Notwithstanding the slowdown, the component makers expect the growth momentum to comeback, hoping recovery in the second half of the fiscal with the installation of the new government
New Delhi: Indian auto component manufacturers are getting ready for a blistering summer, and the woes could even extend right till the end of 2019.
Auto experts say it's because demand for new vehicles has been tapering off for the past few months, and negativity over the future of diesel engine may flip the $51.2 billion industry into a negative zone.
This is sad because the Indian auto component industry has been growing steadily with a 10% CAGR for the past six months, but the weak demand in domestic market and sagging sales have changed fortunes in recent times.
“We have witnessed an unexpected dip in demand from the last festive period,” says Vinnie Mehta, Director General of Delhi-based Automotive Components Manufacturers’ Association. “The weak sales are raising concern on an impending slowdown in the industry, though we expect some recovery after elections in the second half with improved sentiments and steady demand.”
But that’s a hope. Indian passenger vehicle sales started on a healthy note in 2018, but weak consumer sentiments pulled down the festive demand and tweaked fiscal growth to mere 2.7 per cent to 3.4 million units sold till March 2019. Lower sales coupled with weak outlook have impacted the demand for components too that are already facing renewed pressures from a set of new safety and emission regulations.
Indian component makers are gearing up to meet the challenges of supplying new technology and equipment for stringent BS-6 emission norms coming from April 2020, and the much publicized transition to Electric Mobility, vociferously advocated by the Central government and crash test requirements for cars where overall architecture of existing vehicles will undergo a massive change. Besides, bigger car manufacturer Maruti Suzuki has already announced plans to stop making diesel cars from next year.
However, despite the challenges, silver lining is India’s expanding passenger car market - world’s fourth largest - and also the largest exporter of compact cars. This has catapulted the component industry into a major revenue churner from exports. Europe, its largest partner takes 34 per cent of the shipment, followed by 25 per cent earmarked to the US. India exports auto components worth $13.5 billion, with a 11 per cent CAGR over six years.
Notwithstanding the slowdown, the component makers expect the growth momentum to comeback, hoping recovery in the second half of the fiscal with the installation of the new government and aiming return of 10 per cent growth in FY’2020 too.
If that happens, the smiles will return to the industry, and the markets.