The Hindu Business Line : Auto parts cos wilt under increasing steel prices

INCREASING steel prices are putting pressure on the operating margins of the automotive industry. According to Mr Deep Kapuria, outgoing president of the Auto Component Manufacturers Association (ACMA), the operating margins for the automotive components industry have declined by as much as six per cent after the recent hike in the prices of key inputs including steel. "There has been an unprecedented increase in steel prices over a very short period of time," he said.

Further, taking a toll on the margins is the inability of the component industry to increase prices for the end consumer, points out an official from an auto components manufacturing firm.

An ICRA report said the operating profit margin for the industry was pegged at 18.4 per cent during fiscal 2002-03, an increase over the previous year.

The operating margins for the industry had earlier seen a decline from 1998-99 till 2001-02, due to the increase in material costs following an increase in the prices of certain key metals, the survey points out.

It added that strong price negotiations by OEMs have depressed the margins in most product segments. Similarly, margins of vehicle manufacturing firms are also under pressure, even as the companies are non-committal on whether the increased input costs would be passed on to the end consumer through a price hike"There has been an almost 30 per cent rise in the prices of steel, which is putting pressure on the margins. We are not looking to raise prices for now, but we are not ruling out a price hike in the future," Mr R. Seshasayee, Managing Director of Ashok Leyland and outgoing president of the Society of Indian Automobile Manufacturers (SIAM) said.

Points out Ms Sulajja Firodia Motwani, Jt. Managing Director of Kinetic Engineering, "The increased steel prices are putting pressure on the margins of the two-wheeler industry. However, it is unlikely that anyone would raise prices now, particularly with the festive season approaching during which much of the sales for the industry occur."

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