The timing of capital expenditures faces pressures in the supply chain

Deploying the capital costs of car companies is stretching as the delivery time of equipment has increased significantly due to supply problems, says Rohit Nanda, CFO of Sona Comstar Group in collaboration with Autocar Professional. In some cases, the lead times of individual machines have doubled to 18 months or more, Nanda said (pictured above).

The company with Gurugram, which focuses on capital costs of around 900-1000 crore rupees, is currently expanding its capacity at three of its facilities in Pune, Manesara and Chennai. However, due to geopolitical uncertainty, the planned opening of transmission capacity in Pune at the end of March was postponed to the current quarter. The same applies to the Sona Comstar plant in Manesara, where plans to expand the capacity to assemble differentials have been affected. Sona Comstar’s engine manufacturing plant in Chennai for its EV programs is also in expansion mode, and here also roaring supplies and blocking in China could affect service life.

Sona Comstar, which has an order book of Rs 18,600 crore, is one of the leading suppliers of Level 1 high-end, mission-critical automotive systems and components such as differentials, differential transmissions, conventional and micro-hybrid starters, BSG, EV systems. traction motors and engine control units for automotive OEMs in the US, Europe, India and China for both electrified and non-electrified transmission segments.

Sona Comstar supplies its capital equipment primarily from Europe, Japan, and local countries. Manufacturers of capital equipment, in which orders were placed, in turn had to solve the problems of supply chains. These events also affected the outflow of funds from Sona Comstar, which last year was planned at 600 crore rupees and which was to be reduced to 450 crore rupees by mid-2-21. Signs that the final investment may barely reach the mark of 350 rupees.

Nanda, however, was quick to point out that “none of the company’s capital expenditure plans have been halted because the outflow of capital expenditures has just been delayed due to delays in time.” He also stressed that the events did not affect production plans, as buffers were retained when developing plans to increase capacity. For example, if Sona Comstar’s transmission business is currently operating at 85 per cent, then some provisions have been made to bring it to 90 per cent.

In addition, capacity estimates are typically based on six business days, giving companies the opportunity to even entertain the production line for one extra day of the week, although, as Nanda says, “not perfect”. “Overall, it hasn’t affected our production, and we don’t see it happening that way,” he says.

What is of immediate concern to Nanda and his OEM customers is the alarming rise in the number of Covid19 infections spreading in China. “In general, in the automotive industry, even if one component is not available, it slows down the entire production schedule,” says Nanda, even though he clarifies that at the company level, Sona Comstar itself has little need to find from China.