The $22-billion Indian auto components industry is struggling to meet the scaled up requirements of the original equipment manufacturers (OEMs), with the commencement of the festival season. Automobile manufacturers, who are otherwise bullish during this time of the year, are worried whether the situation can jeopardise their production schedules while component makers are apprehensive about the possibility of losing business to overseas players.
The festival period stretching from September to November is a peak period in the Indian automotive calendar. But with production levels shooting through the roof to cater to customer demands, the domestic component makers have been thrown off-gear. Automobile dealers whom FE contacted have said this may result in longer waiting periods.
According to Vinnie Mehta, executive director of Automotive Component Manufacturers Association of India (ACMA), the domestic components industry was not prepared for the sudden spurt in demand.
?The US, for instance, is just seeing a pick-up, while Europe is still struggling. But no one expected the Indian automotive market to recover so quickly and the parts makers have been found wanting here,? said Mehta. ?I expect the auto component imports to increase by 20-25% this year, which is alarming for the domestic component industry,? he added.
?Inadequate manpower, infrastructure bottlenecks and power outages impacted the component industry and remains as major reasons for the supply constraints,? he added.
And this could prove to be a dampener for the impending festive season.
Michael Boneham, president and managing director of Ford India told FE that the company has almost tripled its component sourcing from last year. Ford has also added 30 more component suppliers to its existing vendor base of 150, with the US major doubling its car production to 400 vehicles per day. Ford has 85-90% indigenous levels in its Fiesta, Figo and Ikon models. The company has also increased its engine production to 800 units per day with 60% locally sourced components. General Motors (GM) too has increased production by 20-25% to meet the festival requirements, said P Balendran, vice-president (corporate affairs) of GM India. It buys components from 132 vendors for domestic usage and from 40 suppliers for its global operations. ?Component sourcing has picked up accordingly,? he said. Other top vehicle makers like Maruti, Toyota, Hyundai. Hero Honda, TVS, Bajaj have also increased their production either by fine-tuning their assembly lines or through additional shifts.
?Almost all vehicle players have increased their production, hence the component sourcing too. The unexpected growth has created problems in supply chain management,? said Vaishali Jajoo, a senior analyst attached to Angel Broking. The major supply constraint comes in the segments of casting, fuel injection and tyres, Mehta said. Body and structural accounts for 40% share in the Indian auto component industry followed by engine and exhaust with a share of 20%. Electronics and electrical, transmission and steering, suspension and braking and interior segments accounts for 10% each. To meet the demand the domestic component makers have taken steps to expand their capacity. Mehta said the domestic component makers have lined up $2-3 billion investment in the current year. As per ACMA, the cumulative investment in the industry is expected to climb to $12 billion in the current fiscal from $ 9 billion a year ago. But these investments may yield results after a year, analysts said.
During recession in 2008-09, the component industry had not witnessed any expansion.