The Automotive Component Manufacturers Association of India (ACMA) on Tuesday said it expects the industry growth rate to slow down to 12-15 per cent in the current financial year due to the sluggish demand.
"The first quarter of 2011-12 witnessed some slowdown in vehicle consumption and this indicates that growth in the auto component industry this year will be in the range of 12-15 per cent. It is unlikely though that the growth rate would be 15 per cent,” said Srivats Ram, president, ACMA.
Rising fuel prices and higher interest rates have taken a toll on the industry with passenger vehicle sales declining by nine per cent to 183,657 units last month. This was the sharpest drop the segment has recorded in three years. Overall, the industry grew by a moderate 13.55 per cent, half of the the 26 per cent growth it had posted last year.
The auto component industry grew by 34 per cent last financial year taking the total turnover to $39.9 billion. While exports grew by a robust 54 per cent to $5.2 billion, imports increased by 30 per cent to $8.5 billion.
“The uncertainty in the global markets has not impacted the component exports, till now. But the effects are likely to be felt in the latter half of the year,” said Ram.
Last financial year, exports grew following renewed demand in North America, Western Europe and Asia. In the current year, exports are projected to grow by a minimum of 20-25 per cent. The component industry invested close to $2-2.5 billion on capacity expansion projects in 2010-11.
"We expect investment woth $3 billion this year to enhance capacity. There has been a slowdown in demand but capacity expansion projects have a gestation period of about one-and-a-half years. So, we will be prepared for the next phase of growth,” he said. Labour issues, however, will continue to remain an area of concern, he added.
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Arvind Kapur, vice-president, ACMA said, “We are in talks with the government. Reforms in labour laws are necessary to make India a manufacturing hub. We would like to have only permanent employees. At present, 50 per cent of our workers are hired on contract since the law does not allow us to adjust our workforce in line with the fluctuations in the market.”
The auto component industry is expected to double its workforce to our million workers (permanent and contractual) over the next two years. “There will be a shortage of trained manpower. Companies are investing in training programmes and are engaging in interactive sessions with employees to improve labour relations. When you hire from contractors, the benefits of such programmes can not be availed as the workers keep changing,” he said.