It has been a challenging few months for factories in Chennai's Ambattur Industrial Estate. In 2020, the manufacturing enclave, home to hundreds of tiny auto component manufacturers, dealt with the nationwide lockdown and the subsequent labour crunch. Today these component plants that saw sales dip by 35 percent last year are not yet back to pre-COVID levels.

"Even this year, we are not looking at a huge growth in sales," says AN Sujeesh, proprietor, Sri Hari Industries. "We expect to recover a bit by March, but we may still have a drop of 10 to 15 percent in sales. Our bottom line is hit very, badly because of various reasons."

When the pandemic broke out two years ago, it couldn’t have come at a more inconvenient time for automobile OEMs already reeling from tepid domestic sales and oversupply. That’s also why the last two years have been more than challenging for smaller auto-component makers who have seen order books fall apart and supply chains interrupted amid mounting losses.

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Today, as far as challenges to business go, COVID is only the tip of the iceberg. A sharp spike in steel, aluminium and copper prices between April and December, a supply chain logjam and the semiconductor shortage has meant that MSMEs are making fewer auto components today.

"If you look at numbers in both, two-wheelers and four-wheelers, if I was making 100 components before this crisis, now I have orders only for 70 components," says AN Gireeshan, president of Ambattur Industrial Estate Manufacturers Association (AIEMA)

To make matters worse, the Chennai floods from two months ago gravely impacted 350 MSMEs in the Ambattur Industrial Estate area, leaving behind losses of Rs 100 crore. Given this series of unfortunate events, there is a comprehensive list of expectations that auto component plants have from the upcoming union budget.

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The first of these demands is a list of incentives to invest in R&D for electric vehicle manufacturing, which they hope would, in turn, encourage the manufacturing of components and lesser reliance on imports. Auto component firms also want the government to introduce a mandatory buy-back scheme to be implemented by OEMs, in order to encourage the recycling of materials and components.

Further, speedy GST and service-tax audits coupled with lesser red tape surrounding the dissolution of companies, they say, say are the need of the hour. Auto component MSMEs are also batting for a stimulus package for micro industries that employ 10 to 20 workers, which have borne the brunt of economic distress.

Outside Chennai, in neighboring Gummidipoondi, there's one demand that MSMEs say could make or break their very existence — a requirement-based debt re-structuring model to tide over a pronounced liquidity crisis in the sector.

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"Whenever you go to bankers, they go by your last year’s balance sheet. My last year’s balance sheet is zero. If you go by the previous year’s balance sheet, for most MSMEs, it is negative," says V Sriram, director, VS Pressure Vessels and Gas Projects, "All my savings are gone, there is no fresh funding from the bank, and restructuring is also not possible as I have already had it done."

It does not take an expert to tell you that MSMEs find themselves at a crossroads of sorts in the post-COVID world. With wafer-thin profits maxed out in procuring high-cost raw materials and the credit tap firmly shut, a new lease of life for the auto component sector is required now more than ever before.

(Edited by : Jomy Jos Pullokaran)

First Published:Jan 20, 2022 10:20 PM IST