On the back of 11% slip in business for FY-20, the auto component industry is bracing for yet another year of steep decline as both domestic and export demand remains sluggish. In the Q4 call of FY-20, Bosch had said it does not expect the market to regain the previous peak before FY-24. So clearly, it is going to be a long hard road ahead for the company.
Reviewing the quarter, Bosch India MD Soumitra Bhattacharya said economic recovery for this year looks weak and global GDP is expected to contract sharply for FY-21. For India too, it has been a challenging phase, before Covid, the market was hit by a weakening economy.
“Indian economy is expected to see the sharpest contraction in 40 years and the GDP decline is expected around 4-5%. The auto industry is likely to be pushed back in certain segments to 2009-2010 levels. However, we see some positive signs in industry and either gradual recovery or strong demand in tractors and two wheelers, which is likely to sustain till the end of festive season,” added Bhattacharya.
Bosch was to execute Rs 24000 crore orders in the coming five years that though significantly eroded, can still be recovered with a recovery in the markets, Bhattacharya said.
The order book has come down to Rs 18000 crore due to lower volume. The order size is likely to again go up to the pre-Covid period if the market improves further, he hoped, Bhattacharya however did not define the timeline for recovering lost business.
Under this challenging market environment, the short term focus is on cost containment and conservation of cash said the senior management. So for FY-21, the company has halved its capex to about Rs 200 to Rs 250 crore.
Industry production guidance for FY21 for Bosch India after the March quarter results implies a decline of 12-47% across the vehicle segment. Sales fell 64% to Rs 992 crore in the June quarter following the sharp fall in volume in sales of vehicles due to lockdown. As a result, profit before tax without the exceptional item stood at Rs 330 crore.