India Preps to Challenge Chinese Manufacturing in a Post-Corona World

Mobile Manufacturing

In the Budget session of the Parliament, the Cabinet approved two schemes associated with electronics manufacturing in India. Production Linked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing and Modified Electronics Manufacturing Clusters (EMC2.0) schemes were passed in the parliament.

Crux of the Matter

EMC2.0 as the Support System
Through the development of infrastructure and common amenities, this scheme would help in the development of the Electronics System Design and Manufacturing (ESDM) sector and an entrepreneurial environment in electronics manufacturing.

It will aid in setting up Electronics Manufacturing Clusters in certain geographical areas, and Common Facility Centre (CFC) in industrial parks, etc at a cost of ₹3,762.25 crores. The following benefits can be yielded out of the Scheme:

  • It will create a robust infrastructure with Plug & Play offices.
  • It will bring new investment in the electronics sector.
  • It will create new job opportunities in the electronics manufacturing sector.
  • It will generate revenue, in the form of taxes, for the government as well.

“Assemble in India for the World”
PLI scheme is aimed at boosting domestic manufacturing and investment in specified electronic components including ATMP (Assembly, Testing, Marking, and Packaging) units and mobile production. It will achieve this through a production linked incentive in which it will extend a 4-6% incentive on incremental sales of Indian-made goods over a period of 5 years. It is likely to benefit 5-6 global players and a few domestic electronics manufacturers.

The government has set aside a sum of ₹40,995 crores for this scheme. It is estimated that the scheme will generate 2 lakh direct jobs. India produced ₹1.70 lakh crores worth mobile phones in 2018-19. With the conflux of this ‘Assemble in India for the World’ and ‘Make in India’, India aims to boost its electronic production.

New World Leader
Coronavirus may have hampered the growth of Chinese manufacturing as many world nations are mulling over sanctioning China. After the USA-China Trade War, now Coronavirus may have a lasting impact on the Chinese industry. India’s production boost, especially in the electronics and mobile manufacturing, can put India abreast of China. India can see this as an opportunity to become a manufacturing hub for multinationals, besides definitely encouraging domestic production.

Curiopedia

The electronics industry in China grew rapidly after the liberalization of the economy under the national strategic policy of accelerating the “informatization” of its industrial development. Manufacturing was the sector that grew the fastest. Major Chinese electronics companies include BOE, Changhong, Haier, Hisense, Huawei, Konka, Lenovo, Panda Electronics, Skyworth, SVA, TCL, Xiaomi, Oppo, DJI and ZTE. China’s production recorded the largest world market share for its electronics exports in 2016. It also recorded high volume outputs across a wide spectrum of consumer electronics; between 2014 and 2015—according to China Daily—286.2 million personal computers (90.6% of the global supply), 1.77 billion phones (70.6% of global supply of smartphones) and 109 million units (80% of global supply of air conditioners) were produced. More Info

Good News from India's Manufacturing Sector Hints at Economic Revival

After a long time, positive news comes in for India’s manufacturing sector as its activity reached an 8-year high in January 2020. The IHS Markit India Manufacturing PMI rose from 52.7 in December 2019 to 55.3 in January 2020.

Crux of the Matter

A survey conducted says that it is due to the sharp rise in new business orders amid a rebound in demand conditions that led to the rise in production and hiring activity.

Pollyanna de Lima, Principal Economist at IHS Markit said, “Manufacturing sector growth in India continued to strengthen in January, with operating conditions improving at a pace not seen in close to eight years.”

It is the 30th consecutive month that the manufacturing PMI has remained above the 50-point mark. Point above 50 means expansion whereas below that denotes contraction.

The fastest increase in new export orders was recorded since November 2018 as the rise in total sales was supported by strengthening demand from external markets.

Hiring activity also improved in January as firms employed at the fastest rate in nearly 7.5 years.

The survey also showed that there was a slow increase in both input costs and output charges. This survey and other positive forecasts have given hope and optimism in the manufacturing industry.

Curiopedia

Purchasing Managers’ Indexes (PMI) are economic indicators derived from monthly surveys of private sector companies. The three principal producers of PMIs are the Institute for Supply Management (ISM) the Singapore Institute of Purchasing and Materials Management (SIPMM) and the Markit Group.PMI surveys on a monthly basis by polling businesses that represent the makeup of the respective business sector. ISM’s surveys cover all NAICS categories. SIPMM survey covers all manufacturing sectors. The Markit survey covers private sector companies, but not the public sector. More Info

IHS Markit Ltd is a London–based global information provider formed in 2016 with the merger of IHS Inc. and Markit Ltd. One part of this conglomerate originally was a firm that assigns IMO identification numbers for ships, companies and registered owners. It has since grown to incorporate other companies in the information services sector, many dating back to the late 1700s and 1800s. With more than 1400 employees its revenue as of 2017 stands at US$3.6 billion. More Info

FDI, Manufacturing Sector Hint at Revival of Economy

With the Foreign Direct Investments peaking in the first half of FY2019 and Manufacturing PMI increasing in December, the Indian economy has shown signs of recovery.

Crux of the Matter

15% Rise in FDI

  • Foreign Direct Investment in India in the first half of FY19-20 rose by 15% year-on-year and stood at $26 bn.
  • Services, Computer Hardware and Software, and Telecommunications saw the highest inflow of FDI at $4.45 bn, $4 bn, and $4.28 bn respectively.
  • With an $8 bn investment, Singapore remained India’s largest FDI provider. Mauritius, US, Netherlands and Japan were other significant investors at $6.36 bn, $2.15 bn, $2.32 bn, and $1.78 bn, respectively.
  • Indian Government eased FDI regulations in coal mining, contract manufacturing and brand retail trading.


Manufacturing Sector Takes Positive Strides

  • With the Purchasing Managers’ Index (PMI) reaching 52.7, Manufacturing sector is showing signs of positive consumer demand. PMI above 50 represents expansion i the sector, while below 50 represents contraction.
  • 4 out of the 5 components that make the PMI increased. Consumer demand, supported by demand for intermediate goods, carried the growth.
  • Other factors pointing at the economic revival are increased GST collection, core sector improvement, gradually rising auto sales, and increasing exports of non-oil products. Rising sales comprised majorly of foreign demand for goods and services.
  • Pollyanna de Lima, who is the chief economist at IHS Markit that conducted this survey, said that market optimism was weak and that that sentiment may hinder investments and job creation.
  • Inflation for industrial input and output charges indicated that favourable demand may allow producers to protect margins in the rising cost environment.
Curiopedia

Purchasing Managers’ Indexes (PMI) are economic indicators derived from monthly surveys of private sector companies. The headline manufacturing PMI is a composite of five of the survey indices. These are New orders, Output, Employment, Suppliers’ delivery times (inverted) and Stocks of purchases. More Info

APAC Autos Face Tough Environment; Supported by Financial Profiles

Fitch Ratings expect limited rating movement for the automotive manufacturers in 2020 as most entities in their portfolio are on a stable outlook. However Fitch have a Negative Outlook on Tata Motors Limited (TML, BB-/Negative) due to rising business risks in both its Indian operations and fully owned UK subsidiary Jaguar Land Rover plc (JLR, BB-/Negative). The portfolio is largely investment grade, with all ratings but TML in the high ‘BBB’ or ‘A’ categories.

Crux of the Matter
  • Regarding 2020 Outlook for the Asia-Pacific Automotive Manufacturers, Fitch Ratings expects weaker global demand and rising investment to continue to put pressure on Asia-Pacific (APAC) automotive manufacturers’ profitability and cash flow generation in 2020.
  • Sales in the US and Europe are likely to post negative growth, but it is expected that Chinese sales would recover modestly after two consecutive years of decline.
  • Automakers are also accelerating investments in clean-energy vehicles, new technology and mobility trends.
  • Lingering uncertainties over trade issues, such as US-China tensions and potential US tariffs on car imports, are factors to watch. However, Fitch’s stable outlook on the automobile sector takes into consideration the robust financial profiles of major automakers, which should provide a sufficient buffer and flexibility to cope with those challenges.
Curiopedia

Fitch Ratings Inc. is an American credit rating agency and is one of the “Big Three credit rating agencies”, the other two being Moody’s and Standard & Poor’s. It is one of the three nationally recognized statistical rating organizations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975. Fitch Ratings is dual headquartered in New York and London. Hearst owns 100 percent of the company following its acquisition of an additional 20 percent for $2.8 billion on April 12, 2018. More Info

Tesla’s Newly Launched ‘Cybertruck’ Gets Historic Bookings

At the launch event in California, Tesla CEO Elon Musk had announced the industrial-looking vehicle, Cybertruck made up of stainless steel alloy which is capable to go from 0 to 100km/h in about three seconds has got record bookings of up to nearly 2, 00,000.

Crux of the Matter
  • 42% have ordered the dual-motor option whose price starts at $49,900, 41% have ordered the $69,900 triple-motor option and 17% ordered the single-motor version which starts at $39,900.
  • Tesla’s website allows customers to order the truck for a fully refundable amount of $100. The Production of Triple-motor variant is expected to begin in late 2022.
  • Tesla faced a lot of criticism at the launch event when the windows of the Cybertruck shattered during a demonstration supposed to show their durability.
  • No official date has been given for the vehicle’s release, but it is expected to be ready by end of 2021.
Curiopedia

Tesla, Inc. is an American automotive and energy company based in Palo Alto, California founded in 2003. The company specializes in electric car manufacturing. It operates multiple production and assembly plants, such as Gigafactory 1 near Reno, Nevada, and its main vehicle manufacturing facility at Tesla Factory in Fremont, California. After 10 years in the market, Tesla has ranked as the world’s best selling plug-in passenger car manufacturer in 2018, both as a brand and by automotive group, with 245,240 units delivered and a market share of 12% of the plug-in segment sale. More Info