Makers of auto components have been in a huddle since Tuesday morning trying to figure out ways to cope with the ever increasing demand from vehicle makers.
At an executive council meeting of the Auto Component Manufacturers’ Association (Acma) in Mumbai on Tuesday, the key issue deliberated was ways to ramp up capacities faster, to keep up with the scorching pace of demand for key components.
Acma president Jayant Dawar acknowledged that, till a few months back, the component industry was apprehensive about whether the pace of growth would be sustained for the full year and was therefore skeptical about putting up new capacities.
But now that it is assured of demand, capacities are already on the upswing. This fiscal, component industry is expecting a top line growth of 25%.
Dawar said the industry is investing close to Rs 9,000 crore in capex this year — and this does not include the Rs 10,000 crore that tyre makers have committed.
Component supplies are already up 30% and should increase further. Top component makers such as Rico Auto, Subros, Sandhar Technologies and Sona Koyo are all expanding.
But twin problems of timely sourcing of capital machinery to execute projects and non-availability of working capital are hindering capex.
“We have increased supplies by up to 30% in the last few months to keep up with OEMs’ demands. But availability of key capital machinery is holding us up. Take the example of plastic mouldings. They were earlier available with almost no lead time or within 15 days to a month.
But now it is taking anywhere up to six months to get hold of these mouldings. Even dye casting machines are in short supply. My company Sandhar is now resorting to buy second-hand machinery from as far away as Canada to meet demand,” Dawar, who is also vice-chairman and
MD of Sandhar Technologies.
Dawar also pointed out that with record breaking pickup in demand, OEMs are also playing truant about raising prices for component supplies. “We are facing a huge pressure on working capital because of these issues,” he said.
So will all this impact component makers’ profitability, despite a significant increase in volumes?
Dawar said the impact on profitability would be clearer by mid-year.
But what about supply glitches in some critical parts?
Dawar said that 5-10% deficiency in supplies is being seen in some components and for some vehicle categories. “This is specific to certain components but we will try and normalise things soon. In 2010-11, we expect industry turnover of $24-25 billion”.
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