Automobile Slowdown Hits Component Manufacturers In Chennai

In a clear sign of slowdown hitting the automobile industry, car sales declined by 26 per cent last month compared to May 2018. Car showrooms are bearing a huge inventory which has hit car production too with many automobile makers applying brakes on their roll out. As a cascading effect in Chennai, the Detroit of India, auto component manufacturers are resorting to partial shutdown and temporary lay offs.

C Raju, director in Arihanth Forgings - a factory in Chennai - says there has been a 40 per cent fall in demand for auto components in the last three months following a slump in vehicle sales. He now operates only seventy per cent of his machines.

"The production is down by 30 per cent, we are managing by staggered working pattern. Our potential efficiency now is at 70 per cent," he told NDTV.

Not far away in Ambathur, Balachander, the CEO of Delta Control Systems feels lucky. Though, domestic demand has taken a hit, exports keep him in good stead. However, many in the industry, he says, have laid off workers temporarily. He says, "Everybody is pinning hopes on the Budget. There may be a sudden upsurge also. It's very difficult to get qualified people now. May be many have reduced the number of hours, reduced the number of machines they run and have redeployed people to other work what they've been outsourcing."

The Society of Indian Automobile Manufacturers, or SIAM, says car sales has dropped by 26 per cent in May compared to last year. Passenger vehicles sale fell by 20 per cent and overall vehicle production is down by nearly 8 per cent.

Experts say many have postponed buying their first car due to better metro connectivity in cities, cheaper app-based cabs and traffic congestion. The auto industry, too, is treading cautiously. From April next year, vehicles ought to conform to Bharat VI emission norms and there is a growing focus on electric vehicles too.

"We urge the government to reduce the basic GST rate to 18 per cent from 28 per cent in the auto sector," says Vishnu Mathur, director general, SIAM.

While automotive component manufacturers are certainly facing the heat of the industry's slowdown, many hope the upcoming Budget would address this and set the ball rolling, quite literally.