Chinese plastics equipment maker Welltec Machinery Ltd. and its Indian partner seem to have found a successful way around the Indian government's 2009 decision to levy steep tariffs on Chinese injection molding machines.
The company opened a factory in India last year, and officials said they are now expanding it to better tap into the country's growing market.
Welltec's investment with Jishu Hozen Machines Pvt. Ltd. in Ahmedabad, India, is one of the more-concrete examples of how Chinese firms have changed their approach to India, after the 2009 anti-dumping duties imposed tariffs of up to 174 percent on many Chinese molding machines.
Judging by interviews at the recent Plastindia trade show, those tariffs effectively froze a lot of Chinese firms out of the market, and played a part in improving the financial health of India's domestic press manufacturers. The duties are scheduled to come up for review next year, industry officials said.
The tariffs were a key reason Welltec gave for partnering with Jishu Hozen. The investment so far has paid off, the partners said, and they plan to double the size of the factory in the next few months to about 32,300 square feet and increase production to more than 100 presses a year.
Other Chinese firms also have changed their strategies.
China's largest press maker, Haitian International Holdings Ltd., canceled its plans for a joint venture in India and instead built in Vietnam. Like other Chinese press makers, Haitian was at Plastindia with its all-electric machines, since electrics and machines with clamping forces of more than 1,000 metric tons are exempt from the tariffs.
Haitian's Zhafir Plastics Machinery Ltd. subsidiary, which makes electric presses in Ebermannsdorf, Germany, plans to open a sales and service office in Mumbai, India, in the spring, its first regional office outside its Germany and China factories.
The Welltec joint venture, JH-Welltec Machines (India) Pvt. Ltd., sold 50 presses in the first nine months of operation, meeting its target, said marketing director H.R. Nagadia at Plastindia, held Feb. 1-6 in New Delhi.
JH-Welltec plans to open sales offices in major Indian cities this year, including New Delhi, Mumbai, Chennai, Bangalore and Kolkata, he said.
Wilson Wong, general manager for Welltec, which is part of Hong Kong-based Cosmos Machinery Ltd., predicts the company will sell 250 presses a year in India in several years. “We strongly believe that once we open our sales offices throughout India, the sales will go higher,” he said.
Nagadia said JH-Welltec has seen repeat business from customers in India, mostly by selling locally made versions of Welltec's energy-saving machines. It does not plan to export from India, at least until volumes get higher, because of the domestic demand, Wong said.
The India facility is more than an assembly site; it sources more than 50 percent of its components locally, Nagadia said.
India's press market is growing, and while precise figures are not available, the country's major producers are estimated to make about 4,000 molding machines a year, with growth pegged at about 15 percent a year.
Adding in the smaller Indian firms and imports, including a substantial number of used machines from Europe and other developed markets, Indian companies probably buy about 8,000 injection presses a year, industry officials said at Plastindia.
It's a much-smaller market than China, but the potential for growth in India has drawn Chinese firms like Welltec, prompting the tariffs.
Nagadia expects the Indian government to extend the tariffs.
“I think the government will continue it, because they must have seen some positive results from the anti-dumping,” he said. “The Indian suppliers have seen their volumes increase.”
Some Indian companies in the injection molding sector, however, remain unhappy with the tariffs on the machines they buy.
“As an industry, we are looking forward to the removal of the tariffs,” said Raju Desai, director of injection molder Jyoti Plastic Works Pvt. Ltd. in Mumbai, and one of India's better-known processing industry executives.
Desai serves on the managing committee of the Plastindia Foundation, an umbrella trade group, though he was not speaking for the group, which does not have a position in the debate.
He said the tariffs initially raised prices about 10 percent on molding machines in India, but prices have since dropped back down. JH-Welltec's Nagadia said he also believes the anti-dumping duties increased prices and lead times in India's market.
Desai said that since the duties went into effect, Indian machinery companies have improved their competitiveness. He also believes the government will retain the anti-dumping tariff.
“It is going to stay,” Desai said. “I don't think the anti-dumping will go away.”
One of India's largest press manufacturers, L&T Plastics Machinery Ltd. in Chennai, said it is not clear if the Indian government will extend the duties after the review next year.
It's a delicate point between the countries' industries. Chinese government officials have publicly challenged the duties in speeches at Indian plastics trade shows, and Chinese plastics groups continue to raise the issue with their Indian counterparts.
India's government argues that its smaller machinery industry was being overwhelmed by Chinese equipment dumped at unfair prices. The Chinese respond that they were simply more efficient and were being unfairly targeted.
“The Chinese still lobby the government and we also equally are lobbying,” said L&T CEO P. Kailas. “We have to discuss that in 2013. Today it is too early.
“We will definitely approach the government to extend it, but it is purely the government's decision,” he said. Kailas said he has noticed Chinese machines coming in from Vietnam, where Haitian set up a factory last year.
Machines from Vietnam, the Philippines and Malaysia can be imported into India duty-free because of trade pacts India has with those countries, but exports of Indian machines to those markets have to pay duties, he said.
“It should be reciprocal,” Kailas said. “Right now I export machines to their country [and] it is not zero duty, but when they import to my country, it is zero duty.”