Issues relating to shortage of key automotive components, which were supposed to be sorted out a month ago, will hit production even for the next two quarters, as slow ramp-up and discrepancies in tyre prices impact output.
Production of leading vehicle manufacturers, especially utility vehicles and commercial vehicles such as those from Mahindra & Mahindra, Tata Motors and Ashok Leyland, has suffered due to lack of adequate supply of components.
Maruti Suzuki and Hyundai Motor, the two biggest domestic carmakers have maintained that so far the crunch in parts supply hasn't hit production but analysts tracking the industry state that if vendors do not raise production, it could mean longer waiting periods for the car.
While M&M said it lost about 3,000 units in production of UVs in the past few months, Tata Motors Commercial Vehicle Unit President Ravi Pisharody blamed reasons ranging from power outages to slow production ramp-up by vendors for the short supply. "We are working with our suppliers, we keep updating our projections so they are mainly successful but there are shortages," Pisharody added.
R S Thakur, executive director & CEO, Tata Autocomp Systems, said, "We are working on seven-day-shifts for the past three months to meet the demand. It is true that component capacities are stretched but we are trying to resolve the problems." Taco is the component making arm of Tata Motors.
Recently, M&M President (Automotive and Farm Equipment Division) Pawan Goenka outlined three grey areas, namely casting, fuel injection parts and tyres, where the maximum crunch in supply is experienced.
Tyremakers, meanwhile state there is no shortage of tyre supply within the industry and that the matter is related to differences over prices of tyres between the tyre manufacturers and original equipment manufacturers.
Arnab Banerjee, executive director - sales, marketing and outsourcing, Ceat, said, "We do not believe there is any loss in supply of tyres in the local market. Since OEMs were not able to procure the tyres at a price which they were asking for, we could not sell it to them. Prices of rubber have skyrocketed, leading to a corresponding surge in tyre prices, which OEMs do not agree to."
The dependence on domestic tyre producers for procuring radial tyres, which is in limited supply, has forced companies like Chennai-based Ashok Leyland to approach the government and seek a tyre import licence. When contacted, a company spokesperson refused to comment on the production loss it faced due to the shortages.
Chinese truck tyres, which faced flak from the international community for allegedly compromising on quality, carry a price tag 20-30 per cent cheaper than Indian counterparts. At present, imports from China constitute more than 70 per cent of total tyre imports into the country.
According to today's rubber prices available from the Rubber Board, a kilogram of RSS-4 grade rubber is priced at Rs 180, whereas the same was sold for Rs 99 per kg same month last year. RSS-4 is the chief raw material used for making tyres in India.
An executive from auto industry body stated, "The issue is more of a commercial issue but is projected as a capacity issue. OEMs are demanding 25-30 per cent lower rates than the current prices. Despite the strike at the Apollo Tyres facility, there is very nominal impact of it on supplies. OEMs are not ready to pay the revised prices, although the rates of rubber have touched an all-time high."
Meanwhile, companies like Ceat are selling their produce in the international market for better realisations. "When we are getting better prices in the export market, why should we sell them at lower rates to Indian OEMs? The price realisation overseas is significantly higher than in the domestic market," added Banerjee.