Why is auto ancillary paddling slower than auto ind?

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Why is auto ancillary paddling slower than auto ind?

The booming auto sector undoubtedly has pushed the auto ancillary industry on the growth path.

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The booming auto sector undoubtedly has pushed the auto ancillary industry on the growth path. Evidently, the fortunes of the auto ancillary sector are linked to the auto sector's growth. The auto ancillary demand is directly impacted by a change in the demand pattern in cars, two-wheelers or commercial vehicles. In India Replacement demand accounts for close to 57% of total demand, while OEMs ( Original Equipment Manufacturer) account for 27%. The balance is met from exports. 

According to a report by The Automotive Component Manufacturers Association of India, (ACMA), the Automotive Component Industry's output amounted for the financial year 2005-06 was US$ 10 billion with a growth rate of 15 % against financial year 2004-2005.

The industry has been exporting around 18% of its output and growing at the rate of 28%. In the year 2005-06, industry has exported US$ 1.8 billion versus US$ 1.4 billion in year 2004-2005, the report said. According to a McKinsey report, the Indian ancillary industry has the potential to achieve exports of $25 billion (Rs 1,15,750 crore) over the next decade.

However, despite the promise, the industry has not performed as well as the auto industry. Between September 26, 2005 and 2006, the share price in auto industry grew by 67% compared to the 38% recorded by the auto ancillary industry. According to our data of 34 companies under the auto ancillary industry that are listed on the BSE, only 13 companies have recorded a gain in their Price and Market Capitalization.

The top performing stock is Exide Industry in the auto ancillary sector, having registered a gain of over 95% in the one year period between September 26 2005-2006. In the auto industry, Moneycontrol has taken a list of 15 companies, and only 5 stocks have given negative returns during the period under consideration.

List of Price, Market Cap of auto ancillary industry on Page 2

List of Price, Market Cap of auto industry: One Page 3