Next 6 months will be volatile for auto sector over BS-VI shift: MRF CMD

The next six months are expected to be volatile for the auto sector on account of the shift to BS-VI emission norms. The tyre industry would have to align its production in line with this requirement, says tyre major MRF's Chairman and Managing Director, K M Mammen.  

He added that the current year is expected to be a tumultuous one for the auto sector on account of various regulatory changes, especially the transition from BS-IV to BS-VI. The uncertainty is further compounded by lower consumer sentiments resulting in inventory build-up, and all OEMs are aligning production in line with demand.

"In the immediate future, the industry faces challenges due to the paucity of credit funds, which have partly been addressed in the Budget with the expected infusion of Rs 70,000 crore into the public sector banks," said Mammen, who is optimistic about the Indian automotive industry's future in the long run. He expects that India would become the world's third-largest passenger vehicle segment by 2021, propelled by the economic growth that the country has witnessed and the accompanying increased consumption and urbanisation.

The Indian automotive industry is at an inflection point where both opportunities and challenges abound in equal measure. The coming year will be witness to several landmark disruptions and changes in the auto industry that, by implication, will shape the direction of future events in the industry, said the company.  

While stating that it was a roller coaster year for automakers after a stellar 2017-2018, the MRF annual report said that the Indian automotive industry hit a speed bump with a moderate increase of five per cent in the financial year 2019, raising fears of a cyclical slowdown.   

The revised axle norm implemented towards August-September 2018 increased the freight carrying capacity of medium and heavy commercial vehicles (M&HCV) by 20 per cent. This would imply that tyre manufacturers need to bring their product portfolio up to speed to match the demands of vehicles with increased tonnage. Intensive product development efforts with special focus along the axes of size, strength and enhanced load-bearing capacity will be needed.

Exports

MRF's export turnover stood at Rs 1,566 crore as compared to the previous year's turnover of Rs 1,353 crore. It grew above the industry average, with 16 per cent growth for the full financial year.

The African countries continue to be a key volume driver of export growth, notwithstanding the geo-political developments and foreign exchange availability in some of these markets.

ASEAN, SAARC and Middle Eastern countries continue to be key destinations and drivers of the company's export growth. However, a heightening of protectionism in the form of increased import regulations and high tariffs (especially in South East Asia -- Thailand, Indonesia and Bangladesh) could possibly temper the future growth of its exports, said MRF.