Declining European Auto Market A Big Blow To Indian Parts Makers

Indian automotive component manufacturers are experiencing significant setbacks due to declining demand in the European market, compelling several companies to shut down their European Union (EU) facilities and express concerns about future prospects, says a report by Express Drives.

New vehicle registrations across Europe decreased by 2 per cent year-on-year during the first quarter, giving way to plant closures and workforce reductions among automakers and their component suppliers. The situation is further complicated by potential export difficulties to the US following President Donald Trump's recent tariff actions.

Europe Is Key Market For Indian Auto Component Makers

Europe, including the UK, serves as a major destination for Indian automotive parts producers, with numerous manufacturing facilities supplying prominent brands such as Volkswagen, Stellantis, Daimler, Renault, Ford, and General Motors.

Component exports from India to Europe constituted approximately 32.5 per cent of total parts exports during the 2023-24 fiscal year. Companies including Motherson, Bharat Forge, Endurance, and Sona Comstar maintain significant exposure to the European Union through local manufacturing operations.

Apollo Tyres Closing Netherlands Factory

On April 25, an Apollo Tyres subsidiary in the Netherlands initiated proceedings to discontinue tire production at its Enschede facility. The company attributed this decision to escalating costs stemming from macroeconomic disruptions, substantial increases in energy and labor expenses, and decreasing demand for Spacemaster and Agri tires.

Apollo Tyres stated that competition from low-cost manufacturers has created pricing pressures that have rendered operations uncompetitive. The company concluded that "The high-cost situation is expected to continue, therefore, long-term profitable production at Enschede is not in any way feasible."

Widespread Challenges

"The European automotive industry is facing challenges of rising costs, transition to electric vehicles and competition from China. Renowned European automakers announced plant closures that sent shock waves through the industry," SP Shukla, chairman of CIE Automotive India (formerly Mahindra CIE) was quoted as saying in the annual report statement. 

European markets account for approximately 32 per cent of CIE Automotive's sales.

Multiple Risk Factors

Ambit Capital, assessing risks for Samvardhana Motherson (SAMIL), noted: "There has been an over 10 per cent decline in automotive volumes in the US and the EU due to tariffs. There has also been a substantial increase in market share of Chinese players in the EU market." 

Around 38 per cent of SAMIL's revenue comes from Europe.

Last week, SAMIL announced it would wind down operations at its Judenbach plant in Germany, which it had acquired through its purchase of Dr Schneider Group in 2023. The company characterized this as a planned closure that would not impact its financial position.

Analysts following Pune-based Bharat Forge indicate that weakening demand coupled with the growing adoption of electric vehicles in Europe presents significant challenges for the company. Bharat Forge maintains considerable exposure to Europe's heavy-duty truck market, which has been experiencing contracting demand.