Exports help small biz tide over 2nd wave
Continuous flow of exports and an extended recovery period following the first phase of spate of lockdowns last year allowed small and medium auto component makers to emerge relatively unscathed from the disruptions caused by the second wave of pandemic.
While the second wave brought about a complete halt in sales and production of vehicles for the domestic market, the decision by several state governments to allow manufacturers to operate their factories with limited capacity during this allowed these companies to weather the crisis much better than last year, where revenues in most cases had dropped to near zero, senior industry executives told Mint. Micro, Small & Medium Enterprises (MSME) constitute the bulk of India’s auto component manufacturing industry and have been among the worst impacted by the pandemic due to continuing disruptions that include shortage of raw materials and manpower as well as finances.
According to Jagdeep Rangar, managing director, Stork Rubber Products Pvt Ltd which manufactures rubber components for vehicles, while the overall revenue of the smaller companies in this segment have declined by around 25% on an average in the last three years due to the slowdown and factors like increase in prices of raw materials and lack of availability of finance, the export market has remained the silver lining throughout.
“We have a sizeable share of exports that has helped us stay alive and that’s what we are pursuing at the moment. Though there have been disruptions globally, export order has been quite steady,” said Rangar.
He also added that impact of the second wave in the rural market might delay the recovery for the industry and availability of manpower might become an issue.
Vehicle sales were hit initially due to lockdown measures imposed in Maharashtra to contain the spread of covid. Similar steps were implemented in other parts of the country from the second half of April, which further impacted sales and production.
“During the first wave last year some of the Automakers and tier one vendors extended help to the smaller partners in the supply chain. Then we received high orders from clients and were running short of resources to meet the orders since demand was really high. This year the sentiment is not as low as last since we have seen the recovery,” said Sanjay Malhotra, managing director, Jumps Auto Industries Pvt Ltd.
He further added that last year MSMES benefited from the emergency credit line scheme but this year there none, but most companies have generated come cash in the last 6-8 months and smaller companies have lower variable cost structure which has helped.
“Be it tier one manufacturers or smaller ones everyone is growing due to exports. If you don’t have 30-40% of exports, then there is a problem. We also grew because of exports since truck and bus sales in America Europe are booming now,” said Sunil Arora, managing director, Abilities India Pistons and Rings.