Indian Auto Parts Suppliers Cut Capex

India’s auto supply industry has suspended capital investments worth at least $1.5 billion because of slumping car sales, according to the Automotive Component Manufacturers Assn.

ACMA Director General Vinnie Mehta adds that capacity utilization among suppliers has plunged from 80% a year ago to roughly 50% now. Retail vehicle sales are down 30%.

Analysts blame the industry’s slump on rising vehicle prices caused by India’s move to tougher BS6 emission standards and the country’s intent to eventually phase out internal combustion engines.

Deal Tracker Venture Intelligence says private equity investment in the Indian auto supplier industry has plummeted to $29 million in the fiscal year that began April 1 compared with $712 million worth of transactions in the same period a year ago.

India’s auto components sector has expanded by an average 14% annually over the past six years, including a 15% jump in the last fiscal year to $57 billion, ACMA says. The industry employs 5 million people and contributes 2.3% to India’s gross domestic product.