Indian auto component makers plan mage investments
The burgeoning demand for automobiles in India and revival in demand in markets abroad has put pressure on auto component manufacturers.
The 500 odd manufacturers in India big and small are together investing INR 9,000 crore in 2010 -2011 for setting up new capacities and upgrading the existing ones. This is nearly 33 % higher than 2009 to 2010 when they put in INR 6,750 crore.
Mr Jayant Davar president of Automotive Component Manufacturers Association said that "Demand has far outstripped supply primarily because of several new models launched in the domestic market and slow but steady recovery in demand from overseas. Moreover since penetration levels continue to be low in India capacity is likely to go up by 20 to 25 % this year at an estimated investment of nearly INR 9,000 crore. This would be in tandem with the growth estimates for the sector."
The reports said that Motherson Sumi Systems has earmarked an investment of INR 230 crore to 300 crore in India of its total CAPEX of INR 500 crore to 550 crore for 2010 to 2011 and TATA AutoComp Systems is investing INR 300 crore in the current year to build new plants and upgrade technology.
Mr Pankaj Mittal chief operating officer Motherson Sumi said that "Demand is quite robust at this time and as people continue to upgrade to new model we expect the growth momentum to continue in the future as well. Since there is a lead time before a final product hits the road we are investing INR 230 to 300 crore in the current financial year to set up new plants that will meet the future demand of the industry."
According to Davar, the Indian auto industry's output is getting affected by 5 to 7% due to supply shortage in components. He also added that "Further there is scarcity of tyres and batteries coming from China as they are seeking an unreasonable price hike to cash on the boom."
However inflationary pressure is a problem. If commodity prices continue to surge future investments in the sector could be impacted.
Mr Srivats Ram MD Wheels India and vice president of Acma said that "High levels of inflation in India and the appreciation of the rupee will significantly dent the wafer thin margins. While the industry is investing to catch up with the demand they need to find a way of reaching the threshold levels of return on their investment in view of inflation in commodity prices, power, fuel and manpower cost."
(Source: BS)
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