Sluggish demand for automobile and auto components in the global market, in the last financial year, had crippled the sales of small-scale auto parts dealers in the country.
Besides, severe liquidity crunch and delayed payments from global auto giants have worsened matters for the Indian auto component industry. Moreover, going by the industry forecasts, the scenario is unlikely to change in the near term.
Fitch report
A new Fitch report has predicted tougher times ahead for small and mid-sized auto component firms in India. According to the report, the demand in the auto market is predicted to remain muted for most part of 2009.
The slowdown in maritime trade due to the ongoing lull is also likely to result in lower capacity utilisation of small units to prevent piled-up inventory.
“The first few quarters of the current financial year are unlikely to see any significant turnaround in auto sales. A major recovery in the car sales will happen only after global market picks up momentum,” commented Rajesh S Kothari, Chairman of Rohan Automotive Equipments; a small-sized Ahmedabad-based automotive firm.
Sales to remain under pressure
The light car segment, which witnessed growth in 2008, is also likely to see lower demand and flat sales this year.
“While liquidity pressures are slowly easing and raw materials costs are decreasing, the margins of small-scale auto component firms will continue to be low as the demand is unlikely to pick up soon in the global and domestic markets,” said Manu Vora, proprietor, Kunal Auto Services, a small-sized auto firms in Mumbai.
With forecasts for the coming quarters looking bleak, small and mid-sized component firms will have to exercise greater prudence and adopt a wait and watch policy till the gears of the global economic engine start turning again.
