 "Rise in auto sales bring back growth at auto component industry")
Three years back Prakash Sawant (name changed) owner of an auto-component business in Bhosari, Pune had to shutdown his business as the auto market reeled under the impact of global meltdown.
With a turnover of Rs 50 crore, Sawant was providing metal sheets for cars to auto manufacturers like Tata Motors, Mahindra & Mahindra and Eicher among others. "Almost 10-15 businesses in this region shut shop because of the slowdown," he remembers.
Earlier this year his 32-year old son Ajay Sawant set up a new business catering to the auto segment providing the same service. "The market is showing positive signs and the conditions are better as compared to last two years. However, smaller companies have not fully recovered form the slowdown and will take another two years for full recovery," said Sawant.
After witnessing a slowdown in the last few years, there are signs of revival for Indian auto-component industry.The sector could gain momentum and register growth of 8-10 per cent in the coming financial year, rating agency ICRA said. In FY16, industry has registered a growth of 7.2 per cent y-o-y vis-a-vis a decline of 3.9 per cent in FY15.
According to ICRA, improved macroeconomic environment (faster GDP growth, easing financing cost, fuel cost) and slew of launches, especially in compact car and utility vehicles (UV) segment supported growth during FY16.
"The past few years have belied the growth projections made by the automotive industry experts but this year we are seeing some green shoots especially in the commercial vehicle (CV) sector.The sales growth in CV and passenger vehicles is expected to enter the positive trajectory, driven by expected moderation in interest rate, fall in ownership cost and improvement in economic activity and consumer sentiments," said Suresh K V, country head, ZF India.
German auto component major ZF India has a strong presence in commercial vehicles (CV) and off highway segments. It supplies components for all luxury cars along with popular mass segment cars.The company has nine plants spread across Pune, Pantnagar, Gurgaon, Chennai, Coimbatore and Madurai, and approximately 3,000 employees.
Suresh said: "Auto component manufacturers are expected to increase their presence by venturing into non-auto sectors as a means to reduce their over-dependence on the vehicle market. Further, with foreign OEMs sourcing vehicles as also auto parts from India, with several of them making India their sourcing hubs, overall growth prospects of the components industry looks better."
According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is expected to register a turnover of $100 billion by 2020 backed by strong exports ranging between $80- $100 billion by 2026, from the current $11.2 billion.
The Indian auto-components industry is set to become the third largest in the world by 2025. Indian auto-component makers are well positioned to benefit from the globalisation of the sector as exports potential could be increased by up to four times to $40 billion by 2020.
Satara based engine manufacturer Cooper Corporation, which supplies components to the major Indian OEMs like Bajaj Auto, Ford India, Yamaha, Renault-Nissan, Tata Motors and overseas clients like Jaguar Land Rover, KTM is also seeing good momentum for FY17. The automotive space contributes to nearly 40 per cent of Cooper Engineering's business while generator sets form another critical user base.
Farrokh Cooper, chairman & managing director, Cooper Corporation said: "We have diversified our business into various sectors like automobile, oil and gas, power and power gensets.The right balance of import and export has helped us to survive in slowdown. However, there are signs of revival from auto industry and it is helping our sales. We have witnessed significant growth of around 40 per cent in diesel engines sales in the last one year."
Forging industry which is largely (around 60 per cent) dependent on automobile sector has gone through a rough time. According to Asheet Pasricha, former president, Association of Indian Forging Industry (AIFI), many survuved the slowdown because they diversified into non-auto segments, but a revival in sales will only be good for the industry.
"Depending upon the distribution of order book within the auto component manufacturers, passenger car and two wheeler segment is doing good from the last two quarters.The commercial vehicle segment has shown a sign of recovery and forging industry has observed demand across all spectrum," said Pasricha.
DSM Engineering Plastics, which supplies plastic parts to automobile manufacturers is also riding high on the growing demand from the sector.The company is expecting a double digit growth for the next two years.
"We are very much optimistic about the growth in automobile sector. DSM being a tier-III supplier for automobile sector, we are hoping to achieve a double digit growth in the next financial year as demand is growing form the sector. I am sure this trend will continue for the next few years because of favourable economic conditions, said Sanjay Jain, business director, DSM India.
With a turnover of Rs 50 crore, Sawant was providing metal sheets for cars to auto manufacturers like Tata Motors, Mahindra & Mahindra and Eicher among others. "Almost 10-15 businesses in this region shut shop because of the slowdown," he remembers.
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Earlier this year his 32-year old son Ajay Sawant set up a new business catering to the auto segment providing the same service. "The market is showing positive signs and the conditions are better as compared to last two years. However, smaller companies have not fully recovered form the slowdown and will take another two years for full recovery," said Sawant.
After witnessing a slowdown in the last few years, there are signs of revival for Indian auto-component industry.The sector could gain momentum and register growth of 8-10 per cent in the coming financial year, rating agency ICRA said. In FY16, industry has registered a growth of 7.2 per cent y-o-y vis-a-vis a decline of 3.9 per cent in FY15.
According to ICRA, improved macroeconomic environment (faster GDP growth, easing financing cost, fuel cost) and slew of launches, especially in compact car and utility vehicles (UV) segment supported growth during FY16.
"The past few years have belied the growth projections made by the automotive industry experts but this year we are seeing some green shoots especially in the commercial vehicle (CV) sector.The sales growth in CV and passenger vehicles is expected to enter the positive trajectory, driven by expected moderation in interest rate, fall in ownership cost and improvement in economic activity and consumer sentiments," said Suresh K V, country head, ZF India.
German auto component major ZF India has a strong presence in commercial vehicles (CV) and off highway segments. It supplies components for all luxury cars along with popular mass segment cars.The company has nine plants spread across Pune, Pantnagar, Gurgaon, Chennai, Coimbatore and Madurai, and approximately 3,000 employees.
Suresh said: "Auto component manufacturers are expected to increase their presence by venturing into non-auto sectors as a means to reduce their over-dependence on the vehicle market. Further, with foreign OEMs sourcing vehicles as also auto parts from India, with several of them making India their sourcing hubs, overall growth prospects of the components industry looks better."
According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is expected to register a turnover of $100 billion by 2020 backed by strong exports ranging between $80- $100 billion by 2026, from the current $11.2 billion.
The Indian auto-components industry is set to become the third largest in the world by 2025. Indian auto-component makers are well positioned to benefit from the globalisation of the sector as exports potential could be increased by up to four times to $40 billion by 2020.
Satara based engine manufacturer Cooper Corporation, which supplies components to the major Indian OEMs like Bajaj Auto, Ford India, Yamaha, Renault-Nissan, Tata Motors and overseas clients like Jaguar Land Rover, KTM is also seeing good momentum for FY17. The automotive space contributes to nearly 40 per cent of Cooper Engineering's business while generator sets form another critical user base.
Farrokh Cooper, chairman & managing director, Cooper Corporation said: "We have diversified our business into various sectors like automobile, oil and gas, power and power gensets.The right balance of import and export has helped us to survive in slowdown. However, there are signs of revival from auto industry and it is helping our sales. We have witnessed significant growth of around 40 per cent in diesel engines sales in the last one year."
Forging industry which is largely (around 60 per cent) dependent on automobile sector has gone through a rough time. According to Asheet Pasricha, former president, Association of Indian Forging Industry (AIFI), many survuved the slowdown because they diversified into non-auto segments, but a revival in sales will only be good for the industry.
"Depending upon the distribution of order book within the auto component manufacturers, passenger car and two wheeler segment is doing good from the last two quarters.The commercial vehicle segment has shown a sign of recovery and forging industry has observed demand across all spectrum," said Pasricha.
DSM Engineering Plastics, which supplies plastic parts to automobile manufacturers is also riding high on the growing demand from the sector.The company is expecting a double digit growth for the next two years.
"We are very much optimistic about the growth in automobile sector. DSM being a tier-III supplier for automobile sector, we are hoping to achieve a double digit growth in the next financial year as demand is growing form the sector. I am sure this trend will continue for the next few years because of favourable economic conditions, said Sanjay Jain, business director, DSM India.