Notwithstanding the recent measures to stimulate the economy and provide liquidity to the system, the auto hub of Chakan and Pune in Maharashtra are still reeling under the impact of slow off take of automobiles in the market.
Auto companies and component manufacturers said that the festive season may clear some unsold inventory before BS VI emission norms kick in. There is a feeling that things would be normal by mid 2020. Till then, the hope is that focus on R&D would rise and cost cutting would spur agility.
Despite all the bad news around the sector, companies that have focussed on exports and bagged new customers have managed to offset poor domestic sales.
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Stating that sales have been under pressure for the past few months, Mercedes-Benz India MD and CEO Martin Schwenk said “We adjusted our production many months in advance when we saw we might run into some issues. Now we are confident with the reduced plans.”
“On the dealer side, liquidity was a bigger problem. We supported them through our Daimler Financial Services where we could. We reduced dealers’ stocks. The problem has not gone [away] yet,” he added.
He said that in September, the company saw 25% higher traffic and enquiries at showrooms compared to a slump month such as August. “We may not be able to meet the 2018 numbers. Our Q3 will be below the Q3 of last year. We expect better sales in the festive season,” he said.
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While most component makers have been impacted severely, Flash Electronics (India) Pvt. Ltd., which supplies electric and electronic components and gear boxes to two-wheeler and four-wheeler companies, said it remained insulated due to its product expansion and export strategy.
‘Not hit by slowdown’
“We are not affected by the slowdown. Even this year, we have grown. This is not a slowdown but a correction. This correction happens every 6-7 years. This year, it has been a little more significant for reasons that are not exactly known,” said Sanjeev Vasdev, MD, Flash Electronics.
Adding that market sentiment was still weak, he said as leading OEMs have been saddled with high stock, October production plans were pretty subdued or more similar to August or September of this year.
“The situation is not going to return to normal soon. It will take about 8 to 10 months before things can really become normal. The customers need more clarity on electric vehicles and BS VI before making any purchases,” Mr. Vasdev said.
He said it was possible for the company to remain insulated as it had acquired new customers and had set up two manufacturing units for forgings and gears which are now producing at full steam.
“Pitched against my business plan, [my numbers may be] down but year-on-year, I will grow in revenue.”
Auto component firms like Kinetic Engineering Ltd. have also managed to offset domestic losses through increased export income. “The last two quarters have seen significant slowdown,” said Chaitanya Koranne, CEO, Kinetic Engineering.
“We have been lucky that one of our customers, Renault, has launched a new vehicle and they have propped up the volume a little,” he said. He said it would take about two quarters more for normal to return.
“Since 50-60% of our revenue come from exports, we will be at the same level as last year,” he added.
Viraj Kalyani, founder and CEO, Kalyani Studio, which develops high tech productivity enhancement equipment for OEMs, said he had seen a lot of interest from OEMs for his products in the last six months.
“There has not been a tapering of interest or demand from customers. In challenging times, OEMs look at improving efficiency. They are more invested in improving their products to be globally competitive,” he said.