The sector is also expected to invest in capacity enhancements and upcoming regulatory changes
PUNE: The auto component industry is likely to spend Rs 25,000 - Rs 30,000 crore for capacity expansion and localization, including electric vehicle (EV) parts in FY2026, said rating agency ICRA on Thursday.
The sector is also expected to invest in capacity enhancements and upcoming regulatory changes.
At present, only 30-40 per cent of the EV supply chain is localized, so further localization will attract significant capex spend.
So far there has been substantial localization on in traction motors, control units and battery, ICRA noted, adding that battery cells, which constitute around 40 per cent of vehicle cost, are still entirely imported.
“The relatively low localization level gives rise to manufacturing opportunities for domestic auto component suppliers,” ICRA report pointed out.
“The industry is estimated to spend Rs 15,000 crore to Rs 20,000 crore in FY2025 and another Rs 25,000 crore to Rs 30,000 crore in FY2026,” said Vinutaa S, Vice President and Sector Head – Corporate Ratings at ICRA.
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, she pointed out.
The rating agency said it expects the revenue growth of the Indian auto component industry (represented by a sample of 46 auto ancillaries with aggregate annual revenues of over Rs 3 lakh crore in FY2024) to ease to 7-9 per cent in the ongoing fiscal and 8-10 per cent in the next financial year (FY2026), from the highs of 14 per cent in FY2024.
"Demand from domestic Original Equipment Manufacturers (OEMs), which constitutes over half of the industry revenues, is estimated to grow by 7-9 per cent in FY2025 and 8-10per cent in FY2026," said Vinutaa.
Part of the growth would stem from premiumization of components and higher value addition, she noted.
Growth in replacement demand is pegged at 5-7 per cent in FY2025 and 7-9 per cent in FY2026, driven by an increase in vehicle parc, higher average age of vehicles/used car purchases, preventive maintenance and growth in organized spare parts, among other reasons.
"Exports, which account for close to 30 per cent of the industry's revenues, are likely to be impacted by subdued vehicle registration growth in the target markets," said Vinutaa.
However, factors like rising supplies to new platforms because of vendor diversification initiatives by global OEMs/Tier-I and higher value addition, partly stemming from an increase in outsourcing, augur well for Indian auto component suppliers, she added.
