[GTO]

Superb summary by indiaratings.co.in:

India Ratings expects moderate demand growth for automotive suppliers during 2013, borne out by the continued slow economic growth and weak signs of recovery in export markets. Aftermarkets can only help weather the impact of sluggish growth in original equipment manufactures’ (OEMs) automotive sales to some extent; however an expected pick-up in demand towards H213 would likely ease the pressures on the overall sector. India Ratings believes that the auto supplier industry is better positioned to handle the current slowdown compared with their 2008 position.

The export competitiveness of automotive suppliers, arising out of the weak INR, could only slightly benefit them as global automotive sales in key export markets such as Europe would remain weak in the near term. A further weakening of the INR could impact auto suppliers’ profitability as cost increases for imported components may be only partially compensated by OEMs and with a lag. Besides, firm commodity prices would stress cash flows.
However, a thrust on localisation would drive growth and profitability over the medium term. Many domestic automotive suppliers are focused on developing new products to benefit from localisation. This partly has also been driven by domestic capacity constraints in technology-oriented products and significant competition faced by suppliers in simple commoditised offerings from cheaper imports. These innovations can be a key differentiator in the long run but entail major investments for suppliers and have necessitated reliance on external funding sources.

The liquidity stress faced by OEMs could be passed down the value chain leading to longer payable period and higher working capital needs. This would drive up debt and prevent improvement in credit profiles in 2013. India Ratings also remain concerned about the impact of international trade agreements which could reduce its export competitiveness and intensify competition in the domestic industry over the medium term.

India Ratings-rated automotive suppliers include: Shriram Pistons and Rings Limited (‘IND AA-’/Stable), Hi-Tech Gears Limited (‘IND A’/Stable), Sandhar Technolgies Limited (‘IND A-’/Stable), Sterling Tools Limited (‘IND A’/Stable), and TVS Srichakra Limited (‘IND A-’/Stable).

The full report ‘2013 Outlook: Indian Automotive Suppliers’ is available at www.indiaratings.co.in.

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

[volkman10]

India Ratings & Research downgrades automobile industry to stable to negative.

http://economictimes.indiatimes.com/...w/21002552.cms

[chennai-indian]

I have already seen the negative impact of slowdown on Indian auto component industry. One Tier 1 supplier to TATA/Mahindra I know for example is going for extended maintenance shutdown this week due to lack of orders. Sad part is that the company will consider this as "leave" for the employees and will deduct days from the leave quota.

Another issue is that a lot of capital gets locked up in investments already made. The company spends a lot of money on dedicated tools and machinery based on projections from OEM's (vehicle manufacturers) and if and when the upturn comes, they are short of capital to invest.

[volkman10]

After Maruti, Mahindra's, now Tata and Toyota join in to cut production to keep pace with the slow market demand.



Cheers!

http://economictimes.indiatimes.com/...w/21028243.cms