The Hindu Business Line : Re, input costs hit auto parts export growth rate

New Delhi, July 21 The strong rupee vis-À-vis the dollar in the last financial year and rise in input costs triggered a sharp fall in the country’s auto parts export growth rate.

Auto component companies say that the strengthening of the currency had shrunk their export margins. At the same time, global vehicle companies baulked from giving price increase on raw material to domestic component companies in long-term contracts.

During April-November 2007-08, actual imports were Rs 12,061 crore and exports Rs 8,692 crore, as per the latest DGCIS data. The Auto Component Manufacturers Association (ACMA), in its estimated figures for the entire financial year, pegged the growth rate in exports at 3 per cent against the 16 per cent recorded the previous year.

Similarly, imports during the last financial year grew 24 per cent against 34 per cent in the previous year.

“Our exports have been flat since the last two quarters and we expect it to remain at the same level in the coming months. Steel prices rose 40 per cent domestically, and in international markets, the increase has not been in the same proportion. We are finding it tough to renegotiate contracts at a higher price from global companies,” said Mr Santosh Singh, Chief Financial Officer, Amtek Auto.

Mr Ashok Taneja, Managing Director, Shriram Piston and Rings, voiced a similar concern. He said, “due to the fluctuating commodity prices, we were in a flux while bidding for global contracts. So if we quote a higher price, anticipating a certain amount of price hike in those commodities, we become uncompetitive.”

ACMA said that the appreciating rupee led many companies to lose business . “Many of the companies whose contracts were getting over and had to be renewed lost business,” admitted Mr Vishnu Mathur, Director General, ACMA.

“Morever, the US economy was moving slowly, resulting in lower exports. Though with the euro and pound remaining strong, exports in these currencies remained buoyant,” he explained.

Acknowledging the disincentive to export due to the appreciating rupee, Sona Koyo Steering System in its 2007-08 annual report stated that it scaled down its dollar denominated exports target.

“We had originally planned to do Rs 100 crore, but as dollar exports became unattractive, we concentrated on getting more euro-related orders. Hence we downgraded our projection to Rs 60 crore,” the company said. Sona Koyo had an export income last year of Rs 63 crore compared to Rs 55 crore the previous year.

Eicher Motors Ltd said in its annual report that auto component exports had been growing year after year with about 20 per cent CAGR over the last 4-5 years due to the edge Indian industries had over its global competition.

“However, during the year ending March 2008, overall Indian industry witnessed pressure on margins due to steep appreciation of the rupee by about 10 to 12 per cent over the last two years, out of which appreciation of around 8 to 10 per cent happened in the year under review. This has resulted in deceleration in the growth rate of exports,” it said.

Related Stories:
Auto components imports surge, exports dip
Auto parts cos hit by slowdown in exports

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