Auto, consumer companies boost imports on supply fears

Automobile and consumer goods makers in India are beefing up their imports to stock up on raw materials, components and finished goods for the upcoming festive season as rising Covid cases in China fan fears of new restrictions that could hobble global supplies. Electronic companies said they are pushing up imports by 30-35% despite low demand and production cuts in the last two months due to inflation, fearing stricter restrictions in China and an increase in shipping rates that could adversely impact their festive season inventory.

In the passenger vehicle segment, demand remains strong despite inflationary pressures, but customers may have to wait longer if the supply situation worsens, industry executives said. Two of the country's largest carmakers, Maruti Suzuki and Hyundai Motor India, said while supply constraints have eased compared to last year, visibility remains low on availability of components, especially semiconductors, due to global uncertainties.

The two companies together have bookings of nearly half a million units, with the order book expected to swell further in the upcoming festive period.

"For the first time in the Indian automobile industry, we have had two consecutive quarters with sales of over nine lakh units. But there are supply-side issues. While demand parameters remain strong, the situation will become clearer once production increases," said Shashank Srivastava, senior executive director (marketing and sales) at Maruti Suzuki India.

China's Covid cases have again spiralled with newer restrictions thanks to Beijing's zero Covid policy in six cities affecting some 30 million people. This has again sent shivers down with companies fearing fresh onslaught on supply-chains apart from impacting stock markets in several countries. Martin Schwenk, managing director & CEO at Mercedes Benz India, said there was no impact of the macro-economic issues on car demand in India, which remains strong.

"The pressure is clearly on the supply chain in which we are so far not capable of letting the problems behind us. We have constraints which cause production delays, from semiconductor parts missing to single parts missing. We are not able to adhere to our production schedules," said Schwenk.

Consumer electronics and smartphone companies expect the festive season will revive sales that have slowed down in the last few months.

Avneet Singh Marwah, chief executive of SPPL, which manufactures Kodak, Thomson and Blaupunkt brands, said the company has expanded import of components by 35% more than the usual plans due to Covid surge in China. "We had expected prices to drop, but it now looks unlikely as the fresh surge may increase shipping rates," he said.