The Automotive Components Manufacturers Association is hoping the current slowdown in the automotive industry does not deter auto component makers from making “substantial” investments for anticipated future growth.
With a spate of launches planned in the next few months, up to the marquee auto expo, and a 14 per cent CAGR estimated in the next five years for the auto industry, the blip in the current year must not curtail investments, says Mr Srivats Ram, President, ACMA.
“The last few months have seen mildly negative sentiments with fuel rate and interest rate increase and expectations of further rate increase. My concern is one bad year must not slow down investments. Substantial investments are needed for the growth likely to happen in the next five years. Basic economic fundamentals and demographic dividend will ensure that growth will return.”
In 2010-11, $2 billion investments were made in the auto component industry ($1.7 billion). At the start of the year, the expectation was around $2.5 billion for FY12. Will this go down? “We have only had a few months of slowdown. It’s a bit early to take a call,” says Mr Ram.
The automotive industry was looking at 14-15 per cent growth in FY12 (last year growth was 26 per cent) but current circumstances would peg it at 8-12 per cent.
Growth of the auto parts market will be 15 per cent against 30 per cent last year. “All this depends on how the government tackles inflation and things shape up in the latter half of the year because significant sales happen then.”
Global economic factors will also impact exports – about 2/3rd of auto parts are exported to North America and Europe. “If there is only stagnation and not a double dip, the export market may be able to squeeze through this year.”