Published by Economic Times August 02, 2013
The auto industry in India is going through one of the worst phases in the recent past. With many OEMs announcing frequent block closure of their plants, coupled with the need to correct for excess components inventory in the supply chain, the resultant effect is de-growth of sales for most component vendors.
Although, the OEM market has been under a slump, the After Market has witnessed an unparalleled increase in demand, triggered primarily through replacements of worn out parts. It has emerged as ‘recession proof’ segment, since the number of vehicles in use has been on a continuous increase year on year. Moreover, most ‘first-fit’component vendors can sell their products in After Market.
The After Market is also financially lucrative, since the average gross contributions of the same parts are higher than what component vendors get from the OEMs. However, over the years of rapid growth, the component manufacturers have neglected this segment. The reason is not strategic but operational in nature, since component manufacturers are expected to expedite orders placed by the OEMs. Since, missing supplies to OEM assembly lines can have huge ramifications on future business, the capacity of component manufacturers, in the short term, is mostly diverted to serve the OEM assembly plants. The residual capacity is made available to After Market, thereby making the supply intermittent and highly unreliable.