Revenue Growth Of Auto Component Industry May Ease To 5-7% In FY25: Report

Icra's analysis suggests that its sample of 45 auto ancillary companies, collectively generating annual revenues of Rs 2.7 lakh crore in FY23, is anticipated to expand by 9-11 per cent in FY24

The annual revenue growth of prominent auto component manufacturing firms is expected to decrease to 5-7 per cent in the next fiscal year. This decline is attributed to a slowdown in domestic sales volumes and a decrease in exports, said the credit rating agency Icra on Tuesday.

Icra's analysis suggests that its sample of 45 auto ancillary companies, collectively generating annual revenues of Rs 2.7 lakh crore in FY23, is anticipated to expand by 9-11 per cent in FY24. This growth is expected to be propelled by robust domestic demand despite facing a high base alongside moderate export growth.

Icra predicts that for FY25, the growth is anticipated to be comparatively lower, around 5-7 per cent. This projection is based on the expected slowdown in domestic volume growth and a pessimistic outlook for exports. Additionally, it was observed that investment in FY24 increased due to capital expenditure directed towards capacity expansions and technological advancements. This trend is expected to persist into FY25.

“The industry is estimated to incur a capex of at least Rs 20,000-25,000 crore in FY2025, with incremental investments being towards new product additions, product development for committed platforms, and development of advanced technology,” the rating agency report reads.

It added that the capital expenditure would also be allocated towards electric vehicle components, capacity expansions, and forthcoming regulatory adjustments.

Icra highlighted that factors such as increased supplies to new platforms due to vendor diversification efforts by global original equipment manufacturers (OEMs), greater value addition, and potential aftermarket demand in foreign markets, coupled with the ageing of vehicles, go well for Indian auto component suppliers.

Icra further added that in the medium to long term, opportunities in the electric vehicle (EV) sector, the trend towards premiumisation of vehicles, emphasis on localisation, and shifts in regulatory standards are anticipated to boost stable growth for auto component suppliers. This growth will be supported by increased content per vehicle.

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