Auto components sector to grow 7-9% in FY25, driven by 2W and PV demand: Crisil
India's
automotive components
sector is expected to record 7–9 per cent revenue growth in the current fiscal, similar to the previous year, driven by continued demand from two-wheelers (2Ws) and passenger vehicles (PVs), particularly utility vehicles. These two segments account for nearly half of the sector's overall revenue, according to a
Crisil Ratings
analysis.
A moderate rise in commercial vehicle and tractor sales, which contribute around 17 per cent of revenue, is expected to provide additional support. The aftermarket segment, contributing around 15 per cent to overall revenue, is projected to grow steadily at 5–7 per cent.
However, muted demand for new vehicles in the US and Europe — markets that account for approximately 60 per cent of India's auto component exports — poses challenges.
Operating margins for the sector are projected to remain stable at 12–12.5 per cent, aided by the increasing share of high-margin products such as ADAS modules, infotainment systems, and braking components. Lower input costs, especially of steel, aluminium and plastics — key materials for structural, weight reduction and interior applications — are expected to support profitability. However, potential tariff increases by the US could impact margins for companies with significant exposure to that market.
OEM demand to lead 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,' said Poonam Upadhyay, Director, Crisil Ratings.
'The aftermarket segment will log a steady 6–7 per cent growth, supported by an ageing vehicle base. Export growth, however, will moderate to 7–8 per cent amid weak demand for internal combustion engine vehicles and a deceleration in electric vehicle adoption across the US and Europe.'
Although the US contributes around 5% to total sector revenue, it accounts for 28 per cent of export earnings and remains the fastest-growing market for Indian auto components. A planned 25% tariff on Chinese-origin electric vehicles and components imported into the US could negatively affect Indian exporters dependent on this geography.
Anil More, Associate Director, Crisil Ratings, noted, 'The share of high-margin, technology-intensive components now accounts for ~27 per cent of the segment's revenue, up from ~18% before Covid-19, driven by premiumisation and stricter emission norms. This structural shift, along with easing input costs, will help players sustain operating margins at 12–12.5 per cent this fiscal despite the global headwinds. However, companies with high export dependence on the US market may see margins compress 125–150 basis points amid limited ability to pass on tariffs.'
Capex and financial position remain steady
Capital expenditure in the sector is expected to remain elevated at approximately Rs 22,000 crore, focused on electric vehicle capabilities, automation, and precision manufacturing. This investment aligns with evolving vehicle models, many of which now include EV variants. However, with EVs making up only about 4 per cent of PV volumes, the contribution to revenue remains low.
The credit outlook for the sector is stable, underpinned by strong cash flows and limited debt addition. Key financial ratios are expected to remain consistent with last fiscal, with interest coverage and debt-to-EBITDA at around 9 times and 1.3 times, respectively.
Domestic OEM demand trends, raw material and freight cost movements, global shifts in vehicle demand, and the impact of reciprocal US tariffs on exports will be factors to watch in the coming quarters.
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