CV makers face production hurdle as suppliers hold off on expansion

constraints will continue to be a hindrance for commercial vehicle manufacturers as tier-II suppliers hold back from making additional investments to ramp up production capacity, citing uncertainty in long-term demand and business cycle risks inherent to the segment.

Tier-II suppliers manufacture components such as castings, bearings and forgings, which are used by tier-I vendors, who are direct suppliers of parts to original equipment manufacturers (OEMs) such as Tata Motors Ltd and Mahindra and Mahindra Ltd.

Component manufacturers are shying away from making long-term investments because the market scenario post the implementation of Bharat Stage VI (BS VI) emission norms in April 2020 is uncertain, according to a senior executive at a Mumbai-based bearings manufacturer.

“As vehicle prices are set to rise post BS VI, the management is not keen on making long-term investments as the demand scenario is not clear,” the executive said on condition of anonymity. The government’s “lopsided” electrification drive and the prospect of high levels of unutilized capacity in case of an economic lull are depressing sentiments, the executive added.

The company usually plans its investments depending on the projected returns for the next four-five years.

As commercial vehicle sales picked up pace during the second half of fiscal 2018, the sudden upswing in demand left component manufacturers across the board in a tizzy, as they could not immediately ramp up capacities to required levels, said OEMs.

MUMBAI:Capacity