Credit Crisis in India Hits Auto Factories

author image Satish Kalepu
Friday 01 May 2009, 00:00 AM

The credit crisis is yet not over. The projected growth in the auto sector has been scaled down which has resulted in under utilization of capactity by 40 percent. There have been nearly flat domestic sales since past one year now and the exports have also slowed down considerably. The $5 billion investments done by the auto companies have started to pinch the auto makers as these investments have failed to deliver the expected ROI.

Although top two auto makers Maruti Suzuki and Hyundai are moderately hurt with their capacities lying partially unutilised, the major effect is being experienced by Honda Siel Cars India, Ford India, GM India and Mahidnra Renault Logan.

Even the auto component manufacturers are hurt by the ongoing slowdown in the market. SKF India, manufacturers of lubrication systems and mechatronics has cut down its production by 30 percent in last three months. "We have been producing 30% less for the last three months and that is because when the economy was strong, we were running very fast and suddenly the tap shut. So there has been a fair amount of inventory that has built up," said Managing Director Rakesh Makhija. AB SKF is the Swedish company which is the largest manufacturer of bearings in the world. Bearing contribute nearly 90 percent of the revenues to its Indian arm.

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