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Global Recession Influences...

Global Recession Influences Car Component Manufacturers

We are all aware of the current suppressed Indian auto industry due to the economic meltdown. This crisis has not only given a tough time to car manufactures but also squeezed the car component manufacturers. The component suppliers are important part of the car industry that contributes around 70% in the car production. The depressed car component manufacturing companies are impacting the overall car industry in a big way.

The slow down is so prominent that it cannot be ignored. The numbers speak and that is the truth. A close eye on the net sales record of 70-odd car component makers in India reveals a drop of 11.11 percent from 12.27 percent during the first half of 2007-08. Further, the net profit margin dropped sharply to 3.96 percent from 5.2 percent in the first half of 2008.

However, the car sales in the first fiscal of this year rose to 24 percent and the overall net profit of the component manufacturers’ slipped to 6.64 percent. Mr. Arvid Dham, MD of Amtek Auto revealed that the company did foresee the upcoming crisis, but the impact was underestimated. The company has laid hope on Europe for its sales, but the crisis wrapped Europe too in its clutter, thereby shattering the hopes of the component manufacturers. Another automotive glass manufacturer disclosed that if the situation continues on for some more time, then there are chances of mass lay-offs in the industry.

A leading tyre manufacturer also had the same story to unveil. The component suppliers had a good scroll over the last seven years but now it is going through a very tough phase.

In the first seven months of 2008, the domestic vehicle sales rose by just 5.64 percent compared to the double-digit figure of last few years. Export sales also saw a dip from the market like US, which has taken a stiff beating on the component manufacturers. The export sales figure sloped to 6 percent in April 2008-September 2008 period against 25 percent during the last five years.

The automotive component manufacturers, Automotive Components Association of India (ACMA) and their subsidiary units have come together and placed a request to the government for a relief package that will support them to overcome the present economic crisis.

Some of the measures that ACMA has put forward that would reduce the current burden are:

Assured funds from banks on capital expenditure.
Removal of customs duty on raw materials.
To increase the duration of repayment of existing loans of small and medium enterprises.
To reduce the CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) of Central bank

Though, the Indian component manufacturers are under pressure, they are still aiming high and waiting for the good time to arrive. They will have to buckle up until the market is back to normal for some more time.