New Delhi, April 14 Hero Honda commissioning its largest plant in Haridwar at a time of declining sales in the sector has not changed the mood among auto ancillary companies, which are on caution mode. Even as the company inaugurated its plant recently, most of the auto part companies are yet to set up their facilities in the region.

Many of the companies such as Lumax, Minda, Sriram Pistons and Rings and Amtek Auto, among others, are considering supplies from their existing facilities rather than making fresh investments in the State.

“We already have spare capacity at our existing plants from where we are supplying to Tata Motors and Bajaj. We are reviewing and streamlining our investment plans in the current scenario of declining sales,” said Mr Deepak Jain, Executive Director, Lumax Industries Ltd.

Similarly, Minda Industries Ltd would also cater to the Honda plant from its other units. “At present, we would be supplying from our other plants located nearby,” said Mr Vivek Jindal, Executive Director, Minda Industries Ltd, Batteries Division.

Amtek Auto too, does not seem keen to commit fresh investments. “We would not make any new investments for this plant. As of now, we would be supplying from our existing plants in Gurgaon or Ahmednagar,” said Mr Santosh Singhi, CFO, Amtek Auto Ltd.

Hero Honda initially expects 40 of the component companies to be located in the industrial park and over the next two years 100 vendors to be present in the premises. Hero Honda, which is producing bikes in the excise free zone in Haridwar, would have to pay higher input costs if it has to procure raw material from outside the State. This would make it difficult for the company to produce at a competitive price.

“If the vendors do not co-locate in the vendor park then the Modvat benefit is foregone. In the absence of which there is an additional cost to be borne by the company,” said Mr Mahentesh Sabarad, Senior Vice-President, Research, Centrum Broking India Ltd.