Exports help keep small biz afloat
A steady flow of export orders and the rebound in automobile sales after last year’s lockdown helped small and medium auto component makers emerge relatively unscathed from the disruptions caused by the second wave of the pandemic.
The second wave brought about a complete halt in production and sales of vehicles for the domestic market. However, decisions by several states to let factories run with limited capacity allowed auto parts makers weather the crisis much better than last year, said top industry executives.
Jagdeep Rangar, managing director, Stork Rubber Products Pvt. Ltd, a maker of rubber parts for vehicles, said while overall revenue of the smaller firms in this segment have dipped about 25% on an average in the last three years, the exports market remained a silver lining.
“We have a sizeable share of exports that has helped us stay alive and that’s what we are pursuing at the moment. Though there have been disruptions globally, export order has been quite steady,” said Rangar. Rangar said also that the impact of the second wave in the rural market might delay a recovery for the domestic automobile industry while availability of manpower might become an issue.
Automobile sales were hit first due to lockdown measures imposed in Maharashtra to contain the spread of the second wave. Other states followed suit from the second half of April.
“During the first wave last year, some of the automakers and tier one vendors extended help to the smaller partners in the supply chain. Then we received high orders from clients and were running short of resources to meet the orders since demand was really high. This year, the sentiment is not as low as last year since we have seen the recovery,” said Sanjay Malhotra, managing director, Jumps Auto Industries Pvt Ltd.
Malhotra said that last year, Micro, small and medium enterprises (MSMEs) gained from the emergency credit line guarantee scheme announced by the government but this year, no such scheme has been announced so far.
However, most companies have managed to garner some cash in the last six to eight months through increased sales, while smaller firms have benefited from lower variable cost structures.
“Be it tier one manufacturers or smaller ones, everyone is growing due to exports. If you don’t have 30-40% of exports, then there is a problem. We also grew because truck and bus sales in America, Europe are booming now,” said Sunil Arora, managing director, Abilities India Pistons and Rings.
According to bankers, automobile dealers and parts makers have been slightly better off this time compared to last year and expect that a moratorium on loan repayments and debt recast offered last year have helped the sector prepare better for the second wave.