VEHICLE PARTS MAKERS SEE UPTICK IN DEMAND

 Auto parts makers expect to close this fiscal on a brighter note, with domestic sales showing signs of recovery. However, they are not celebrating just yet as the growth of this quarter may be difficult to sustain.
 
Sunil Kaul, senior vice president and chief operating officer of Behr India, which has clients such as Tata Motors, Mahindra & Mahindra and General Motors, said, "We are seeing a 30% quarter-on-quarter increase in orders. The market sentiment is slowly improving with the stimulus packages and the softening of interest rates on loans."
 
After cutting inventories in the December quarter, automakers had to increase their component purchases this quarter to meet the increase in demand for vehicles.
Indian automobile manufacturers sold 1.04 million vehicles in February, up 10.61% from 942,955 units sold in the same period last year.
 
Insiders say the depreciation benefit of 50% for vehicles purchased this quarter also boosted sales. MK Khera, managing director, Kinetic Engineering Ltd, said, "A lot of sales, particularly in the commercial vehicles (CV) segment, are happening as people look to avail tax benefits before the fiscal end." The company services CV makers such as Tata Motors, Force Motors and Carraro. Parts makers say their inventory levels have eased as well. Kinetic Engineering, for instance, keeps inventory levels at 6-7% compared with near 15% levels in December.
 
Though there is no particular automobile segment driving sales, some companies are doing well and are looking to push up sales before the fiscal ends. "Firms like Hero Honda and Maruti Suzuki are boosting demand.The fiscal is coming to a close and these companies are gunning for sales, which is helping our sales indirectly," said Anmol Jain, director, Lumax Auto Technologies Ltd.

The company has seen a topline growth of 20% since October and expects to end this fiscal at a flat growth of Rs 500 crore in revenues. The order book of part makers is also getting healthier with automakers looking to increase their capacity utilisation and their working days. Ashok Leyland Ltd, for example, has increased the number of production days at its factories to five a week from three after its sales, at 3,245 units, jumped 33% in February compared with January.
 
RN Rao, special director (sales and marketing), Ashok Leyland, said, "Auto component companies will also benefit in the next few months thanks to the bus procurement package announced by the government. Tenders are already out and about 15,000 buses will be procured by the 60-odd city corporations."
 
Analysts,are wondering if the January- March pick-up is an aberration.
"The auto industry will take at least two years to see the kind of growth it did until recently and this will indirectly hit parts makers. Also with rupee depreciating, input costs are impacted and margins strained. Export markets like the US and Europe will not recover anytime soon and therefore, parts makers must not read too much into this quarter's small boost," said an analyst, requesting anonymity.