Indian automotive component makers are getting back into top gear, with European car companies showing a demand revival.
They either supply parts to car makers in Europe or to Indian manufacturers for exports there, and have recorded a steady rise of 10-12 per cent in demand during the past two-three months.
Earlier, the domestic auto component industry suffered a lot when some of the biggest companies like Tata Motors and Ashok Leyland announced plant shutdowns. In addition, car making companies had also announced production cuts to align with demand.
The European turnaround follows the decision of 10 European countries to go in for massive car purchases by their respective governments. These are the UK, Germany, France, Austria, Italy, Romania, Spain Portugal, Cyprus and Luxembourg.
Also, under a new scheme from this year, each European Union government provides ¤750-4,000 (Rs 51,000-274,000) as scrappage incentive to encourage buyers to dispose of their older, more polluting vehicles in favour of new, low emission and fuel-efficient ones.
According to the Brussels-based European Automobile Manufacturers Association (ACEA), new car registrations reported a growth of 2.4 per cent to 1,461,859 units, for the first time in 14 months in Europe in June. Germany, Europe’s largest auto market, reported a growth of 40.5 per cent.
Vishnu Mathur, executive director, Automotive Component Manufacturers Association, said, “We are seeing a revival because of the stimulus packages announced by several European governments. The vehicles sales data in Europe has improved during the past few months and we expect the trend to continue.”
The biggest beneficiaries of the turnaround are those component companies which directly supply to these regions from India or have a subsidiary company in Europe. Besides, major Indian small-car exporters like Maruti Suzuki and Hyundai Motor India have benefited.
Pankaj Mital, chief operating officer, Motherson Sumi, said: “The European region is showing signs of recovery. Key markets like Germany, France and a couple of other countries have found support and have reported growth in the past few months.”
Motherson Sumi is a Delhi-based auto component company which supplies to Europe from India, as well as its plant in Sharjah, UAE. It had bought the UK-based Visiocorp Plc, a rear-view mirror making company in January.
Nirmal K Minda, managing director of the Rs 1,000-crore N K Minda Group said: “The European market is finally on the growth track, but it is at a very early stage. So far, we have seen a 10-12 per cent increase in exports, quarter-on-quarter.”
Likewise, the Rs 3,000-crore Delhi-based JBM Group, which supplies parts to Maruti Suzuki for the A-Star, as well as Pixo (for the Nissan made by Maruti) has seen an encouraging rise in demand from the market leader. Exports of Maruti zoomed by 134 per cent to almost 30,000 units during April-June this year.
Nishant Arya, executive director, JBM Group, said: “Our supplies to Maruti Suzuki have gone up following increased demand in the European region for their cars.”
Source : Business Standard