A Gloomy Picture Behind A Rosy One
Its a hunky dory picture for Indian car parts manufacturing companies now. Well in reality its a myth. The curtain is raised and story doesnt match the media recent reports on how the car components makers are making big margins. Its a saga of a squeezed margin no immediate scale and pressure.
Its only a few top auto component makers like Amtek Sona or Bharat Forge are leaping up on the sector the other side of the same business in hard bowled by stronger rupee which is declining profitability in the export.
Lets see what Automotive Components Manufacturers Association ACMA has to say: exports are estimated to grow at 15.8 while imports are likely to grow at more than double that rate 35percent this fiscal.
Post ASEAN level in 2008 the car component manufacturing industry have tried to reverse some duty since the tariff rates were said to decrease. But the expectation fell flat. President of ACMA further complaint: Our profits are shrinking. While the dollar debacle has cut our margins the flooding of imports from China and our free trade agreement FTA partner Thailand is making us uncompetitive. India has become a net importer of components. The pressure on prices and profitability with cost increase due to increase in higher interest rates is making us uncomfortable
Then which are markets booming against India? Not shockingly the vehicle manufacturers are looking at Chinese and other and Southeast Asian to get cheaper components.
The car parts industry in India is combating the import duties and getting clutch by the export tariffs. The president of Shriram Pistons Rings Ltd said: Skilled manpower development needs special emphasis. There is shortage of skilled work force and Indias advantage in developing lowcost components of global quality will be lost if the talent resource is not generated.
The entire industry is wobbling under the custom duty of 10 percent with a new duty coming down to 7.5 percent on a few selective products.
Its fine that the government carries our internal reforms before taking any decision on custom duties. Octroi entry tax toll tax and many interstate levies need to be removed while the implementation of uniform goods and services tax or GST to replace central sales tax will allow us to retain intrinsic competitiveness in the global trade added ACMA president further added.
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