India’s auto parts industry to halve this financial year

Article by Christian Andrei, on September 2, 2011

For this financial year, the revenue growth for India's auto parts industry will probably be cut by as much as half due to the slowdown in domestic auto sales and a year-ago base that’s higher, according to the apex industry body.

For 2011-2012, the supplier sector is predicted to increase by 12% to 15% due to moderating business sentiment, a significant drop compared to the 33% growth seen in the previous fiscal year, when revenue increased to $39.9 billion due to a surge in auto sales. Srivatsa Ram, president of Automotive Components Manufacturers Association (ACMA), said that lower growth is expected.

Car sales were affected as credit has become more expensive due to the persistently high inflation in India, which has the second-fastest in the auto market worldwide after China, according to Autonews. Car sales in India have fallen 16% in July, the first decline in 2.5 years, after surging by 30% in 2010.

In the quarterly period that ended June, India’s economy expanded by 7.7%, its weakest in six quarters. It’s predicted to be even weaker due to the impact of interest rate increases, weak global conditions, and high inflation.

Since March 2010, the Reserve Bank of India has raised interest rates a total of 11 times. Several analysts expect the central bank to raise rates by an additional 25 basis points in its policy review on Sept. 16. For the Indian car market for FY2012 to 10% to 12%, the Society of Indian Automobile Manufacturers has reduced its growth estimate from 16% to 18%, as the demand has been down due to higher interest rates and increasing vehicle costs.

Topics: india

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