The Indian machine tool industry’s hope of achieving phenomenal growth between 2008 and 2010 seems to have gone awry.
The slowdown in the industrial sector and the ongoing recession has adversely affected the annual growth of the segment. The machine tool industry has already witnessed around 20% to 30% decline in its business volumes this year.
With the sector’s sales growth estimated to be 15% less than the previous year, small and medium enterprises (SMEs)-forming the core of the industry-are feeling the heat.
Machine tools industry is largely linked to the auto sector as more than 45% of the production from this sector goes to the auto part industries, ancillary units and auto majors.
Thus, the demand for machine tools depends on the orders placed by commercial vehicle manufacturers, original equipment manufacturers (OEMs) and auto component units.
As a result, the slump in the auto industry has resulted in a severe blow to the business of small scale machine tools manufacturing units. The steep fall in demand for auto parts in the global and domestic market have triggered reduced sales growth for these small manufacturing units.
Some of them have reported around 50% fall in their revenue growth during the last three months.
The future of the Indian machine tool industry, which had been growing at an average of 30% over the last five years, is further looking gloomy. It is anticipated that it will remain flat during the current financial year.
Moreover, with the global auto market showing no signs of recovery yet, the machine tools sector is unlikely to see any major improvement.
In conclusion, to stay afloat during these difficult times, small units should implement new strategies and expand into new areas. Diversifying into segments like aerospace, power, construction, alternative energy, plastics and medical implants manufacturing would help small industries to reduce their dependence on the automotive industry.
Machine tools sector should also adopt new technology to help upgrade its manufacturing process and cater to the rising demand in high-tech areas like aerospace, defense and earth moving equipment sector.