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Time of India
21-05-2025
- Automotive
- Time of India
Automotive component sector likely to clock 7-9% revenue growth in FY26: Crisil
Domestic automotive component sector is expected to clock 7-9 per cent revenue growth this fiscal, mirroring last fiscal, driven by sustained demand momentum from two-wheelers and passenger vehicles segments especially utility vehicles, which account for nearly half of the overall revenue, ratings agency Crisil said on Wednesday. It also said that while a moderate uptick in commercial vehicles and tractors sales (around 17 per cent share) will provide an additional tailwind, the aftermarket segment (15 per cent share in revenue) is seen ticking along steadily at 5-7 per cent. However, weak demand for new vehicles in the US and Europe (around 60 per cent of India's exports), presents headwinds. "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 at Crisil Ratings. The aftermarket segment will log a steady 6-7 per cent growth, supported by an ageing vehicle base, she said, adding 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. Live Events The US, while contributing just around 5 per cent to total revenue, commands a dominant 28 per cent share of export earnings and is the fastest-growing auto component market, said Crisil. The 25 per cent tariff planned by the US can hurt companies heavily reliant on this geography, as per the ratings agency. According to Crisil, operating margins are seen stable at 12-12.5 per cent, driven by growing share of high-margin components such as ADAS (Advanced Driver Assistance System) modules, infotainment systems and advanced braking. A decline in input cost -- particularly of steel (45-50 per cent share in input costs), aluminium (15-20 per cent), and plastics (10-12 per cent) -- used for structural rigidity, reducing vehicle weight and for interiors will support profitability. But pressure from new tariffs can dent the margins of companies exporting largely to the US, it stated. As per Crisil, continuing high capital spend will be funded primarily by internal accruals. This, along with tight control over working capital, will ensure low dependence on external borrowing, keeping credit profiles stable. "The share of high-margin, technology-intensive components now account for around 27 per cent of the segment's revenue, up from around 18 per cent before Covid-19, driven by premiumisation, and stricter emission norms," said Anil More, Associate Director, Crisil Ratings. 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, according to him. The rating agency also said that the sector's credit outlook for this fiscal is stable owing to strong cash flows and minimal debt addition, despite sustained capex of around Rs 22,000 crore for scaling EV capabilities, automation and precision manufacturing - in tune with model launches that increasingly feature EVs. However, with EVs forming just around 4 per cent of PV volume, their revenue contribution remains marginal, keeping returns from this category of vehicles muted in the near term, Crisil said. Economic Times WhatsApp channel )
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Business Standard
21-05-2025
- Automotive
- Business Standard
Auto parts sector to grow 7-9% in FY26, driven by 2W, PV demand: Crisil
India's auto components industry is expected to grow 7-9 per cent in FY26, maintaining last fiscal's pace, supported by strong domestic demand from two-wheelers (2Ws) and passenger vehicles (PVs) — especially utility vehicles — which together account for nearly half of the sector's revenues. Crisil's analysis covered component manufacturers accounting for 35 per cent of the sector's Rs 7.9 trillion revenue in FY25. A moderate recovery in commercial vehicles and tractor sales, which contribute around 17 per cent to overall revenue, is also expected to support growth, according to a report by Crisil Ratings. The aftermarket segment, with a 15 per cent revenue share, is projected to grow steadily at 5-7 per cent, aided by an ageing vehicle fleet. However, global headwinds persist. Weak demand for new vehicles in the US and Europe — destinations for about 60 per cent of India's auto component exports — could weigh on the sector's export performance, which is expected to moderate to 7-8 per cent growth this year. Operating profitability is likely to remain range-bound at 12-12.5 per cent, supported by a growing share of high-margin, technology-intensive components such as Advanced Driver Assistance Systems (ADAS), infotainment systems, and advanced braking modules. Input costs have also eased, particularly for steel, aluminium, and plastics, which account for over 70 per cent of raw material costs. Still, proposed US tariffs of 25 per cent on certain imports threaten to dent the margins of exporters significantly reliant on that market. The US alone makes up just 5 per cent of total sector revenue but contributes 28 per cent to export earnings and remains the fastest-growing export destination. 'The share of high-margin components has increased from around 18 per cent pre-Covid to nearly 27 per cent now, thanks to growing premiumisation and stricter global emission norms,' said Anil More, Associate Director, Crisil Ratings. 'This structural shift and falling input costs will support stable margins despite global headwinds. However, companies with high exposure to the US may see a margin squeeze of 125-150 basis points, given limited room to pass on new tariffs.' Demand from original equipment manufacturers (OEMs) — which generate two-thirds of total revenue — is expected to grow 8–9 per cent this fiscal, with value growth outpacing volumes amid rising safety, emission, and electronic content in 2Ws and PVs. Capital expenditure is expected to remain high at around Rs 22,000 crore as companies invest in EV capabilities, automation, and precision manufacturing to keep pace with evolving model launches. However, electric vehicles currently constitute just 4 per cent of PV volumes, keeping their revenue contribution limited in the near term. Despite these challenges, the sector's credit outlook remains stable due to strong internal accruals, controlled working capital, and minimal reliance on external debt.
New Indian Express
21-05-2025
- Automotive
- New Indian Express
Crisil projects 7–9% growth for India's auto component industry in FY25
Operating margins in the sector are projected to remain stable at 12–12.5 percent this fiscal, supported by the increasing share of high-margin components such as automated driver assistance systems (ADAS) modules, infotainment systems, and advanced braking systems. A decline in input costs — particularly of steel (45–50% share in input costs), aluminium (15–20%), and plastics (10–12%) — used for structural rigidity, weight reduction, and interiors, will further support profitability. However, the imposition of new tariffs could erode margins for companies heavily reliant on US exports, Crisil warns. Continued high capital expenditure will be funded primarily through internal accruals. Alongside tight control over working capital, this will limit dependence on external borrowing, keeping credit profiles stable. An analysis by Crisil Ratings, covering automotive component makers that accounted for nearly 35 percent of the sector's total revenue of approximately ₹7.9 lakh crore last fiscal, supports this outlook. However, demand trends are expected to vary across the three key segments served by component manufacturers — original equipment manufacturers (OEMs), the aftermarket, and exports. 'Demand from automotive OEMs, which contribute two-thirds of total revenue, is expected to grow 8–9 percent this fiscal, with value growth outpacing volume growth due to rising safety, emission, and electronic content, especially in PVs and 2Ws,' said Poonam Upadhyay, Director, Crisil Ratings. 'The aftermarket segment will post steady 6–7 percent growth, supported by an ageing vehicle base. Export growth, however, is expected to moderate to 7–8 percent amid weak demand for internal combustion engine vehicles and a slowdown in electric vehicle (EV) adoption across the US and Europe,' she added. While the US contributes only about 5% to total industry revenue, it commands a significant 28 percent share of export earnings and is currently the fastest-growing export market for auto components. The proposed 25% tariff by the US could significantly impact companies with high exposure to that market. According to Anil More, Associate Director, Crisil Ratings, high-margin, technology-intensive components now account for around 27 percent of the segment's revenue, up from about 18 percent before the COVID-19 pandemic — a shift 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 percent this fiscal despite global headwinds. However, companies with heavy export dependence on the US may see margin compression of 125–150 basis points, given limited scope to pass on the impact of tariffs,' said More. The sector's credit outlook remains stable for this fiscal, supported by strong cash flows and minimal debt addition, despite continued capital expenditure of about ₹22,000 crore aimed at enhancing EV capabilities, automation, and precision manufacturing — in line with new model launches featuring more EVs. However, as EVs currently represent only around 4 percent of passenger vehicle volumes, their revenue contribution remains marginal, limiting near-term returns from this segment.
Time of India
21-05-2025
- Automotive
- Time of India
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.
