Auto component sector revenue to be down 30-35% in two years: ACMA

The turnover of the automotive component industry during FY20 declined 11.7 per cent to Rs 3.49 lakh crore ($49.2 billion) from the previous year, the Automotive Component Manufacturers Association (ACMA) said on August 19.

ACMA president Deepak Jain said that there will be about 25-40 percent degrowth this year and there will be a 30-35 percent degrowth in two years.

The ACMA, the apex body representing the auto parts sector, released the findings of its Industry Performance Review for FY20 on Wednesday.

“The revenues in June quarter was at 15 percent level compared to the March quarter. Month-on-month, there is an improvement and we see this improving till the festive period. Nevertheless, over a two-year period, we are seeing a 30-35 percent degrowth,” he said.

The turnover of the auto component aftermarket (the segment where components are sold in the market freely, through shops) at Rs 69,381 crore ($9.8 billion) in FY20 remained stable, while sales to original equipment manufacturers in the domestic market declined 17 per cent to Rs 2.87 lakh crore ($40.5 billion), both over the previous year.

In FY20, imports and exports declined by 11.4 percent and 3.2 percent, respectively. Imports stood at Rs 1.09 lakh crore ($15.4 billion) and exports at Rs 1.02 lakh crore ($14.5 billion).

“The automotive industry faced a prolonged slowdown in FY20, with vehicle sales in all segments plummeting significantly. Subdued vehicle demand, investments made for transition from BS-IV to BS-VI emission norms, liquidity crunch, lack of clarity on policy for electrification of vehicles and slowdown in key export markets, among others, had an adverse impact on the performance of the components sector as also on its expansion plans,” added Jain.

In the wake of the financial stress, the government, in June, approved a Rs 20,000-crore aid package to the Micro, Small and Medium Enterprise (MSME) sector.

Several Tier -III companies from the auto component sector also benefited from this initiative. Timely release of payments from the automakers helped tide over the crunch.

The revival in demand for vehicles since the second half of June has resulted in an uptick in demand for auto parts. Several two-wheelers and car makers have witnessed demand jumping back to the pre-COVID levels, he said.

“With the unlocking of the economy, growth seems to be returning to the industry with uptick in vehicle consumption, especially in the two-wheeler, passenger vehicle and the tractor segments, although sales of commercial vehicles continue to be challenged,” added Jain.

To allow for uninterrupted production in the automotive value chain, despite local lockdowns, ACMA has recommended to the government to accord ‘continuous production industry’ status to the automotive industry.