Other segments, including two-wheelers and commercial vehicles, also saw a sharp decrease in deliveries as the liquidity crisis facing non-banking financial companies
(NBFCs), distress in rural India, weak sentiment and an overall rise in the cost of ownership have prompted buyers to defer purchases.
Signaling a slowdown in consumption, as well as investment, India’s factory output entered negative territory in March after a gap of 21 months, contracting 0.1 per cent.
The impact has been more pronounced for smaller suppliers. Upkaar Singh Ahuja, chairman, Swan Automotive, a Ludhiana-based manufacturer of sheet metal parts for passenger vehicles and two-wheelers, said, “The situation is akin to what happened after the note ban of November 2016.”
To rein in the cost, Swan has been curtailing production to four or five days a week, depending on the schedule of its customers.
Owing to an uncertainty ahead, it has also postponed the plan to set up a new facility. Swan gets a big share of its revenues from Honda Motorcycle and Scooter India and Maruti Suzuki India. Both companies
have taken steep production cuts to align supply to demand.
Ahuja is not the only one. A proprietor at another auto component maker in the Pune-Chinchwad belt, which has Tata Motors as its key customer, had to let go of close to two dozen contract workers over the last six months following a slowdown in truck sales after implementation of the axle norms in November.
Ahuja and the other supplier reflect the predicament facing small suppliers as India’s auto industry grapples with the one of the worst slowdowns in many years.
Meanwhile, large suppliers that are not reliant on just a few manufacturers are better off. They are not revisiting investments or expansion just as yet. They remain optimistic of the tide to turn after the new government takes charge.
“Our wide customer base has helped,” said Nirmal K Minda, chairman Minda Industries, adding that from June he expects the trend to change for the better as political uncertainties end. But Minda, too, is cautious. “We are holding on to projects that have a larger payback period – say two years – and instead concentrating on the ones that have shorter pay backs," he added.
Yearning for growth
Few suppliers curtailing production to four or five days a week depending on the schedule of their customers
Long-term prospects for the industry remain buoyant
Willingness to invest, albeit with delay
Companies are investing in new areas like defence, electric vehicle, among others
Given uncertainty because of election and new regulatory norms, the industry feels 2019-20 would be tricky