Things are not looking particularly rosy for the Indian auto as well as the auto ancillary industry. As inflation has stayed firm, the central bank has not been enthused about cutting interest rates. Thus a combination of high interest rates and steep rise in fuel prices has played a hand in dampening demand. Companies have also been facing pressure on the margin front. This is due to rising raw material costs and steep rupee depreciation. Plus, the market leader Maruti Suzuki's troubles at the manufacturing plant at Manesar have only piled on the woes.
But despite these near term headwinds, auto companies have not really cut back. They have been investing to keep up the pace of new product launches. These developments will be mirrored in the performance of auto ancillaries as well. The sector is cyclical. So, despite some near term hiccups, the long term story remains intact as the government lays emphasis on ramping up infrastructure (especially roads). What is more, the Heavy Industries Minister Praful Patel also holds a favourable view on the sector. He expects the auto as well as the auto parts industry to touch US$ 145 bn by 2016.
But despite these near term headwinds, auto companies have not really cut back. They have been investing to keep up the pace of new product launches. These developments will be mirrored in the performance of auto ancillaries as well. The sector is cyclical. So, despite some near term hiccups, the long term story remains intact as the government lays emphasis on ramping up infrastructure (especially roads). What is more, the Heavy Industries Minister Praful Patel also holds a favourable view on the sector. He expects the auto as well as the auto parts industry to touch US$ 145 bn by 2016.
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