Rupee puts temporary brake on auto sector
The rupee appreciation against the dollar would have a mixed impact on the automotive industry.
By Meenakshi Verma & Chanchal Pal Chauhan, TNN |
While auto component players believe that it will erode their profitability to an extent, passenger car makers and two-wheeler makers feel it would not have a significant adverse impact.
Says Jagdish Khattar, managing director, Maruti Suzuki India, which has recently lined up an aggressive strategy for exports, "It will have some impact on exports."
"However hardening of rupee against dollar will also lead to some relief for auto makers as it will make imports of components cheaper."
Two-wheeler maker Bajaj Auto’s managing director Rajiv Bajaj believes that the hardening of rupee would not have a significant impact on the industry. “Rupee appreciation would not have a terribly significant impact at the moment. For brand-led sales likes our their exists a price elasticity to ensure profitability,” he said.
Companies like Korean maker Hyundai who are high on exports , had shifted to stable currencies for safer overseas trading. “On the long-term we will totally switch over to euro transaction to avoid any currency problems. Currently our small exports to Latin America and Africa are in dollars which will shift to Euro in the long-term,” a HMIL spokesperson said.
However auto component makers believe that the hardening of rupee will not only make them less competitive but will be a direct hit on their margins. Says A K Taneja, MD, Shriram Pistons, “The latest currency fluctuation would not hamper the export growth of the auto component industry, since most of the component makers are servicing long-term contracts. However it will directly hit the industry’s profit margins.”
The component industry believes not only will India loose business to low cost countries like China but it will also make long term contracts financially non-viable for the industry. “ The component industry is being asked by OEMs that they should factor in the impact of currency fluctuations while they are signing fresh contracts for component exports,” he added.
Said Arvind Dham , CMD, Amtek Auto,“Traditionally exports are more profitable for component makers.However the latest trading rates would hit exports and domestic markets profits at the same level.”
Says Jagdish Khattar, managing director, Maruti Suzuki India, which has recently lined up an aggressive strategy for exports, "It will have some impact on exports."
"However hardening of rupee against dollar will also lead to some relief for auto makers as it will make imports of components cheaper."
Two-wheeler maker Bajaj Auto’s managing director Rajiv Bajaj believes that the hardening of rupee would not have a significant impact on the industry. “Rupee appreciation would not have a terribly significant impact at the moment. For brand-led sales likes our their exists a price elasticity to ensure profitability,” he said.
Companies like Korean maker Hyundai who are high on exports , had shifted to stable currencies for safer overseas trading. “On the long-term we will totally switch over to euro transaction to avoid any currency problems. Currently our small exports to Latin America and Africa are in dollars which will shift to Euro in the long-term,” a HMIL spokesperson said.
However auto component makers believe that the hardening of rupee will not only make them less competitive but will be a direct hit on their margins. Says A K Taneja, MD, Shriram Pistons, “The latest currency fluctuation would not hamper the export growth of the auto component industry, since most of the component makers are servicing long-term contracts. However it will directly hit the industry’s profit margins.”
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The component industry believes not only will India loose business to low cost countries like China but it will also make long term contracts financially non-viable for the industry. “ The component industry is being asked by OEMs that they should factor in the impact of currency fluctuations while they are signing fresh contracts for component exports,” he added.
Said Arvind Dham , CMD, Amtek Auto,“Traditionally exports are more profitable for component makers.However the latest trading rates would hit exports and domestic markets profits at the same level.”
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