Auto Parts Sector Likely To Witness 7-9% Growth

India's automotive components industry is likely to maintain a 7-9 per cent revenue growth rate in the current fiscal year, matching last year's performance, according to a recent analysis by Crisil Ratings. This growth will be primarily driven by sustained demand from the two-wheeler and passenger vehicle segments, particularly utility vehicles, which together represent almost half of the sector's overall revenue.

However, the industry faces challenges from sluggish demand for new vehicles in American and European markets, which together comprise approximately 60 per cent of India's auto component exports.

The commercial vehicle and tractor markets, contributing roughly 17 per cent of industry revenue, are expected to see moderate sales increases that will provide additional momentum. 

Meanwhile, the aftermarket segment, which accounts for about 15 per cent of total revenue, is forecast to grow at a steady 5-7 per cent rate.

Operating margins across the sector are expected to remain stable at 12-12.5 per cent, supported by an increasing proportion of high-margin products including Advanced Driver Assistance System (ADAS) modules, infotainment systems, and braking components. Lower costs for key materials such as steel, aluminum, and plastics -- essential for structural elements, weight reduction, and interior applications -- should help sustain profitability. 

However, potential tariff increases by the US could impact margins for companies with significant exposure to that market.

OEM Demand For Growth

"Demand from automotive OEMs, contributing two-thirds of total revenue, is expected to grow 8-9 per cent this fiscal, with value outpacing volume on rising safety, emission and electronic content, especially in PVs and 2Ws," Poonam Upadhyay, Director, Crisil Ratings, said in a statement.

While the US represents approximately 5 per cent of the sector's total revenue, it accounts for 28 per cent of export earnings and remains the fastest-growing market for Indian auto components. 

A proposed 25 per cent tariff on Chinese-origin electric vehicles and components imported into the US could adversely affect Indian exporters who rely heavily on this region.