South auto parts units see 7.2% rise in net sales

The auto ancillary sector in southern region registered a 7.2 per cent increase in net sales between April 2008 and March 2009, as compared with the national level of 5.3 per cent, according to Confederation of Indian Industry’s southern region quarterly industry and economic update for the automotive and auto components sector.

However, net profit of these units declined by about 40.8 per cent, compared with 2007-08.

The investment climate is intact in southern states like Tamil Nadu, as committed projects in the automotive segment are on track. There are about 142 projects that are coming up in the southern region, which accounts for one third of the auto industries in India, the report pointed out.

Major automobile and auto component production clusters in the region are located at Chennai, Bangalore and Hosur.

There are 46 registered original equipment manufacturers in India, of which 15 are located in the southern states. In the organised sector, 27 per cent of the companies are located in the southern region, of which most are in Tamil Nadu due to the concentration of the auto companies in that region.

According to the study, in 2008-09 listed companies in the automotive sector with registered offices in the southern region reported an 11 per cent decline in operating income to Rs 10,073 crore.Though growth was at 17 per cent in the first quarter of FY2009, it declined to 12 per cent in the second quarter, as the early signs of recession became evident.

Auto component suppliers were affected by high raw resource costs from their suppliers and price reduction demands from their customers. As a result, they faced added hardships of reduced orders as vehicle production was cut by automakers starting roughly in September 2008. Industry analysts suggest that suppliers need to run at least 80 per cent capacity to make profit but expect suppliers to be running at only 50-60 per cent capacity in 2009.