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In tandem with the auto industry, the components sector slowed in the first half of the current fiscal, with sales declining 10 per cent year-on-year (YoY) to ₹1.79-lakh crore.
The Automotive Component Manufacturers Association (ACMA) said on Friday that around one lakh temporary jobs were nixed between October 2018 and July 2019.
“The automotive industry is facing a prolonged slowdown,” observed ACMA President Deepak Jain. “Vehicle sales in all segments have continued to plummet over the past year. Considering that the component industry grows on the back of the vehicle industry, a 15-20 per cent cut in vehicle production has, inter alia, adversely impacted the components industry’s performance and investments.”
For the industry, some respite came from exports, which grew around 3 per cent to ₹51,397 crore, and after-market sales that rose 4 per cent to ₹35,096 crore during first half of the financial year
But the slowdown, said Deepak Jain, has resulted in an investment loss of up to $2 billion during the period. A 10 per cent growth would have added $6 billion in revenue, for which the corresponding investment could have been around $2 billion, he explained.
With the transition to the BS-VI emission regime and the implementation of safety norms, the value-addition by the component industry is expected to rise progressively, Jain said.
Transition to BS-VI
He said the auto industry has invested ₹80,000-90,000 crore for the BS-VI transition, of which the components sector has put in ₹30,000-35,000 crore.
Seeking the Centre’s intervention for sustainable long-term growth, the ACMA chief said one of the key demands of the sector has been a uniform GST rate of 18 per cent. “Currently, 60 per cent of auto components are taxed at 18 per cent and the remaining 40 per cent, the majority of which are two-wheeler and tractor components, at 28 per cent. This has led to the flourishing of grey operations in the after-market,” he added.
He said subdued vehicle demand, investments made for the transition to BS-VI, the liquidity crunch and lack of policy clarity on electric vehicles have had an adverse impact on the expansion plans of the components sector.
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