[Auto] Auto parts sector revenue declines 34.6% in H1 FY21

[_Happy boy]

NEW DELHI : India’s auto parts makers recorded a 34.6% decline in revenue in the fiscal first half from a year earlier as production came to a halt due to the nationwide lockdown, showed data issued on Wednesday by the Automotive Component Manufacturers Association (Acma).

The sector, however, reported a swift turnaround in the second and third quarters as automobile production improved to record levels before the festive season.

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Revenue in the six months ended 30 September fell to ₹1.19 trillion from ₹1.82 trillion a year earlier, according to Acma.

Component imports declined too—probably as a result of the union government’s push for automakers to use locally-made parts.

In the fiscal first half, component exports fell by 23.6% to ₹39,003 crore, while imports also dropped by 32.7% to ₹37,710 crore. The recently-announced production linked incentive (PLI) scheme might help the sector maintain the export surplus status in the coming years, analysts said.

According to Deepak Jain, president of Acma, the component industry’s performance has improved manifold after the lockdown measures were lifted and the industry expects significant recovery in demand in the next fiscal year. Despite the swift recovery, the auto component industry will take around four years to match the revenues of FY19 when it touched a record.

“Inventory levels after the festive season is low and production forecast in December is also lower because of the planned factory shutdowns. Demand going forward will soften but it will be sustainable. Now, it will be dependent on whether there will be covid-related disruptions but overall, there will be good momentum in demand in rural and urban markets," said Jain.

He said the PLI scheme will help the auto component sector become export surplus on a sustainable basis in the coming years.

To be sure, senior executives in leading automakers such as Maruti Suzuki India Ltd and Bajaj Auto Ltd have aired concerns about the softening of demand after December.

Increased commodity prices and scarcity of components such as semi-conductors may also derail recovery in the financials of most component manufacturers. Higher commodity prices are also likely to impact their operating profits and margins.

Vehicle manufacturers and their parts suppliers have been witnessing continuous decline in sales from the second half of FY19 due to the economic slowdown and increase in vehicle prices following the transition to new safety and Bharat Stage VI emission norms.

In FY20, vehicle sales fell 15-25% across categories, worsening from a low single-digit growth in FY19.

“The component industry is hopeful that the PLI scheme will help the sector grow in the future. During the covid crisis, not a single member of Acma went bankrupt or lost their business. Measures announced by the government like moratorium on repayment of interest on loans also helped companies a lot. In the coming quarters, we expect demand in the commercial vehicle industry to come back. As of now, overall demand has come back and none of the manufacturers are complaining," said Vinnie Mehta, director general, Acma.