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Auto parts sector expected to reach pre-Covid levels by festive season

India's auto parts industry expects to reach pre-Covid production levels by the upcoming festive season on the back of buoyant rural markets and lower base.

According to ACMA Director General Vinnie Mehta, deep-localisation drive as well as eventual conversion of pent-up demand into a sustainable off-take and normalisation of supply chains will further grow the visible 'green shoots' of the sector.

"The industry's performance is expected to return to pre-Covid levels by the festive season, almost returning to last year's levels," Mehta told IANS.

The auto component and vehicle industries are closely working together for 'deep-localisation' and import substitution, which will result in higher value addition by manufacturers, create demand and enhance productivity.

However, he was quick to cite the need to augment demand as fiscal measures to shore up supply side have worked well so far.

"While the supply side has been well addressed, in order to further revitalise the auto and auto component industry, there is an urgent need to create vehicular demand as also give thrust to exports," he said.

"Hence, we further expect the government to support the sector with relevant policies like scrappage and reduction in GST which will help combat the challenges of demand revival."

Besides, he pointed out the worrisome fact about the low urban demand in the current macro-economic picture.

"Buoyancy in rural markets, led by bountiful 'Rabi' crop, better agricultural support prices and now a healthy monsoon, has been a key driver in the automotive sector's revival so far," Mehta said.

"However, 'Bharat' cannot sustain India, we also need to focus attention on demand in urban India." Nevertheless, Mehta termed the Centre's focus on 'Atmanirbhar Bharat' scheme as being a major trigger for the industry to build global competitiveness.

"We can achieve an 'Atmanirbhar Bharat' only when a clear roadmap of 8 to 10 years is available, and economies of scale are achieved," he said.

"Interventions on the front of making our logistics, cost of capital, energy costs, among others comparable to those offered by our competitors will be critical in making our industry globally competitive."

Furthermore, he elaborated that overall supply chain seems to be gradually returning to normalcy.

"Availability of labour at this juncture is sufficient to meet the current production requirements, however ramping up could be stymied if adequate labour do not return. That apart, local lockdowns could also adversely impact production as movement of people becomes severely restricted and it is challenging for workforce to reach the factories," Mehta said.

In addition, he said the 'Unlock' phase has ushered in a faster recovery rate in the automotive sector than previously expected.

"We hope the recovery is not led alone by pent-up demand but is a sustained one," he added..