Mumbai: The buoyancy in the Indian automobile market has put makers of auto components in a tight spot as they struggle to keep pace with rising demand.
The rampant shortage of auto parts—blamed on anything from power shortages, inaccurate sales forecasts and a lack of competition—has in turn curbed to some extent the auto sector’s fast growth.
The mismatch in demand and supply is most pronounced for casting components, say auto makers.
Photo: Ramesh Pathania / Mint
Casting components are critical as these are used in engines and transmission parts in an automobile.
Even Hinduja Foundries Ltd, one of India’s biggest makers of casting components and a supplier to clients such as Tata Motors Ltd, Hyundai Motor India Ltd and Mahindra and Mahindra Ltd (M&M), is struggling to meet demand.
“There’s a sudden increase in the order book for fully engineered casting parts,” said Bala Swaminathan, group president technology, Hinduja Group and a director on the board of Hinduja Foundries.
Automakers produced 2.7 million vehicles in April-May, a 33% growth over a year ago.
The unanticipated growth has caught suppliers off guard, some of whom are still recovering from the bruises of the slowdown of 2008-09.
Rajesh Jejurikar, chief executive at M&M’s automotive division, said the shortage of key parts resulted in production losses in April and May. “We could have sold couple of thousand more vehicles,” he said, adding that more than anything else “it’s an opportunity loss.”
Some of the inability of auto parts makers to keep pace is blamed on the power shortages in many regions. Making casting components is power-intensive, and frequent electricity cuts in Maharashtra, Punjab and other states have hurt production, said Jejurikar.
Hinduja Foundries’ Swaminathan said steel and aluminium require temperatures as high as 1,300-1,500 degrees Centigrade to melt. Long, unscheduled power cuts during peak hours cools the furnaces, hurting output.
To tide over this, the Chennai-based company is looking to establish captive power units that can generate 3-6MW of power. For production during non-peak hours, the firm will continue to depend on the state government, he said.
Hinduja Foundries will also ramp up its casting capacity from 80,000 tonnes to at least 100,000 tonnes by the end of the year, Swaminathan said.
Not all auto parts makers are as willing to invest. M&M’s Jejurikar said one reason for the parts shortage was the reluctance of components makers, wary of the demand sustaining, to invest in production.
V.G. Ramakrishnan, senior director, automotive and transportation, at consulting firm Frost and Sullivan, said the parts shortage is also a function of the lack of serious competition in the segment. “The industry has been highly fragmented with a very few large-scale players,” he said.
Ramakrishnan also blamed the inability of auto makers to give accurate sales forecasts.
A. Maitra, sourcing head at Maruti Suzuki India Ltd, said the country’s largest car maker saw an unprecedented growth in sales in the April to June quarter, suprising both the company and its parts suppliers.
Typically, car sales are low in the first quarter of a fiscal year and pick up pace towards the last three months.
Maitra said Maruti hasn’t faced any production loss due to the parts shortage, but added, “It’s a tight situation for smaller casting components”, transmission, for instance.
He expects the situation to ease in a month or two as capacities are ramped up.
A Tata Motors spokesman, too, said the firm hasn’t faced production losses but is closely monitoring the issue.