Column: As auto looks up, component manufacturers see light

Written by Malabika Sarkar | Malabika Sarkar | Updated: Aug 6 2009, 07:24am hrs
Due to the downturn in the global auto market, the auto components sector has also had to struggle hard as sales have declined. A majority of small and mid-sized auto part manufacturers and exporters in India were under pressure to stay afloat amidst steep decreases in their business volumes.

However, things have started improving in the recent past as demand in the domestic market has started picking up. In India, we can see some signs of recovery in auto except for the commercial vehicles segment. which has not shown signs of a comeback yet. But two wheelers and passenger cars are showing recovery trends.

Therefore, with early signs of recovery in auto, the auto component sector is believed to be the next sunshine sector. Many global Original Equipment Manufacturers (OEMs) are coming into the country and with this the auto component sector would experience many more acquisitions, mergers and investments, all avenues of growth.

On the one hand if we look at component manufacturers inside India, they will get new customers to sell their product. Secondly, new OEMs might bring along their own suppliers who would want to explore the Indian market, which means more investment. If this happens, some of the current vendors who are of a smaller size might start expanding to meet the demand of the market. So, theres definitely a lot of scope for the auto component manufacturers to widen their business.

According to industry analysts, last year, the auto component industry had a growth of 9.6%. This year they are anticipating a growth of 13% to 15% from the sector. Again, in terms of OEM market, around 8% to 9% growth is expected to happen.

However, we have to wait for another six to seven months to proclaim a sustainable recovery. At present, there is a halt in terms of negative growth.

Therefore, in the near future as we see new players coming in, joint ventures, acquisition, expansion of businesses and overall growth of the business is most likely to take place.