INDIA: Parts shortage affecting output - report
Automakers including Toyota and Nissan Motor have invested a combined $4bn in India over the past three years, setting up new plants and boosting capacity at existing factories. Nissan India started building the new Micra on 24 May
The inability of some autoparts suppliers to keep up with growing sales of locally-assembled cars is annoying would-be buyers, a media report said. The news came as the Automotive Component Manufacturers Association of India said business grew 22% in fiscal 2009/2010 on a turnover of US$22bn, a tally expected to increase to $26bn this fiscal year.
Bloomberg News quoted a Volkswagen Polo buyer complaining of waiting three months for his new car with no firm delivery date yet in site and said Maruti Suzuki and Hyundai Motor India, the country's two biggest carmakers, also have waiting lists for some models as a shortage of batteries, engine castings and other parts forces automakers to curb production in Asia’s third largest automotive market.
Tata Motors is importing tyres from China after local component suppliers failed to anticipate a surge of more than 30% in Indian car sales this year, the report added.
“At least for the next three to four months, the problems won’t get resolved,” Pawan Goenka, head of the Society of Indian Automotive Manufacturers and president of SUV and utility vehicle maker Mahindra & Mahindra, told Bloomberg.
Goenka said Mahindra made 12% fewer vehicles than it wanted to in the quarter ended June because of the parts shortage Maruti has waiting lists of as much as a month for its Swift and Dzire models and Anil Dua, the company’s marketing chief, said Hero Honda Motors, India's largest motorcycle maker, couldn’t build as many as 80,000 motorbikes in the second quarter.
The shortage of parts and a consumption boom stoked by a doubling of per-capita income over the past eight years mean that Indian car buyers face industry-wide waiting lists for the first time in more than a decade, the report said. Makers of steering wheels, bumpers and headlamps are rushing to boost production and build plants to meet the surge in demand.
“The partsmakers were caught by surprise,” IHS Automotive India managing director Deepesh Rathore said. “The loss of sales will lead to a loss of profit for automakers.”
Maruti has asked suppliers to boost investments after facing shortages of bumpers, tires and batteries, CEO Shinzo Nakanishi said. Tata began buying Chinese tyres as Indian suppliers couldn’t meet its needs, spokesman Debasis Ray told the news agency.
“The supply of tires has been occasionally disrupted,” said Volkswagen India spokesman Kurt Rippholz. “That’s affecting all carmakers, not only VW.”
The carmaker has re-shaped production to better cope with supply interruptions, he said. Hyundai’s India operations have also suffered from the industywide tyre shortage, according to managing director HW Park.
“In India, there is a unique problem of undercapacity,” Intelligence Automotive Asia's London-based managing director Ashvin Chotai said. “The entire supply industry has been overcautious.”
The lack of capacity is likely to persist for some time as machines for making components have to be custom-made and then installed in plants, Sanjeev Varma, a senior adviser at Duff & Phelps in Novi, Michigan, told Bloomberg.
Nationwide, partsmakers plan to spend as much as $2.5bn in 2010 and may invest $30bn by 2020 to boost production, according to Jayant Davar, president of the Automotive Components Manufacturers Association of India. Concerns about how much automakers will pay for parts amid rising wages and higher steel costs have deterred investment, he said.
“If we are assured that the pricing will be fair, then the increase in capacity may happen faster,” he said.
Indian car sales are forecast to touch 1.71m units this year, up from 1.53m last year, Pawan Goenka, president of SIAM, said last month. Total sales of cars and SUVs will likely reach 2.19m units, he added. Annual sales may reach 3m by 2015, doubling from last year, the group has said.
Automakers including Toyota and Nissan Motor have invested a combined $4bn in India over the past three years, setting up new plants and boosting capacity at existing factories, Blomberg noted.
Reviewing the autoparts industry's performance for fiscal 2009-10, Automotive Component Manufacturers Association of India president Jayant Davar said with business sentiment gaining momentum and consumption of finished vehicles growing steadily, the auto component industry in fiscal 2010-11 expected to see better than 18% growth.
''Exports owing to slow recovery in the US and Western Europe remained flat at $3.8bn but imports crossed $8bn, growing 20% over the previous fiscal year,'' Davar said at a press conference.
He said the first quarter for 2010-11 had significant growth of over 30%.
The review said Europe accounted for more than 40% of exports, followed by Asia and North America at 24 and 22%, respectively, Kyodo News reported.
Davar said the industry added $1.7bn in new capacity last fiscal year.
The review said cumulative investment in the auto component sector in India is now at $9bn and another $2bn is expected to be invested next fiscal year.