The Hindu : Tamil Nadu News : Automobile sector goes on the reverse gear

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Sunday, Aug 03, 2008
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Tamil Nadu

Tamil Nadu

Automobile sector goes on the reverse gear

— File photo: R.M. Rajarathinam

At the crossroads: A bus body building facility at Karur.

Inflation and prices of essentials and materials becoming dearer know no boundaries. They impact both the affluent and the poor, only the degree of loss varies. In some cases, higher the investment or expenditure, deeper is the pierce and the injury is more painful.

One such sector that has found itself marooned by rising prices in all its factors is the automobile industry and more specifically the heavy vehicle operators. If operating a bus or a lorry was seen as a mark of affluence elsewhere, then it is not so here in the district where a large number of middle of middle class people have been owning and operating heavy vehicles for more than a few decades now.

They achieved quite a measure of success yet there is a long list of persons who took a deep breath, plunged into the world of automobiles only to hit the quicksand bottom to suffer irreversible injuries in the form of losses. In some instances miscalculation was the reason for their losses previously, a slew of factors have of late upset the applecart of a majority of heavy vehicle operators.

Prices of fuel, steel, wood, vehicles, spares, tyres, lubricants and labour among other things have sharply risen to edge out the industry from the list of lucrative ventures. In the past couple of years many individuals and even established firms anticipated losses and quit the automobile scene or where forced out after a heavy pasting.

Over the last year or two all finance firms that fund the vehicles have forced upward revision in their interest rates multiple times. The internal rate of return has risen from 11 to 15 percentage points in the period in the case of new vehicle loans while it has crept to 26 per cent in loans for used vehicles, according to a local financier.

Fuel is the most obvious issue of concern to the motor operators. “While the price of petrol has gone up 16 per cent in the last one year, diesel has become dearer by 11.5 per cent in the same period. Lubricants have become costlier by about 35 per cent,” according to the Karur District Petroleum Dealers’ Association president A. S. Janardhanam.

Prices of spares

Price of spares has increased sharply adding to the burden of the motor operators in the same period. “Steel-based spares have become costly by about 30 per cent while the rubber-based spares that did not see any price rise in the previous three years have seen a 30 per cent hike in prices. Similar is the case precision items the prices of which have climbed up by 15 to 20 per cent. Worse still in some essential items, a new price advisory arrives once in two months,” says Thiyagarajan, a leading automobile spare parts dealer.

It is sad to note that only non-dependent automobile operators (those who use the heavy goods vehicles for own or captive use and do not ply them for rent or freight) have been staying afloat. Others have fallen by the wayside, Mr. Thiyagarajan adds.

Tyres, our main source of concern, have pinched our hands, points out B. Baburam, manager of a reputed Karur-based logistics company. A pair of new tyres of regular dimension s for a bus or lorry used to be sold for Rs.19,000 to Rs.20,000 about a year or two back. Now the same grade and mark of tyres cost Rs.27,000, he adds.

Citing mounting prices, manufacturers too have jacked up their prices steeply. A class of vehicle that sold for Rs.11.50 lakh in April 2007 costs Rs.12.40 lakh now.

Similarly, a 10-wheel chassis of a lorry cost Rs.10.50 lakh then costs Rs.11.66 lakh now, according to a dealer of heavy goods and passenger vehicles in Tiruchi.

Likewise the cost of body-building, be it a bus coach or a lorry, has gone up by more than 12 per cent in the last year or so. That applies for regular and luxury coaches in the case of buses that involved a lot of steel and aluminum work as also lorry body making that consumed wood significantly. The cost of fitting a wooden frame on a 10-wheeled Taurus chassis has gone up from Rs.2 lakh in 2007 to Rs.2.55 lakh or even Rs.2.95 lakh now, points out J. Sahayaraj, a lorry labour body builder in Tiruchengode, Namakkal district.

It is in these circumstances that the bus operators are forced to contend with State-advised fares while the lorry operators have to make do with less remunerative freight rates. “Kindly do not speak of profit margins in the motor industry now. Frankly speaking we operate lorries with freight rates bare enough to meet the Equated Monthly Instalment demands of the finance firms. Mounting dues have forced many bankers to take back possession of a large number of vehicles financed,” says G. Gopalasamy, a transporter.

Harried goods and passenger transport vehicle owners do not see any immediate turn around in their fortunes any sooner. What they expect is a sympathetic government policy that takes into account the reality of the moment and device policies that does not leave the industry in the lurch. Any adverse impact is only passed on to the end users __ the public.

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