High raw material prices hit MSMEs in the automobile sector

Jayakumar, who runs an MSME unit at the SIDCO Industrial Estate here, used to take up machining for foundries that supply to the automobile sector. The last two months have seen a slump in orders and was temporarily shut ahead of Deepavali.

“I do not know when the auto sector will revive. Hence, rather than keeping the unit idle, we are trying to do orders for other sectors as we need to repay loans and meet other fixed costs,” he said.

Almost 50% of the MSME units at the Kurichi SIDCO Industrial Estate here supply to the automobile sector and they are all hit by a sharp drop in production. “We do orders for foundries who in turn supply to a major commercial vehicle manufacturer. Our supplies are lying as stocks with the vehicle manufacturer and they have not revived production. Acute shortage of semiconductors and steep hike in raw material prices have hit the automobile sector,” he says.

A foundry owner here said the workers used to get 12 hours work a day. Now, there is no overtime and they work only for eight hours. The ancillary units also suffer when production reduces in foundries.

M.V. Ramesh Babu, president of Coimbatore District Small Industries Association, said about 30% of MSMEs in Coimbatore cater to the automobile sector. High prices of raw materials and shortage in availability of semiconductors has hit the vehicle manufacturers and the ancillary units and the MSMEs feel the impact. “Nearly 40% of production is down in October and November. Several units declare holiday on Saturday and Sunday, do not give overtime to workers, and there are no jobs for contract workers,” he says.

Vikram Mohan, Managing Director of Pricol, which is an automotive component and solutions provider, said semiconductor shortage is so acute that if an order is placed now, the automobile sector customer gets supply after 18 months. Further, the prices have also increased manifold.

With huge demand for semiconductors from sectors such as mobile phones, computers, and consumer durables, the automobile sector is hit by shortage, he explains.

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