Gujarat auto component makers focus on exports

Slowdown in domestic demand forces auto makers to eye export revenues
Sohini Das  |  Ahmedabad  April 10, 2014 Last Updated at 20:35 IST

With demand from domestic original equipment manufacturers (OEMs) in slow lane, auto-component makers in Gujarat are eyeing the exports market to keep afloat in these tough times. It is estimated that exports from the Rajkot-based autoparts hub of Gujarat during 2013-14 was about Rs 200-250 crore, up by around 20-25 per cent from last year.

Rajkot houses as many as 500 small and medium scale component makers, of which around 50 odd firms supply directly to OEMs. With the domestic automotive industry reeling under slowdown in demand, the production at the auto-component hub at Rajkot is down by almost 40 per cent, and the industry feels no immediate relief is in sight.

"While more than 75-80 per cent of our production goes to OEMs in India, people indeed are focussing more on exports to boost their revenues," said Suresh Santoki, managing director of Amul Industries, makers of connecting rods and crankshafts for automobiles. Amul Industries is one of the bigger component makers in the region, with plants at Rajkot and Sanand in Gujarat, apart from Pune in Maharashtra, Hyderabad in Andhra Pradesh, Jamshedpur in Jharkhand, Rudrapur in Uttarakhand, and Ranipet in Tamil Nadu.

It has exported engine components worth Rs 56 crore this fiscal (from its Rajkot plant), which is up by 10 per cent on a year-on-year basis. "The international markets are also tough at the moment, however, we have managed to export to countries like Brazil, Germany, US, Iran, Turkey and a few other West Asian countries. This would be around 25 per cent of our overall turnover," Santoki explained adding that most of the bigger component firms in Rajkot have focussed on exports this fiscal.

Others like Bhavani Indsutries which makes transmission components, and some small bearing makers too have focussed on the export markets this year. A local manufacturer and exporter of bearings said that exports from the region are up by 20-25 per cent, as many companies who have traditionally not been exporting have tapped international clients this year. In Gujarat, majority of the exports have come from Rajkot based component makers, other clusters like Halol, Vadodara, Ahmedabad have mainly catered to the demand of OEMs present in the locality, claimed industry insiders.

Kirti Rathod, chairman and managing director, Delux Bearings and deputy chairman of the Automotive Component Manufacturers Association (ACMA), western region pointed out that companies have been investing in building infrastructure for exports for the past few years.

"On a pan-India basis, between 2011 to 2013, major investments have taken place in the auto-component space, to the tune of Rs 2,500-3,000 crore. This has gone into getting the systems in place, as well as product development," he said adding that exports have been up in the range of 20-35 per cent in recent times. Santoki too said that his firm had invested close to Rs 25 crore in the last few years in plant and machinery as well as product development for the export market. ACMA has sought that in order to make exports more competitive, the government should extend the 5 per cent interest subvention on investments made in capital equipment.

Vinnie Mehta, executive director, ACMA felt that with the domestic industry on a slow lane, and no respite seen anytime soon, several component makers in the country, including the SMEs in Gujarat have focussed on exports this year. ACMA, however, does not collate region-wise data on exports.

(Source : http://www.business-standard.com/article/companies/gujarat-auto-component-makers-focus-on-exports-114041001218_1.html)

Volatility a new lesson for Indian auto sector - ACMA

Volatility has impacted organisations of all sizes, across all major industries but most significantly the MSMEs. The industry is under constant pressure from what is termed as VUCA forces, i.e. Volatility, Uncertainty, Complexity and Ambiguity, which continue to characterise the business environment.

VUCA has affected the market such that there is a slowdown coupled with other adversities in macro-economic factors that have created negative sentiments in the industry. However, every cloud has a silver lining and this holds true for the Auto industry as well.

In light of above, ACMA with the Ministry of Micro, Small & Medium Enterprises jointly organised 3rd MSME summit in New Delhi on March 21st 2013. mr Ajay Shankar, Member Secretary of National Manufacturing Competitiveness Council inaugurated the summit, with Mr N K Maini, Deputy MD of SIDBI as the Guest of Honour and Mr Sudam Maitra, COO (Supply Chain) of Maruti Suzuki India Limited as the Keynote Speaker.

The summit was organised to assess the current business scenario and how component manufacturers, especially the small and medium enterprises can harness this challenging environment to their benefit. Mr N K Maini, redefined VUCA as Vision, Understanding, Communication and Agility and urged the industry to strategize such that the adversity turns into an advantage.

During his inaugural address Mr Shankar, referring to volatility as intrinsic to human civilisation said that “While we have seen growth come to a standstill due to uncertainty and lack of confidence, the challenges for the future are equally daunting. Lack of availability of power, poor managerial bandwidth and low return on investments add to the challenge of unutilised capacity, especially for small Tier 2 and Tier 3 manufacturers. The industry has a lot more ground to cover and become cost competitive, while the Government needs to ensure a dependable and competitive ecosystem and infrastructure, the industry needs to focus on internal efficiencies and opportunities other than the conventional to keep their heads above water.”

At the event Mr Sudam Maitra, referred to VUCA as the ‘New Normal’. To mitigate volatility, MSMEs must strategically design a long term road map, have effective financial planning, prudently manage manpower, work smarter & leaner and focus on limited dedicated yet diversified customers without any compromise on quality. It is imperative that for the auto component industry to be globally competitive, the Tier-1s must hand hold Tier -2/3s to build their capabilities including technology and skilling of personnel.

Further, it is critical that the industry explores tools and best practices such as diversification to newer segments, globalisation, technology absorption, hedging forex, effective cash-flow management and continually innovate, along with working on concepts such as Practical Improvement in Sales and Marketing, improvising quality through innovation, better inventory management, re-examining suppliers credit processes and exploring external markets for increasing business returns to mitigate volatility.

On the occasion Mr Ramesh Suri, Vice President of ACMA said that “The purpose of this summit was to understand the dynamics of the Indian automotive market with focus on MSMEs, the factors affecting their de-growth and what could be the possible strategies to manage the volatility in the industry. The industry and the government will need to collaborate in helping companies manage the challenges especially handholding the Tier 2/3s, the weakest link in the entire automotive value chain”.

At the plenary sessions, the discussions revolved around the need for the auto component manufacturers to be innovative and being able to create higher value addition.

Source – Strategic Research Institute, Steel Guru

http://www.automobileguru.in

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