Mumbai, India (PressExposure) February 18, 2009 -- The year 2008 was a dismal year for the small scale auto part makers and original equipment manufacturers (OEMs) in India as sales and export volumes dropped drastically and several companies reported losses. This year too, there seems to be no signs of market recovery as car sales continue to reflect a downward trend. Domestic car sales witnessed a fall of 3.2% in January to 110,212 units from a year earlier, marking a sixth consecutive drop in last seven months.
The export of auto parts has plummeted drastically as economic uncertainties and liquidity crunch have taken a toll on the global auto market. Moreover, with the domestic car market further projected to post a flat growth in the coming months, the auto component sector is bracing up for tough times ahead. Nearly 25% of auto companies in the Indian small and medium enterprise (SME) segment have already become 'non-performing assetsâ (NPAs) due to the deepening economic crisis. Thousands of ancillary units in the domestic auto sector are planning to close their operations as the economic downturn continues to worsen.
To prevent the auto sector crisis from aggravating further, there is a need for ensuring proper implementation of several corrective measures. Introduction of tax incentives to OEMs and tier-I suppliers for sub-contracting auto parts from small industrial units can help bring down the cost of production besides boosting the sales of the latter. Government-backed financial schemes and programmes need to be initiated to help small scale auto part suppliers to conduct market research, upgrade their capabilities and develop appropriate product portfolio. Development of a better infrastructure and promotion of industrial clusters for OEMs and auto SMEs can also enhance their competitiveness and ensure the smooth flow of best practices between larger global companies and local firms.
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