The slowdown in auto sales is having a cascading effect on ancillary units forcing them to cut production as inventories have started piling up due to demand slump.
Leading auto ancillary company Bosch has decided to suspend operations at two plants due to the reduction in demand. The company had suspended production in 2008-09 in the wake of the global financial meltdown.
"We are suspending production for two days at the Bangalore plant and three days at the Jaipur plant to reduce the inventory as the demand has fallen temporarily in this quarter," V. K. Vishwanathan, managing director (MD), Bosch, said.
"We are optimistic that from August-September onwards, the market is likely to pick up because the pre-festival season buying will start. But for the next month or two, typically during the monsoon , the sluggishness is expected to continue," Vishwanathan added.
Bosch is not the only auto component supplier to curtail production. According to industry sources, the demand has gone done by 20 per cent and most companies are resorting to cutting production.
Autoline Industries Ltd, which supplies parts to Tata Motors, has cut output by 20-25 per cent, a senior company executive said. "Auto ancillary companies are already doing away with contract labour, cutting production and curtailing shifts. If sales do not improve, the situation may turn as worse as 2008- 09," the executive said.
Others companies such as Motherson Sumi Systems, which supplies parts to Maruti Suzuki, have also seen a drop in demand. "The demand has gone down. We have not suspended operations but are working for fewer hours a day," an executive from Motherson Sumi said.
According to Automotive Component Manufacturers' Association of India ( Acma), growth of auto component industry is expected to slow down to six to seven per cent this year compared to 14 per cent in 2011- 12.
"The year is not good for the sector. Barring two-wheelers, most other segments, including passenger vehicles, are not doing well. It is a matter of concern. However, we feel that the festive season will trigger growth," Vinnie Mehta, executive director, Acma, told Mail Today.
P. Balendran, vice-president, General Motors India, said, "There is a slowdown in demand. There should be some clarity on fuel pricing. We all hope the market will improve in the next four to five months just ahead of the festive season. If there is no improvement, we are going to see another bad year for auto the industry." Other companies like Toyota Motors and Fiat India are also rationalising their operations forcing their auto part manufacturers to reduce production.
Courtesy: Mail Today