The Hindu Business Line : Auto parts cos hit by slowdown in exports

Multiple bites
Sales have either remained flat or declined in sequential terms this quarter.
The change in emission control norms in the US may have an impact till the third quarter.

Parvatha Vardhini C.
Priyanka Vyas

Chennai/ New Delhi, Aug. 26 It is a double whammy for auto component manufacturers. Even as they are beginning to feel the pinch of the slowdown in the domestic auto industry, exports are beginning to bite as well, thanks to the appreciating rupee.

A study of the first quarter performance of five representative component manufacturers — Sundaram Clayton, Sundram Fasteners, Munjal Showa, MICO and Sona Koyo Steering — shows that while profits have increased by around 13 per cent sequentially, sales have either remained flat or declined in sequential terms.

“With interest rates impacting the sales of vehicle manufacturers, our sales are bound to be affected indirectly. Since 87-88 per cent of our sales are from our supplies to two- wheelers that remains the most affected segment and is pinching us also. Besides, manufacturers too ask for price reductions putting the margins under pressure,” said Mr Mahesh Taneja, Head - Finance, Munjal Showa, which has reported an eight per cent decrease in sales and an almost 50 per cent decrease in its net profit on a sequential basis.

Flat sales

Sundram Fasteners, which witnessed flat sales in sequential terms in the June quarter as well in the previous two quarters, attributes the trend to the slowdown in the export market on the account of rupee appreciation as well as change in the emission control norms in the US that would have an impact till the third quarter.

“Interest rates compounded with movement of goods becoming difficult on account of floods have led to slower sales. We have suffered with 10 per cent rupee appreciation in value of our exports, though not in volumes. Also last quarter of previous fiscal, sales had been more than normal, which led to relatively lower sales reflected in the first quarter,” said a senior official, Sundaram Fasteners, who did not want to be named.

‘Sluggish start’

Sona Koyo Steering also reported a decline in its sales sequentially in the June quarter. “Last quarter of the financial year is always robust and first quarter starts a bit sluggish. Going further, the volume would pick up on a quarterly basis and finally we expect to achieve year-on-year growth of approximately 15 per cent,” said Mr Surinder Kapur, Chairman and Managing Director, Sona Koyo Steering System.

He added that sales in the first quarter of the current fiscal year-on-year had grown by 19 per cent in the non-column electric power steering systems as there had been no slowdown in that segment.

Related Stories:
Auto and ancillary stocks take a knock
Two-wheeler sales continue to skid

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