Auto Component Industry to See Moderate Growth this Fiscal: ICRA
![Auto Component Industry to See Moderate Growth this Fiscal: ICRA Auto Component Industry to See Moderate Growth this Fiscal: ICRA](https://www.deccanchronicle.com/h-upload/2024/07/11/1823412-moderate.webp)
Pune: The disruption along the Red Sea route, which has resulted in a surge in container rates by 2-3 times in YTD CY2024 compared to CY2023, and increment of shipping time by over 2 weeks is likely to impact margins of the auto component industry over the next few quarters, credit ratings agency ICRA said on Thursday.
It said close to two-thirds of the auto component exports are made to North America and Europe, and one-third of the imports is made from these regions.
The operating margins are set for a year-on-year improvement of around 50 basis-points in FY2025, benefitting from better operating leverage, higher content per vehicle, and value additions, while remaining exposed to any sharp volatility in commodity prices and foreign exchange rates, it said.
ICRA expects the growth in revenues of the Indian auto component industry to ease to 5-7 per cent this fiscal, from the highs of around 14 per cent in FY 2023-24.
“Demand from domestic original equipment manufacturers (OEM) constitutes over 50 per cent of sales for the Indian auto component industry and the pace of growth in the segment is expected to moderate in FY2025,” said Vinutaa S, Vice President and Sector Head for corporate ratings at ICRA.
He said these growth projections are based on the sample of 46 auto ancillaries with aggregate annual revenues of over Rs 3,00,000 crore in FY2024.
The aging of vehicles and increased sales of used vehicles in global markets are also expected to aid in the export of components for the replacement segment in overseas markets, according to the ratings agency.
On investments by auto component suppliers, Vinutaa added, "ICRA's interaction with large auto component suppliers indicates that the industry has incurred a capex of over Rs 20,000 crore in FY2024 and is estimated to spend another Rs 20,000 to Rs 25,000 crore in FY2025."
The incremental investments would be made towards new products, product development for committed platforms, and development of advanced technology and EV components, apart from capex for capacity enhancements and upcoming regulatory changes.