The slowing automobile industry has forced the auto component manufacturers to tap the overseas markets in order to offset the anticipated dip in revenue.
As a result, auto component firms are scaling down their domestic investment plans and focussing on increasing their exports. The state of Indian auto sector can be gauged from the car sales numbers.
On a standalone basis, passenger car segment clocked a growth of only 5% between April and July. However, when clubbed with the sales of utility vehicles (which grew by 53%), the auto sector witnessed a 10% growth in the same period.
Refusing to quantify how much investment had been made by the auto component industry, Arvind Kapur president ACMA simply said: ?Last year it ranged between $1.6 to $1.9 billion and well this year it will be lower than that. We are experiencing a dip in the growth rates. We hope that in the next three to four months this would improve as the festive season sets in and may be the interest rates come down. Meanwhile, the numbers are coming in from the diesel segment and exports.?
Kapur, who is also the managing director of Rico Auto Industries, said that for his group alone exports comprise about 12% of the total annual revenue of R2,000 crore. However, they were growing much faster at a 25% rate compared to the total revenue growth of just 15%.
The story is similar for automakers across the industry, forcing the component suppliers to rethink their investment strategy as cars sales slow down.
?We had earmarked R120 crore for investment in product development and R&D this year but given the slow down we have decided to scale this down,? Anmol Jain senior executive director of Lumax Industries told FE.
Lumax posted a revenue figure of R1,800 crore during the last financial year.
The company has revised its growth forecast downwards from an earlier estimate of 30% to about 15%. ?Though currently exports are a small fraction of our total sales, this is a focus area for us and we are planning to ramp it up over time,? he added.
Jain, however, said that while the outlook for the car segment wasn’t very positive, utility vehicles were driving investments in the country.
Rohit Saboo, president of National Engineering Industries Ltd, a CK Birla group company which supplies bearing to two-wheeler companies and four wheeler said exports were growing to become an important sphere as the share of exports for his company had already doubled from a 5% to 11% of the total revenue within the first five months.
Saboo said the company is expecting to post a revenue of R1,400 crore this fiscal and is investing R700 crore over the next five years.