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Fresh investments in the automobile component sector are projected to hit a five-year low at a little less than $ 1 billion in the current financial year on back due to demand in the domestic industry.
“From what we envisaged in terms of capex investment six months back, resources are being scaled back by at least 40-45 per cent across the industry. Last year, a little more than a billion dollars were invested in the auto component sector, but this financial year, it would be considerably lower than that,” said Harish Lakshman, president, Automotive Component Manufacturers Association (ACMA).
Data with industry body ACMA shows fresh investments in the sector this financial year would be the lowest since 2008-09, when component makers had together put in around $ 0.1 billion.
Bharat Forge, for one, on Thursday said it was ‘recalibrating’ its future investments as its existing capacities were not being fully utilised. “We are now recalibrating our future investments. There is no sense in making investments today when you have already made investments which are not being utilised,” said Baba Kalyani, chairman and managing director, Bharat Forge.
He informed that auto component manufactures have a bigger problem in hand than the original equipment manufacturers (OEMs) as they have already gone ahead with the investments. “OEMs invest as they see demand. Component manufacturers invest ahead of demand. Hence, we all have invested years ago. We have a bigger problem because we have huge capacities sitting idle with no off-take,” added Kalyani.
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The Rane Group is holding back about 50 per cent of its planned investments of Rs 550 crore in the face of the slowdown in the market. “The group had a planned investment of Rs 550 crore for the next three years. Now with the slowdown, about 50 per cent of the investments have been scaled back,” said Lakshman, who is also the managing director of Rane TRW Steering Systems.
Sona Koyo Steering Systems, in the meantime, is reviewing capex plans on a monthly basis. Sanjuy Kapur, vice-chairman and managing director, Sona Koyo Steering Sytems, said, “Our capacity utilisation currently stands at around 75 per cent. We are not cutting down investments but are evaluating it on a monthly basis.” The company has planned capex of Rs 80-100 crore in the current financial year. With growth expected to be in single-digits in the domestic market, Sona Koyo is looking at stepping up exports to cash in on opportunities from the devaluation of the rupee.
“The devaluation of the rupee has made Indian exports more competitive. Exports would account for 10 per cent of our revenues this financial year, up from four per cent a year earlier. Over the next three years, we plan to scale it up to 18 per cent. We are looking for export opportunities, specially in the United States for off-highway vehicles,” said Kapur. The Rane Group too, is working on increasing the share of exports to a fourth of its total sales over the next three-four years from 18 per cent at present.
Tarang Jain, managing director of automotive parts maker Varroc Engineering said, “Our strategy to increase exports out of India to emerging markets such as Southeast Asia is driven more by the recognition of where there is growth potential and where we have manufacturing capabilities. But the rupee depreciation is certainly an upside.” Varroc is looking at increasing the share of exports to 25-33 per cent of its India business from 15 per cent at present.
Anand Automotive is looking at doubling export revenues to Rs 800 crore by 2016. “Currently, export accounts for eight per cent of our total turnover. We are looking to increase this mainly by increasing our supplies to our collaborators and also by engaging with the international purchasing offices of established global manufacturers,” said Sandeep Balooja, president (group business development), Anand Automotive.
The Anand Group would invest Rs 1,200 crore over the next five years on new product development and capacity expansion. The group has 47 different manufacturing locations across India and the capacity hike would be among these existing plants. The company is estimating an increase of six percent to post a turnover of Rs 6,100 crore this financial year as compared to Rs 5,800 crore reported in FY13.
