How Exposed Are Our Auto Ancilliaries?

In India the demand for passenger vehicles (PVs) and commercial vehicles (CVs) have declined by 2.2% and 14.5% respectively during August - October 2008. This has resulted in a slowdown in India's auto ancilliaries. From the above table it is observed that currently exports account for 20% of sales for Indian auto ancilliaries. The lion share of their sales goes to domestic market. As the market demand in most global auto markets have been pressurized, the auto ancilliaries having high exposure to domestic and global OEs are likely most susceptible to a decline in sales and profitability.

The data shown above reveals that the companies (like Exide, SKF India, Apollo Tyres, MRF) that have strong exposure to the domestic replacement market are relatively better-off to counter the market slowdown. However Chinese imports could be a threat for tyre companies. The vendors will reap benefits of the lower commodity prices and rupee depreciation in the near term but, it will be slightly offset by drop in realisations as the market demand is cooling down. Nevertheless domestic OEs (especially two-wheeler manufacturers) will likely benefit from lower component prices.