The rupee?s appreciation and the high interest rates during 2007-08 had a negative impact on the exports of auto components, says the 48th annual report of the Automotive Component Manufacturers Association (Acma). The rising rupee and raw material cost pulled down export growth to about 15% in 2007-08 from 20% in 2006-07, thus, reducing the export margins.
The overall exports in 2007-08 stood at $3.6 billion against $2.8 billion in the previous year. The import of components grew at a brisk 35% to $4.9 billion last year from $3.3 billion a year ago.
All this led to a much moderate growth of 11% in the auto component industry during the year against a healthy growth of 22% in the export of vehicles.
Consequently, leading component players have started hedging their exports to escape fluctuations in the rupee vis-?-vis dollar. ?To tide away the squeeze in export margins, component players have now hedged more that 50% of their export. Henceforth, whether the Indian currency appreciates or depreciates there is no change in margins,? says Vaishali Jajoo, senior auto analyst, Angel Broking.
?However, companies end up making or losing money on the portion of export that is not hedged,? she adds.
According to industry estimates, component players like Bharat Forge and Amtek Auto have hedged their exports to the tune of around 60%, followed by a similar degree of hedging by other players.
While Europe continues to be the largest importer of auto components from India, with a share of 38.7% of total exports to original equipment manufacturers and Tier-I suppliers, North America attracts 26.9%, followed by Asia at 12.4%, Africa at 10.8%, Middle East 7.1% and South America 2.8%.