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31. August 2009

IN - Auto part makers eying non auto segment for growth

With uncertainty still looming large over the outlook for demand in some segments of the automotive sector as well as export markets, several auto parts firms, mostly suppliers to the commercial vehicle segment are branching out to new business areas.

As per report the INR 1,166 crore Wheels India part of the TVS Group and a major supplier to the CV segment has forayed into manufacture of steel structurals for thermal power plant makers and wind turbine components on the back of strong investments envisaged in these sectors. Mr Srivats Ram MD of Wheels India said that “We are looking at new areas for better margins and de-risk our business. A major portion of the CAPEX over the next two years will be made in alternative areas.”

Another TVS group company, Mr Sundram Fasteners is also diversifying into alternative business areas to mitigate the impact of cyclical trends in the automotive industry.

Bharat Forge’s non auto strategy has helped the company secure more business as the share of non-auto on a standalone basis stood at 32% in the first quarter in FY10 against 28% in FY09. It is looking at tapping infrastructure led-demand in the domestic non-auto market in sectors such as power, railways, metals and mining and general infrastructure. The company is reported to have made some progress in terms of utilizing auto capacity for non-auto products and seeks to make further inroads into it in the coming quarters.

The revenues of Bosch India have been hit by slowdown in the CV segment and depressed export volumes. However, it has been seeing strong growth in its non-auto businesses comprising power tools, security systems and packaging technology.  According to Jajoo, Bosch India’s non auto business segments have shown robust growth, which mitigated the effect of an almost 10%YoY and a 20% YoY decline in the core diesel system business in the second quarter of calendar 2009 and in the first half on calendar 2009 respectively.”

Prabha Engineers a key supplier to Ashok Leyland is also looking at alternative business areas. Mr C Sivakumar MD of Prabha Engineers told Financial Chronicle that “The year 2009-10 is extremely crucial. We have made a strategic move to utilize our skills in another domain that is not affected by the global meltdown. Power and telecom sectors are not likely to be affected, and we have made efforts to procure orders from BHEL.”

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