Rajkot’s smaller auto component makers are reeling under rising raw material prices, especially of steel. The industry fears that if prices do not stabilise soon, small units will find it difficult to survive. “The increasing prices of steel and other raw material have increased the production cost,” said Upen Modi of Unitech Engineering Private Limited.
He added that while buyers would give the units some margin, it will be only after a lag of three or four months. Manufacturers have to bear the burden during this period, and for small units the going will get difficult.
Rajkot’s auto parts industry mostly uses carbon steel, the price of which has increased by around Rs 18,500 per tonne in the last six months, to touch Rs 60,000-75,000 per tonne.
Most auto components units in Rajkot run their operations when they have orders, and usually do not hold raw material inventories. They buy raw material in accordance with requirements.
“Manufacturers who have inventories are not in trouble, but small players are feeling the pressure. Price stability is a must for them,” said Haresh Dave, chairman and managing director of Maitri Cast Private Limited.
Rajkot has more than 500 auto component manufacturers, of which around 50 are suppliers to original equipment manufacturers (OEMs) and the remainder are SMEs that supply to the retail market. The industry in Rajkot produces more than 300 types of parts for the automobile industry and employs about 10,000 people.