Punjab auto component units expect 5% growth

Despite the slump in automobile sales in the Indian market, over 2,500 Punjab-based auto parts manufacturers, a majority of them in the SME sector, hope to register at least five per cent growth in the current financial year.

According to entrepreneurs, a strong presence in the replacement market or after-market has provided them with insulation from the slowdown.

G S Kahlon, president of the Auto Parts Manufacturers Association, told Business Standard, “A majority of the manufacturers – about 90-95 per cent – supplies to the replacement market and only 5-10 per cent supplies to OEMs (Original Equipment Manufacturers). Since OEMs are suffering due to the slowdown in sales, so are their vendors.”

However, manufacturers who are catering mainly to the replacement market or after-market have not been impacted to that extent.

“Despite negative growth in auto sales our members are hopeful of registering at least five per cent growth in the current fiscal,” Kahlon said.

One component manufacturer who depends solely on orders from OEMs added, “Our business has been affected by 30-40 per cent due to the slowdown in auto sales.”

According to SIAM (Society of Indian Automobile Manufactures), high inflation and a patchy monsoon have affected buyer sentiment in both urban and rural areas, hurting sales of both cars and two-wheelers.

The combined annual turnover of Punjab-based auto parts manufacturers is about Rs 5,000 crore, with the domestic market contributing about Rs 3,000 crore and exports the rest. According to Saurav Joshi, owner of Joshi Auto Industries, many slowdown-hit vendors are diversifying or increasing their presence in the replacement market to minimise the impact of the slowdown.

He added that the last two years had been good for auto parts manufacturers, as auto sales had registered significant growth. Consequently, the replacement market also grew, which is now providing respite to manufactures.

A majority of auto parts manufacturers have decided to put their expansion plans on hold until the situation shows signs of improvement, manufacturers added. Some small and medium industries catering to OEMs have also sought a rescheduling of their debts from banks in order to stay in business.

A majority of the auto parts manufacturers are concentrated in Ludhiana, Jalandhar, Hoshiarpur and Phagwara. Besides catering to the after-market, they supply components such as brake shoes, suspension parts and axle parts to manufacturers of commercial vehicles and passenger cars.