Business Today

Study says exports to drive auto parts sector

During 2011, growth of auto manufacturers will be driven by strong exports on the back of the improving global economy, says a new study.

Anuradha Shukla | January 8, 2011 | Updated 08:37 IST

During 2011, growth of auto manufacturers will be driven by strong exports on the back of the improving global economy, says a new study.

"The growth in auto components manufacturing will be boosted by exports as global automotive demand picks up in 2011," says a recent report by rating agency Fitch. "The aftermarket, which saw a reduced focus by auto suppliers in 2010 owing to capacity constraints and an ever-increasing demand from OEMs (original equipment manufacturers), is likely to support the high growth rate for auto suppliers in 2011," the report says.

According to Pragya Bansal, analyst, Fitch, "The US auto demand is expected to go up by about 10 per cent this year. This will be a key driver in exports." "In Europe even when we expect the sales to remain flat, the pressure to cut cost will attract many manufacturers to import components from India," Bansal added. This view was also expressed by the industry.

Srivats Ram, chairman, Automotive Component Manufacturers Association (ACMA), said overall export volumes is likely to reach $4.75 billion in 2011. "With the signs of recovery in the triad markets, we expect growth in exports in the coming year," Ram said. Exports of auto components remained flat at $3.8 billion in 2009-10 due to slowdown in the US and the European market. Europe accounts for over 40 per cent of exports followed by Asia and North America at 24 per cent and 22 per cent, respectively. About 80 per cent of auto component exports are to vehicle manufacturers.

The report says growing demand from the domestic industry as well as the export markets will attract significant amounts of investment and will foster tieups with foreign firms and organisations for capacity expansion and research and development (R&D), respectively.

"The auto component sectors are already undertaking significant investments in building their technical know-how and developing newer products," the report says. "The trend for joint ventures and technical collaboration with global auto suppliers will gain further steam in 2011," Fitch adds.

"This could help India become a major sourcing centre for auto components in developed markets due to its low cost and design capability advantages," it says. The growth of the India passenger car market was about 30 per cent in 2009-10.

Fitch adds that the growth of the Indian private vehicles (PV) market will slow down to 15 per cent in 2011 and profits of companies in this space are likely to be moderate due to inflationary pressure and huge capacity addition. The Society of Indian Automobile Manufacturers (SIAM) says, the PV market stood at about two million units in 2009-10 and is likely to reach 2.4 million units in this fiscal.

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