Weak rural income, waning demand impact revenue of auto component SMEs

The auto component industry depends heavily on domestic vehicle makers, which account for 65 per cent of total demand in value terms

Small and medium enterprises (SMEs) manufacturing auto components saw business worsen in the second half of FY19 as demand for automobiles —largely two-wheelers and passenger vehicles — slowed. Apart from weak rural incomes, demand was also impacted by an increase in insurance cost, absence of model launches and volatile fuel prices.

But not all SME clusters were affected. While those in Chennai, the National Capital Region and Pune mirrored the industry trend, the ones in Ahmednagar and Aurangabad bucked the trend because they largely cater for a two-wheeler major that grew faster than the industry last financial year.