The crisis in the Indian automobile industry has had its ripple effect on the auto component industry with most automobile manufacturers imposing a self-reduction of production by around 15-20%. As a result, the manufacturers and suppliers of components to these manufacturers have also had to cut down their production. The end result of this is the auto component industry is seeing shedding of over 100,000 temporary jobs till July this year, as per a PTI report.
In the case of the largest car maker, Maruti Suzuki, a majority of components follow a just-in-time delivery to the assembly line. The production plans are conveyed the previous day to the component suppliers. This means when the production is down in the Maruti car plant, the component units will also remain without work. They would also not pile up inventory without knowing what the production plan is going to be.
The details have been shared by the trade body, the Automotive Component Manufacturers Association (ACMA). The association says the combined turnover of its members declined in the six-month period, April to September, this year to Rs 1.79 lakh crore against Rs 1.99 lakh crore for the same period of the previous year, a drop of 10.1%.
The only saving grace for the industry has been that the figures for export and sales to the replacement market have shown a marginal increase. Exports were at Rs 51,397 crore and the aftermarket segment grew to Rs 35,096 crore. These represent an increase of 2.7% and 4% respectively from the previous year’s figures.
The ACMA has tried to quantify the notional loss in investment in the component sector too. They say if the industry had registered a growth of 10%, it would have attracted an investment of around $2 billion, which now stands lost.
The automobile industry in the country is currently making large scale changes to be in compliance with the BS-VI emission norms. This has meant an investment of up to Rs 90,000 crore. It is reported that this amount includes the components sector contribution of around Rs 35,000 crore. Coming at a lean sales season, the industry is virtually crippled as far as the finances are concerned. Many of the component makers are in the MSME segment.
The industry is hoping the government will intervene and prevent a total catastrophe.
Another demand from the ACMA is to rationalise the GST. There are two slabs at which the components are taxed, 18% and 28%. The industry wants this to be made one level, 18%. The industry says this is leading to grey market operations in the replacement market.