take years of effort to reach that point. Earlier Japanese and Koreans products were junk as well.

[OffRoadFun]

Originally Posted by neerajku

I have no data to prove what I am saying but I will be really surprised if export oriented countries like Korea, Japan Vietnam etc are driven by nationalist flavour in their commercial decisions. First among equals, may be, but prefer cheaper better foreign import over more expensive poor quality local? Certainly never. This will not be correct. They could not have become en expert power house with such Swadeshi policies for sure.
The nationalistic fervour, flavour whatever he referring to was the 60s and 70s for them driven by war issues and protectionist measures of those days.

With all due respect, you are wrong. There is no black and white in trade. Japanese and Koreans and too some extent all countries base their decisions on origin of product. This world is not ideal and does not need to be. By buying a foreign product, like it or not, in some sense, some money is sent to another nation which definitely from a trade point of view, is an adversary. That does not mean we should go to protectionist raj, we have seen what that leads to.

As to proof, books have been written on such trading practices by Japanese and Koreans (their intricate network of component suppliers where it is impossible for a foreign (car) manufacturer to get into it and hence they never made a mark into those markets). Forget about Koreans in Korea, for decades, Korean immigrants in the USA would buy only Hyundai cars in the US, which were known to be crappiest cars in 80s/90s and at least first decade of 2000s. If you see a Hyundai in 80s on road in the USA or even today, there is a very high chance a Korean immigrant is driving that. I had some Chinese colleagues in US who will NEVER buy Toyota/Honda out of dislike for Japanese.


The Koreans and Japanese just do not let any outsider enter into their supply chain, nationalist consumers (mostly) keep on buying their products. Starting with inferior/stolen technology of rivals, this is the recipe with which they outsmart the rivals eventually and have the last laugh. This is not to say their products are not good, but that's broadly the recipe how they displace foreigners.

You can go to a Korean IT company, all cars will be Hyundai for their executives/employees despite being inferior to say Toyota, Laptops will be Samsung's (yes they have), ACs will be Samsung/LG irrespective of being superior or inferior.

[furyrider]

Forget about Hyundai, Kia or any other overseas automobile manufacturer for that matter. What exactly did the Indian government (past/present does not matter) do to help Indian automotive companies gain a foothold in our market?

Once our market opened up after the licence raj era, Indian cars could not hold a candle against the onslaught of far superior products from overseas. Case in point? We all know how it ended for Hindustan Motors and Premier automobiles. Tata and Mahindra on the other hand had steady revenue in the commercial vehicle segment which helped the passenger vehicle division stay afloat. The fact that they are now able to challenge products offered by global automotive companies is a matter for another discussion.

In contrast, look at the Koreans. Their government stood by their local automotive companies during difficult times. What did we do? Instead of helping troubled Indian companies, our babus happily switched from Ambassadors to swanky BMWs, Mercs, Lexuses, Toyota LCs. One cannot expect the common man to be a nationalist when the babus themselves prefer foreign over Indian.

[rascalangel]

How many of us take pride in our workmanship? When stuff is done for the sake of doing there is no yearning for quality or improvement. I'm pretty sure if the government had protected Tatas and Mahindras, we would still be driving cars with tractor/truck engines. The Japanese take pride in their work. The quality follows. We are more known for jugaad.

[neerajku]

A fairly simple topic is turning out to be quite a contentious one. Never easy these days. Personal examples shared of a small universe not backed by data , tough for many of us to accept.
No malice to anyone who does not agree, I am just going by basic economics of foreign trade, publicly available data and some extrapolation. Would have loved to do some deep research may be paucity of time or plain laziness.

So, Koreans are nationalistic , Indian consumers are optimisers and hence in a roundabout way guilty of guilty pleasure of cheaper imported stuff.
I do not understand it, all countries and their nationals are nationalist and patriots. But they will buy only local stuff out of love for their country , I think these are over generalisations, based on similar samples over time or may be smaller samples.

Koreans buy local made stuff as, it is cheaper, gives better value, has quality and are durable. They are world leaders in engineering, electronics, vehicles, chemicals and so on, possessing an enviable collection of globally respected brands. So if they prefer them over others , then one cant blame them.

As Indian should we buy only India made stuff? Over other, better quality, cheaper stuff? I dont have to answer that, each according to his or her need and belief and of course money. I buy what I can afford and gives me best value for my money, and for my patriotic duty I pay my taxes on time. And I dont think any other large body of consumers behaves differently in any part pf the world. Those with wealth and high level of patriotism can spend their money fattening inefficient local manufactures. Will that help them build local, only time will tell. Past it could not. Have no view there. Their own money. Not my call.
But I know very well that be Indian buy Indian slogan, failed year after year, spectacularly. Hope meets a better fate this time.
Korean industry was supported by Government’s fiscal support, tax breaks , import restrictions and what not, long time back. May be some invisible barriers still exist but even if they do, their consumers will reject it. Everyone knows prices, quality of stuff across the globe.
Even tougher to implement in Korea , its economy is trade dominated as opposed to local consumer dominated. It is nearly 2 trillion economy with 60% accounted for by trade. Ours will be around 30% or so.
If Government were to subsidise it with fiscal support, they would have had to incur a lot fiscal deficit , accumulate a lot of public debt and give up lot resources for interest payment. Inflation would have been consistently high and they would have poor quality of life. None apply on a consistent basis. Almost all indexes fare far better.

Stories, experience of working with Koreans for decades , may have a lot of anecdotal value but cant be expanded for nation as whole. That , while, very valuable, will be only true for a small group as nation wide numbers don’t support it.

India also had similar strategy since the 60s till 90s. We wanted to encourage Indian manufacturing, promote exports, believed in self sufficiency. Spent crores in subsidising exports and had all kinds of barriers to prevent imports of good and services. Well results are for all to see, we had shortage of goods, paid through our noses for poor quality domestic stuff and Indian exports never picked up despite all this.

Reasons, with the benefit of hindsight, were many. Subsidies were all over the place, not directed, rent quota permit raj ensured that connected ones cornered all the scheme benefits and never invested in quality, quantity etc. Most of the investment Was to perpetuate the license quota permit raj and strangle imports. All of them.

Then hell froze over in the 90s. We opened the floodgates. In 2000, China happened.
It had its issues. Domestic manufacturing could not face the onslaught.
Could we have done something differently?
Korea, as studies show, before opening up the borders, increased domestic competition, generous license, directed subsidised credit etc and then opened up gradually. Support of US was there, may be as a counter to Japan. They also engaged deeply with Japan and systematically absorbed good practices and technology.

In this day and time , is it easy to subsidise trade with visible invisible barriers, yes quite possible. China did it and built scale, with a single minded purpose. But not easy now, nations complaint and there is bug bear Called WTO. We could have gone to WTO if there were barriers in Korea. US allowed it and WTO ignored it, whole world benefited out of cheaper Chinese imports. Now Xi an team are working hard to lose that advantage. For all to see.

We are trying it, and looks like we may make break through. Time will tell but policies are far better directed now. And subsidies have a lot of scrutiny and a sunset clause. Look at the stoppage of payment to EV manufacturers are they are trying to circumvent the norms and siphon off subsidy. Sharper and better monitored support may build up local industry but preliminary views say we have picked up a lot of sectors, we may mot have enough to support all. Let us see.
What I can surely make out from this discussion, economics, trade theories financial management are not part of most of the arguments. At macro levels we all know they help take a business decisions and not xenophobia or love for motherland.
Do not wish to make it acrimonious, personal or score the last shot, this is an august gathering so thought I should share my views and thoughts behind it. I am sure everyone will have their now logic or thoughts behind their views. All views are welcome as long as I learn something from them.
It took Maruti ages to indigenise critical parts, protection of core tech, lack of confidence in Indian expertise. In the end they did. Economics made sense. If Koreans are not importing enough and if they are losing value, they ultimately will, if it make commercial sense.
My feeling is , this playing to the gallery by the Minister may be ploy to push them, like Mr. Bhaskarudu and team did during Maruti Suzuki tussle with GOI in the 90s. And Korean Government will surely push domestic industry to act. We are big now.
Let us see if it yields some good results for its.