Localization is a term which is mentioned in a lot of Automobile news articles. This term is related to the manufacturing or assembling of automobiles. Especially in context of Indian automobile manufacturing, a lot of car companies in India get some of the automobile components from outside India. For example, CNG kits in factory fitted CNG vehicles, transmission components and gears, ECU units etc. There are many components which are imported from the other countries. The main reason for importing these components is lack of availability of some of these components in India locally, or sometimes car makers prefer to use the imported components because of high quality standards of certain components.
What Is Localization?
For a car maker, Localization means locally producing or manufacturing the components at its own plant or in ancillary units. Localization is very beneficial for an automobile maker as it cuts down the cost of the component and the car or automobile as a whole. Also the waiting period between the order and receipt of the component is also reduced. This is also useful in socio-economic sense as higher localization means more production in the region which means more business and employment opportunities for the people of the region where automobile factories and ancillaries are located.
The only concern with localization, especially for the components which are made for the first time is the quality and technological challenges. For example, if a global car maker is setting up its plant in India and it uses certain quality of components which are not available in India, making such components in India through the ancillary may not match the quality of the component manufactured at the base plant in the other country because of infrastructure or technological challenges. This is the reason because of which, some amount of components are usually imported to keep the quality of the automobile high and large amount of the components are localized to keep the overall cost of automobile low and competitive.
Hope my explanation was simple and basic enough and did not confuse you.