Auto parts makers bank on exports to counter local slump

Auto component makers are planning to combat the slump in the Indian automobile sector during the first quarter by focusing on exports.

Deep Kapuria, president of Automotive Component Manufacturers' Association (ACMA), the industry's apex body, said that though the single digit growth reported by the automobile industry is a matter of concern, the component industry will continue to post a double digit growth, driven to a great extent by exports.

"The growth in the automobile segment has been affected partly by rains in the western region, some industrial relations issues in south and due to CMVR (central motor vehicles rules) issues. However, the consolidated numbers reported by component makers shows some growth," Kapuria said.

He said that the overall market growth will be around 20-22 per cent and exports will grow by 30-33 per cent. Should the FY06 numbers match these projections, it would be an impressive performance, considering the Indian automobile component industry in FY05 reported a total turnover of $8.7 billion and exports of $1.4 billion.

Apart from exports, components worth $1.2 billion were shipped last year as embedded components along with fully-built automobiles.

"The automobile exports in FY05 was around $2 billion. And going by a thumb rule that 60 per cent of what goes into the vehicles are outsourced, around $1.2 billion worth of components were exported as embedded components," Kapuria pointed out.

The pressure to focus on components exports comes from a single digit (around 8-9 per cent) growth projected by domestic automobile manufacturers for FY06.

The projected growth (for auto sales), though linked to the large base created last year, comes in sharp contrast to 17.5 per cent growth achieved in FY05.

Kapuria said that major auto component manufacturers have recorded growth between 15-25 per cent in the first quarter, giving reasons to believe that growth momentum will continue.

"The industry is moving in the right direction but there is a strong need for projecting India as a major hub for component exports," Kapuria said.

Discussing growth patterns for specific segments, Kapuria agreed with the industry projection and said the growth in auto sales will be closer to 10 per cent, and commercial vehicle sales will correct itself in the coming months.

LOSING STEAM

• Growth estimates look bleak with rains affecting growth in western region
• Component export is an area that has been largely overlooked so far