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Yet another case of Chinese financial aggression

Thursday, March 08, 2018
By Bharatkumar Raut

All those who have interest in global commercial and industrial developments must have read the following news items in Indian and foreign financial newspapers and periodicals.

  • EU imposes new anti-dumping duties to Chinese steel
  • U.S. imposing anti-dumping duties on Chinese aluminum foil
  • Call for anti-dumping duty on Chinese solar panels
  • Indian government imposes anti-dumping duty on 93 Chinese products
  • Government extends anti-dumping duty on Chinese chemical import

Mind it, these are just a small selection of headlines thrown up by a cursory Google search. Yet they speak loud and damnably clear. Least to say, for years now, China has exploited the free market economies of the world. Under the guise of free trade, Chinese companies, their losses underwritten by their government, have flooded these markets with cut-price goods.

This practice is called dumping. And this game is being played in full swing and unabated all the while. The Chinese approach to trade is no different. Chinese companies continue to dump everything from toys and steel to solar panels and chemicals in our markets. But their anti-competitive maneuvering in the electric vehicles space in particular, threatens to kill India’s own indigenous engine of innovation in the Electric Vehicle (EV) manufacturing space before India’s EV capabilities take off and are showcased to the world. The EV space in India is one of the huge opportunities. The government wants every car sold by the year 2030 to be electric. This includes not just personal transportation but also public transport like buses, auto-rickshaws and taxis.

Over 100 cities in question
Cities and municipal corporations electrifying their public transport fleets are being incentivised by the government. Over 100 cities are expected to put out tenders for a combined fleet of buses over the next few years. Every EV manufacturer is eyeing this space. Unfortunately, though some of these very lucrative EV bus contracts have already gone out to tender. The state transport corporation of Himachal Pradesh for one has placed an order for 25 electric buses. Mumbai’s BEST has also ordered six electric buses to induct into its fleet. The Himachal Pradesh tender, in particular, was the country’s first large electric bus order. But both the HP and BEST contracts were awarded to a joint venture of which Chinese manufacturer BYD forms one half.

And this is where the bone of contention lies...
Tata Motors, Ashok Leyland, Mahindra & Mahindra, who together are not just India’s leading automakers but leading EV manufacturers, all submitted bids for these tenders. And yet the BYD JV was handed the contract. The fact is the proposal that BYD submitted would cost Himachal Pradesh and the municipal corporation of Mumbai far less than the bids submitted by any Indian manufacturer. Thus, while that makes it a no brainer for these state agencies to award BYD the contract, the question that needs to be asked is why was BYD able to undercut the likes of Ashok Leyland, Tata Motors and the Mahindra’s by as much as 60 per cent?

The answer is simple – their losses are being underwritten by the Chinese government. The buses, as per BYD’s proposal, will cost HP and the BMC Rs. 1.61 crore each. While that may be an astronomical amount when compared to conventional buses, it’s a pittance as far as electric buses are concerned. The high costs associated with EVs have often been cited as among the biggest barriers to their adoption. The reason EVs are so expensive is that their batteries are extremely costly to manufacture. In the absence of meaningful subsidies, the cost of manufacturing an EV has to be passed on to the consumer, be it the government or the individual car buyer.

Indian manufacturers simply cannot match the price BYD quoted. And yet, far from helping indigenous manufacturers meet the threat that could sound their death knell, the Indian government is further skewing the playing field in their favour. By allowing them to exploit loopholes that incentivise manufacturers for manufacturing their products locally, they are further subsidising companies like BYD, thereby allowing them to drop prices even further. The incentives are there to benefit manufacturers who ‘Make in India’ in furtherance of one of our government’s flagship initiatives.

However, here BYD aren’t making in India, they are merely assembling in India. BYD are already beneficiaries of hefty subsidiaries from the Chinese government. Why are we subsidising them even more? They have announced plans to set up a Greenfield manufacturing plant where by 2020, they say, about 50 per cent of the components that go into their buses will be manufactured locally. The simple logic is we can subsidise them then in 2020 after they have met their commitments. What is the hurry to extend all monitory facilities to the Chinese players now, that too at the cost of Indian players?

Level playing field required
In the meantime it is essential to create an environment or at least a level playing field in which your local manufacturers can thrive. They are not asking for the odds to be stacked in their favour. They are not afraid to compete. The Mahindra’s, Ashok Leyland and Tata Motors all welcome the chance to pit their expertise against the likes of Mercedes, Volvo and even BYD. But only so long as they’re all competing on a level playing field.

All those who care for the speedy development of Indian manufacturing industry are eager to ensure that Indian manufacturers do not get hampered by the intrusion of Chinese companies. Earlier I had mentioned about Chinese capital entering Indian business under the cover of Indian companies, those are essentially only ‘Letterhead’ companies. The frightening part is that sensitive and critical projects like Coastal Road and Redevelopment of BDD Chawls at Worli are being handed over to Chinese Companies. If Chinese capital is allowed to make ‘Back door’ entry into India, it would essentially mean a permanent threat to Indian security. Sooner we wake up better it would be to ensure our security and safety.

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