Weakening Rupee affects auto component firm's margins

It is not just the auto companies who are suffering from the depreciating rupee, the Auto components suppliers are badly hit too. The auto component makers like Wheels India and Setco Automotive report that in their sort of business, they depend largely on the imports from other countries. So, a rupee exchange value plays an important role in their business. According to an organising body similar to SIAM for Auto companies, the Automobile Component Manufacturer’s Association (ACMA), the auto component companies import as much as 20% from the other markets.

The passenger cars manufacturers like Toyota India and General Motors are finding an easy way out in comparison by passing their losses to the consumers by enforcing a price hike on their models up to 3%. On the other hand they are simply asking the middle men like the auto component companies to absorb their share of affected profit margins. While on one side they are affected by the falling rupee, the demand for the components from the auto majors is also on a downside. Why will the car manufacturers place orders for the components from the auto component companies when the inventories at their sales outlets are literally getting stale. So, the overall demand for the components is also reduced when the passenger car sales are affected drastically seeing a slip by 0.50% in the first half of the FY2011-2012, ie the April-November period.

There is nothing much anybody can do over the higher interest rates and the petrol prices , where the car manufacturers and the consumers or the auto component companies are taking the brunt alike. So, Jayant Davar of Sandhar Locking Devices says that the fluctuations in the rupee value might be passed over to an extent, but what can be the solution for the general negative factors influencing the car industry. ness. According to an organising body similar to SIAM for Auto companies, the Automobile Component Manufacturer’s Association (ACMA), the auto component companies import as much as 20% from the other markets. The passenger cars manufacturers like Toyota India and General Motors are finding an easy way out in comparison by passing their losses to the consumers by enforcing a price hike on their models up to 3%. On the other hand they are simply asking the middle men like the auto component companies to absorb their share of affected profit margins.

While on one side they are affected by the falling rupee, the demand for the components from the auto majors is also on a downside. Why will the car manufacturers place orders for the components from the auto component companies when the inventories at their sales outlets are literally getting stale. So, the overall demand for the components is also reduced when the passenger car sales are affected drastically seeing a slip by 0.50% in the first half of the FY2011-2012, ie the April-November period. There is nothing much anybody can do over the higher interest rates and the petrol prices , where the car manufacturers and the consumers or the auto component companies are taking the brunt alike. So, Jayant Davar of Sandhar Locking Devices says that the fluctuations in the rupee value might be passed over to an extent, but what can be the solution for the general negative factors influencing the car industry.

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