Auto parts export pick up, may grow 8% in FY22

According to S&P, light vehicle sales are expected to increase by over 10% and 15% in Europe and the US, respectively. So, most domestic auto-component manufacturers are planning to increase their capital expenditure,” said Crisil Research director Hetal Gandhi.

Chennai: With factory utilisation dropping from 85% in March to 70% in April and 55% in May due to local lockdowns, auto parts makers — including Wheels India, Sundram Fasteners, Wabco, Pricol and Rane Madras — are banking on export orders to keep production facilities busy and maintain bottom lines.

Therefore, exports are driving capex spends in FY22. “In fiscal 2022, export demand is projected to increase by 6-8% on the back of recovery in key destinations. According to S&P, light vehicle sales are expected to increase by over 10% and 15% in Europe and the US, respectively. So, most domestic auto-component manufacturers are planning to increase their capital expenditure,” said Crisil Research director Hetal Gandhi.

Already, the export pick-up is showing. India Ratings & Research associate director Shruti Saboo said, “CMIE data shows that from December 2020 onwards, monthly exports are higher than the last 3 years. In February, exports were up 20% YoY. Even as the second wave hit India, the EU and the US have recovered very well.” The performance is reflected by financial results. Wabco’s exports rose 70% in Q4FY21 as against around 8% in Q2, and Sundram Fasteners was up 33% as against a 10.5% fall in Q2. Rane Madras saw its Q4 international sales rise 74%, though it went up only 6% in Q2FY21. In some of these companies, new customers brought higher business. Rane, for instance, saw “commencement of supplies to new customer programme for steering products”. In others, export demand is driving new capex spends. Wabco India is lining up Rs 100-crore capex for FY21, a significant portion of which will be spent on a new export-focused factory in Mahindra World City near Chennai. “We have an export order pipeline of two months and strong demand from US and Europe,” said Wabco India MD P Kaniappan. Wabco exports mechanical & electronic compressors and braking solutions. Same is the case for Wheels India, which is ramping up its export plant. “This year, a significant part of our Rs 100-crore capex will be spent on increasing capacity in the newly commissioned cast aluminium wheel plant at Thervoy Kandigai (Tamil Nadu). Last year, the company began its first shipment of cast aluminium wheels to the US from this plant,” said Wheels India MD Srivats Ram.

https://auto.economictimes.indiatimes.com/news/industry/auto-parts-export-pick-up-may-grow-8-in-fy22/83204690