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Japanese earthquake - Indian auto makers shift track after jerk
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Friday, 25 Mar 2011

BS reported that with Japan still reeling under the March 11 earthquake, subsequent tsunami and nuclear crisis, auto makers in India are looking at other countries where Japanese suppliers have facilities, to source raw materials and components and prevent a slowdown in Indian automotive industry.

As per report, though all major Japan based original equipment manufacturers claim the twin disasters are not likely to affect operations over the next few weeks, concerns persist on raw materials and components, once the buffer stocks are exhausted.

An industry source told BS that “Some OEMs have initiated talks with facilities of Japanese suppliers in other countries to source components.”

Auto Component Manufacturers Association president Mr Srivats Ram agreed that “A considerable proportion of sourcing is done from suppliers in Japan by Indian automobile manufacturers. Most of them have inventory for the next two to four weeks. However, beyond that contingency plans have to be put in place, if production fails to resume normally in the country.”

A senior executive at an industry body said that “The issue is that even if a supplier is unaffected, the sub supplier should be able to source materials to him. No one has a clear picture of the extent of damage in Japan. Even if OEMs talk to supplier facilities in other countries, the unit has to have surplus capacity to deliver orders.”

With disruptions likely to persist in rationing power to the industry, after the meltdown of the nuclear plants in Fukushima, production work is unlikely to resume normally for some time in Japan. Delayed consignments of components stand to affect automobile production in India as well.

Mr VG Ramakrishnan senior director, Frost & Sullivan said that “Electronic parts for the automotive industry are heavily imported from Japan. Even if factories resume production work, availability of power is a matter of concern for industries there. Companies like Maruti, Honda and Toyota who account for over 50% share in the Indian market, all have suppliers there. If Maruti faces disruption in supply, there would definitely be a slowdown in the automotive sector in India.”

According to data available with ACMA, components worth over USD 1.2 billion are imported by Indian automobile manufacturers every year from suppliers in Japan. India is projected to import components worth around USD 10 billion in this financial year. Leading auto makers like Maruti Suzuki India, Toyota Kirloskar Motor, Nissan Motors and Honda Siel Cars India source components directly or indirectly through vendors from Japan.

(Sourced from BS)

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