Crisil Ratings has predicted that the Indian automotive components sector would clock 10-12% growth in revenue in fiscal 2024.
This prediction is based on an analysis of the auto component companies rated by the company. These companies, rated by Crisil, account for half of the sector revenue.
According to Crisil Ratings, a 10-12% growth is quite possible, especially in view of the robust demand from original equipment manufacturers (OEMs) on the back of a high base of past fiscals. Also, the rating agency sees steady aftermarket demand. The robust domestic demand comes even as sluggishness continues on the export front, Crisil said.
“Continuing demand momentum, driven by OEMs, complemented by cost-efficiency measures by auto component manufacturers should drive up operating leverage. This, along with moderation in prices of key raw materials – albeit still high compared with pre-pandemic levels – will support operating margin return to the pre-pandemic level at 12.0-12.5% in fiscal 2024,” the Crisil report said.
“Revenue from OEMs is expected to grow 12-14% this fiscal, backed by continued strong demand from almost all segments barring tractors which had hit an all-time high last fiscal. Improving semiconductor availability will support supplies of passenger vehicles and premium motorcycles. Exports, the second-largest revenue contributor, will remain sluggish amid continuing headwinds in key markets in Asia, Africa and Latin America. Lastly, revenue from the aftermarket segment, which accounts for the balance, will grow at a steady 6-8%, supported by strong automotive sales in past fiscals,” a Crisil statement quoted Anuj Sethi, Senior Director, as saying.
In the wake of growth momentum, Crisil expects players with high exposure to engine and transmission components – accounting for 22% of the sector’s revenue – to continue diversifying their product basket by enhancing focus on electric vehicle (EV) components. This, along with focus on meeting PLI2-related commitments and capacity enhancements, would push up capital spending, Crisil said.
NB: Photo is representational; courtesy: Bosch India.
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