Some companies prefer to manufacture in India Vs China
December 10, 2010

Easing monetary and currency policies, a weakening dollar, raising yuan, higher interest rates, greater manufacturing and labour costs and a foreseeable future of increased spending, are dissuading some Indian manufacturers and companies from sourcing and trading with China. As a result of the above mentioned reasons and greater investments in R&D, select Indian companies now find it more economical to manufacture products and components in India rather than China.

Take for example, Tata group watch and jewellery major Titan Industries, which sources watch components from China, the company now plans to restrict such sourcing and instead make additional investments in its manufacturing facility in Tamil Nadu. Similarly, it is now cheaper for Dell to supply PCs from India than from China, especially to countries in the Middle East, Africa and the CIS countries. Dell, which started exports of PCs from its Sriperumbudur plant near Chennai earlier this year, has become the first major PC brand to export out of India and is now exporting several thousand units every month to West Asia.

That’s not all. Indian auto component major Sona Group also has considered sourcing parts from China in the past but sees no significant cost advantage in doing so.

China’s appreciation of the yuan against the dollar is what is also biting Indian exporters, squeezing margins tight. “We do import a small portion of our forgings supplies from China for one of our group companies. However, because the prices of parts in India and China are similar and owing to the distance and lack of clarity about China’s currency situation, most of our sourcing is done within India,” Surinder Kapur, chairman of Sona Koyo Steering Systems, told the Times of India.

The rising costs led by currency fluctuations, combined with India’s growing manufacturing prowess, partly explain why,  India exported more automobiles than China did between January and July this year. While India exported 2.3 lakh cars, vans, SUVs and trucks during this period, a growth of 18 percent, China’s exports tumbled 60 percent to 1.65 lakh units. The same reasons explain why Nokia today exports mobile handsets to some 70 countries, including North America and Europe, from its Sriperumbudur facility.

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