Will benefit only if excise cuts on cars and SUVs are retained by incoming govt
The excise duty cuts announced in the interim Budgettriggered a sigh of relief in the Indian automotive industry, which has been in the grip of a demand slump over the past two years that hurt not only OEMs (original equipment manufacturers) but component suppliers as well.
However, since the duty cuts are valid only until the regular budget is presented by the new finance minister after the forthcoming general elections, manufacturers of auto components are uncertain about future demand from OEMs.
OEMs are expected to clear their inventories on a priority basis if demand surges, but parts suppliers say they will benefit only when auto companies resume operating at optimum capacity.
Vikas Jain, president of the Gurgaon Chamber of Commerce and Industry, told Business Standard that the cascading effect of tepid demand for four-wheelers and commercial vehicles has been quite apparent on auto ancillaries in the Delhi NCR region: “The OEMs have not been able to consolidate their sub-vendors. Volumes have shrunk and margins of small and medium enterprises (SMEs) have been squeezed. Many small units in the NCR cluster have become unviable and those who have multi-location units (operating simultaneously from the NCR and hill states offering tax incentives) have discontinued operations in the NCR.”