Auto component makers to scale down planned investments
NEW DELHI: Auto component makers such as Rane Group and Lumax Auto said they will scale down planned investments in the short term due to a slowdown in the automobile market although they are bullish on the industry's future.
"We had planned for 230 crore investment for this fiscal, but I fear, we may not invest even half of that," L Ganesh, chairman of brakes and steering wheel maker Rane Group, told ET.
"We will wait till October to decide the future course of action," he said on the sidelines of the 52nd annual session of Automotive Component Manufactures Association of India (Acma). He said that apart from direct sales to the automotive companies, after-market demand has also slowed down.
The changing economic scenario has muted demand across different automobile segments from two-wheelers to heavy commercial vehicles and overall auto production growth slowed to 7 per cent in the first four months of the fiscal when 69.54 lakh vehicles were built in the country.
Lighting systems maker Lumax Industries said it is scaling down investments and may miss growth target due to workers' agitation at Maruti Suzuki India's Manesar plant.
"We are refraining from going aggressive," Anmol Jain, senior executive director at Lumax, said. The company had originally planned to invest Rs 100 crore this fiscal. Lumax is growing 14-15 per cent year-on-year against its original target of 25-30 per cent, he told reporters.
Analysts attribute the slowdown in investments to the overall economic environment and the capacities created over the last few years when the auto industry was growing at a fast clip.
"There will be deferrals and people will be careful about investing for the future...everyone will be conservative and cautious in investing," Rakesh Batra, partner at international consultancy firm Ernst & Young, said.
"But I still believe the medium-term growth estimates are still intact," Batra said. That's one thought most stakeholders, including companies and the government, share.
Praful Patel, Union minister of heavy industries & public enterprises, on Wednesday said the automobile and auto component industry will account for more than 10 per cent of the country's GDP by 2016. "The output of the automobile and auto component industry would reach $145 billion by 2016, accounting for more than 10 per cent of the country's GDP and generating employment for more than a million people," he told the annual convention of Acma.
Patel said the growth of the industry has led the government to review targets set for the industry under the automotive mission plan 2006-16. The auto component industry in India has grown at 15 per cent CAGR over the last five years. And it is on this faith on the future that some companies such as Varroc Group and Rico Auto Industries are going ahead with their planned investments. "We are not holding back on our investments," Tarang Jain, MD of Varroc Group, said. "In fact, instead of our earlier plan of investing 160 crore, we will now be investing 200 crore. We can't stop, if our OEM partners are investing, we have to follow them," he said.
Source : Economic Times