Partial revival of auto industry gives life to machine tool sector

Partial revival of the automobile sector has brough relief to machine tools. Around 40 per cent of the machine tools business is primarily driven by the automobile/auto components sector, and during the Covid pandemic, it was severely impacted with muted growth.

“The Covid-19 lockdown dented our cash flows. The impact was severe as most of our business came from the automobile sector, especially, supplies to major OEMs almost came to zero,” said P Ramadas, Managing Director of Ace Manufacturing Systems (AMS).

“In the initial days, especially after the lifting of the lockdown in May, it had become difficult to start operations. But now the situation is getting better after June 2020,” he added.

Recovery phase

V Anbu, Director General & CEO, Indian Machine Tool Manufacturers’ Association (IMTMA) said: “Industries began their operations with the unlock phase in a calibrated way, it was more a matter of sustaining lives as well as livelihoods. Since a large number of MSMEs form a part of the machine tool sector, there are issues relating to cash flow, shortage of labour and supply chain. The industry is gradually recovering as almost 80 per cent of them are now back in operation and are seeing pent-up demand.”

He added, “Although cash flow is still a concern, manufacturing and production is on the uptick and positive.”

Echoing a similar sentiment, TK Ramesh, Managing Director, Micromatic Machine Tools Ltd, said: “The machine tools sector is a big supplier for auto components companies. Post the Covid lockdown and unlock phases, it has disrupted the supply chain severely, impacting companies. For us (sector), the first quarter was as good as zero. In the second quarter, July started to pick up and gradually, in August, growth has been good especially due to good small cars’ and two-wheelers’ sales. Now we expect it to continue till the end of festival season.”

“After the festival season, that is fourth quarter onwards, we are anxious to see how it will pan out especially with regard to government policies,” he added.

Tough few months

Some companies (especially the vendors) which are headed by employers-turned-entrepreneurs, were also severely affected. Ramadas said: “They faced the maximum brunt of the situation with order inflow slowing down and workers going back to their villages on account of the lockdown. It was very difficult to restore their confidence.”

“Due to Covid-19, there weren’t many orders. Nearly 25 per cent of our machines are idle. In the absence of auto orders, we are concentrating on aerospace, defence and unique or special purpose machines making,” said V Narayan Rao, proprietor of Bengaluru-based Machine Tool Accessories Ltd.

Bullish on recovery, Ramadas explains: “As we are heading for a long festival season, we expect to see a lot of buying. We expect a V-shaped recovery from the fourth quarter, which in turn would help machine tool companies.”

The sector is also upbeat given the good monsoon during the June-September. “The farm sector is faring very well; there is an uptick in the rural farm equipment. Growth will be seen from the third quarter,” said Ramadas.