Auto parts makers in no mood to slow

Growth in the passenger car market may be moderating, but this hasn’t stopped most component makers from expanding capacities.

This is especially true of those supplying to two-wheeler and commercial vehicle manufacturers since there is no demand slowdown in these segments.

A prominent Maharashtra-based Tier I supplier of electronic ignition systems, switches and plastic body parts to two-wheeler makers is, in fact, eyeing acquisitions in Europe to expand business.

“About two-thirds of our topline comes from two-wheelers, where volume growth has not slowed down. We plan to invest Rs200 crore this fiscal in expanding existing capacities and another about Rs300 crore in acquiring electrical parts companies in Europe,” said a top official of the company, requesting anonymity.

Such is the enthusiasm in the segment that even those who concede a slowdown believe the automobile industry is cyclical and that since India’s overall economic fundamentals remain stable, at best, some investments would be deferred for a few months.

Bosch, the country’s  largest component maker, will go ahead with plans to invest Rs2,500 crore by 2013 in various businesses including diesel and petrol injections, brakes, starters and generators.

Managing director VK Vishwanathan says the company has been working on a common rail diesel powertrain, specifically for low-cost vehicles, and has already supplied this to some Indian vehicle makers. It is also expected to supply this technology for the Tata Nano diesel.

Bharat Forge’s Baba Kalyani cites sustained GDP growth and projections of the automobile industry growing to three times its current size in the next decade to justify the suppliers and component makers pushing ahead with planned investments.

Vehicle lighting supplier Lumax Industries will invest about Rs150 crore to set up three new greenfield facilities by next year to make additional 2.5 million units, since it expects 20% topline growth this fiscal.

And though Minda Industries has deferred half of its FY12 capex (about Rs40 crore), CMD Nirmal Minda said some components such as CNG kits continued to log healthy growth rates as more original equipment manufacturers buy these and the
demand also rises from the aftermarket. 

Car air-conditioning supplier Subros has also spoken of deferring a `80 crore investment, which would have raised its capacity by a half-a-million units. Chairman Ramesh Suri said this investment would be made as soon as car sales improve.

Going by estimates of the Auto Component Manufacturers Association, the industry would witness about $3 billion investment this year, up from $2-2.5 billion in FY11.