Rising demand for cars is creating a major shortage in key auto components like fuel injection and machined components. According to several vendors, few had expected the auto industry to bounce back with such gusto. While in 2009-10, the automobile sector surged at 26.41%, the components industry grew at only 14% to Rs 90,050 crore.
The country?s largest component manufacturer Sona Koyo Steering Systems feels that not only has demand for cars surged but the fragmented nature of the industry has also contributed to the severe shortage of auto components.
?The auto component industry requires consolidation, especially in the tier II and tier III cities. In these areas the fragmentation is acute,? Surinder Kapur, chairman Sona Group told FE.
Vice-chairman and managing director of Apollo Tyres Neeraj Kanwar said the tyre industry had just not anticipated the sudden surge in demand. ?Even the automakers did not forecast such growth rates we witnessed last year. So, there is bound to be some shortage,? he said.
The recent labour strikes in the Gurgaon-Manesar belt, home to several big auto component manufacturers, has also complicated the problem. A Gurgaon-based vendor said on conditions of anonymity that due to labour strikes last year, it has had a major impact on production. ?Though large labour strikes have largely stopped now, there are still constant labour disputes disturbing production,? he said.
Kapur said the shortfall in supply worsened because of the inability of many vendors to upgrade existing facilities due to lack of funds. ?Companies have to ensure they have strong balance sheets. The supply constraint is a capacity issue,? he said. An official of ACMA said that due to increase in demand, vendors were investing in expanding capacities. However, there would be a time-lag in that too. ?Companies are upgrading some facilities but it would take time for them to start running,? he added. Auto analyst with SSK Securities S Ramnath said that the recovery in the auto sector took everyone by surprise including vendors and analysts. ?You can forgive the vendors for not expecting such high growth rates,? he said.
Chairman of the country?s largest carmaker Maruti Suzuki India, RC Bhargava, said that the shortage is a concern but constant engagement with vendors was keeping the company well stocked. ?Whether the shortage in components is a key issue for carmakers, I would say it is only partly true. The situation is showing signs of an improvement,? he said. Vice-president corporate affairs for General Motors India P Balendran said the supply constraint has been largely due to lack of advanced planning by vendors. ?There is a delivery constraint because they did not plan well in advance,? he said.