Increase in auto parts exports likely.

After a flat year in export, the Indian auto component industry is expected to report a strong positive growth in exports during the current financial year, driven by recovery in global volumes. The exports of auto components remained flat at $3.8 billion during 2009-10 on account of the impact of the recession in the US and Europe. However, the exports are forecast to reach $4.75 billion by the end of this fiscal.

“With the depletion of inventories at the customers’ end, and with the start of a slow recovery in the triad markets, we expect growth in exports in the coming year. The focus on distant LCC sourcing is also increasing the exports. We expect the exports to be around $4.75 billion in 2010-11,” said Srivats Ram, chairman of the Automotive Component Manufacturers Association (ACMA).

In terms of geographic mix, 40 per cent of the auto component exports are going to Europe, 24 per cent to Asia and 22 per cent to North America. About 80 per cent of auto component exports are to vehicle manufacturers. Leading auto component firm Bharat Forge said exports continued to grow driven by recovery in off take from both US and European markets.

After a decline in auto sales in 2009, there has been a steady recovery in global volumes in 2010 led by China, Brazil and India and to a lesser extent the US, such that overall growth rate is expected to be in the positive territory over the short term. However, car sales growth in Western Europe is expected to remain negative in 2010 due to withdrawal of government scrappage incentives, pointed out a report by Icra.

In addition, the European debt crisis may also have a bearing on the overall economic recovery in the region impeding the availability of funding for financing arms of car companies and in the process slowing the recovery process in the European auto industry. This holds a considerable importance for the Indian component suppliers, as Europe and USA together account for over 60 per cent of component exports from India. A continued weak demand in these markets implies that utilisation rates of capacities at Indian suppliers’ end dedicated for serving overseas customers are likely to remain sub-optimal, it added.

Source : mydigitalfc.com