The dismal performance of commercial vehicles, which had been the major demand-driver, aggravated the problems for the sector.
Sales of 63 auto ancillary companies posted only a 15.6 per cent jump to Rs 2,160 crore for the quarter ended June 2000.
A 35 per cent growth in net profit to Rs 78.2 crore was cushioned with piling up of huge inventory which helped to lower total expenses.
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The aggregate closing stock of select companies increased to Rs 53.9 crore from a Rs 1-crore decrease in closing stock in the same quarter of the previous year.
If one excludes the exorbitant closing stock from the bottomline, the net profit shows a 57 per cent dip during the period.
Industry observers feel that the high level of spurious activity in the auto component market has accentuated the problem of the sector. The spurious component penetration could be attributed to low demand satisfaction.
A study conducted by he National Council of Applied Economic Research says that lack of adequate number of original equipment (OE) components in the replacement market has led to extensive use of spurious components.
The level of satisfaction of demand for replacement in respect of five major components viz gaskets, filters, gears, clutches and bulb was 50 per cent or even lower.
In gears, the level of satisfaction of replacement demand was 31.67 per cent, while for gaskets it was 50.75 per cent. The study reports that during the survey about 11 per cent of the traders cited this as the major factor for the use of spurious components.
The other major reason for the substitution is high profit margin for the trader. The profit margin on spurious components range from 17 per cent to 26 per cent as against 3-5 per cent in OE brands at the retail outlets.
However, the Automotive Component Manufacturers Association feels that greater level of e-commerce trading would restrict spurious activity to a large extent and boost the demand from the organised sector.
The trend is visible in the south-based companies where they have encouraged sale of truck parts through e-commerce trading.