India’s auto component makers will possibly see the benefits of the government’s stimulus package and the Reserve Bank of India’s (RBI) rate reductions only three or four months hence when their customers clear surplus inventory, officials said.
On 2nd January, India disclosed its second fiscal stimulus package in a month to boost a slowing economy. The RBI also cut key lending and borrowing rates and also eased banks’ reserve requirements.
Top auto makers such as Tata Motors and Mahindra & Mahindra have reduced production and temporarily closed down some plants in December to offset a steep fall in demand, hurting demand for vendors.
Overall car sales in India dropped by nearly a fifth in November, the worst fall in eight years, data from the Society of Indian Automobile Manufacturers showed.
The government’s stimulus dealings would force banks to lend more, though benefits would be obvious only after April, said an official at Exide industries, India’s top auto and industrial battery maker.
Others such as tractors and auto parts maker Escorts Ltd are not so hopeful as lending by public sector banks was yet to pick up despite the government’s continued efforts.
Tyremakers, battling slowing demand amid rising rubber costs for the better part of 2008, also remained skeptical about the benefits of the recent package.
“Unless the overall economic activity and manufacturing sector picks up, these measures will not have a major impact,” said A.S. Mehta director marketing at JK Tyre & Industries.
“The basic issue is new buying must take place, especially in the commercial vehicles space and in turn demand will come for tyres,” Mehta said, adding this was likely to happen in the April-June quarter.