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17. October 2012

Indian auto component firms put expansion plans on hold

Business Standard reported that faced with the double whammy of a slowing economy and increasing input costs, automobile component firms are in a de risk mode. Most companies are cutting investments or delaying expansion plans with some even mulling diversification into non auto segments.

Mr Srivats Ram chairman of Wheels India part of the USD 4 billion TVS Group said that “We had investments flowing in the past 2 years. But looking at the slow growth of demand this financial year, we have minimized the investment. We would like to delay it further by 6 to 8 months or even a year because even the export market is down.”

According to the Automotive Component Manufacturers Association, the component industry is expected to grow at just 8% to 10% as against 15.7% last financial year.

Mr Surinder Kanwar president of Acma and CMD of Bharat Gears said: that “Ambiguity in the fuel price regime, high cost of capital, high interest rates and slowing of investment in infrastructure are adversely impacting the growth of the automotive industry.”

New investment into the industry fell to USD 1.6 billion to USD 1.9 billion last year from USD 2 billion to USD 2.05 billion in the previous year. With the prevailing gloomy environment, investment this year is expected to fall further.

Tube Investments of India part of the USD 4.4 billion Murugappa Group has cut its investment plan in Punjab, attributing this to the slow down. It was planning to set up a new facility to manufacture tubes with an investment of INR 200 crore to INR 250 crore.

Mr L Ramkumar MD of TII said that “Our Q1 results reflected the volatility and turbulence in the economy. Besides, pricing of railway wagon channels, increasing competition and our inability to pass on the input cost are also impacting our profits.”

Source - Business Standard

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