The Hindu Business Line : Steel price rise puts brakes on auto component sector growth

THE domestic auto-component industry, which is emerging as a key global hub for auto components, has been badly hit by the rise in the steel prices, including the latest hike this month.

"This is an industry that cannot re-negotiate long-term prices committed to domestic OEMs as well as global customers," Mr K.V. Shetty, President, Automotive Component Manufacturers' Association of India (ACMA), said is a statement.

On the contrary, most of the long-term contracts and agreements in regard to supply of auto components, in fact, incorporate year-on-year price reductions, without any commitment on volumes.

According to ACMA, the steep increase in the prices of steel is seriously affecting the industry, both on the domestic front as well as on exports.

During last year, steel prices have been increased by more than seven times. "Steel manufacturers are not forthcoming to enter into reasonable long-term contracts which will enable the components makers to offer stable prices to the OEMs - an ongoing trade practice and a valid requirement for healthy growth of the auto market," ACMA said.

The Association points out further that with India entering into Free Trade Agreements (FTAs) with other countries, such price increases in raw materials would further weaken the competitive strengths of the Indian component industry, particularly in the light of raw material duties in these countries being far less, as compared to India. The case in point is the raw material duty in Thailand, which ranges between 5 and 10 per cent.

"More importantly, India's position as a low cost manufacturing base for global outsourcing will be greatly handicapped due to frequent and steep raw material price hikes, like the one now being faced by the industry, and there is every likelihood of India losing its competitive edge to countries such as Thailand and China," Mr Shetty said.

More Stories on : Automobile Components | Steel

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page