The report projected that the industry to incur capex of Rs 20,000-25,000 crore in FY2025 towards capacity expansion and technological developments….reports Asian Lite News
The revenue growth for the Indian auto component industry is expected to moderate in FY2025, about 5 to 7 per cent, after a strong performance in FY2024, a new report showed on Thursday.
According to rating agency ICRA, operating margins are expected to improve year-on-year in FY25, driven by factors like better operating leverage and higher value addition.
“Demand from domestic original equipment manufacturers (OEM) constitutes over 50 per cent of sales for the Indian auto component industry and the pace of growth in the segment is expected to moderate in FY2025,” said Vinutaa Sriraman, VP and Sector Head – Corporate Ratings, ICRA Limited.
“Growth in replacement demand is pegged at 5-7 per cent, after two to three years of healthy growth, following a relatively weak Q1 in the current fiscal,” she added.
The sample for the report included 46 auto ancillaries with aggregate annual revenues of over Rs 3,00,000 crore in FY2024.
Further, the report projected that the industry to incur capex of Rs 20,000-25,000 crore in FY2025 towards capacity expansion and technological developments.
Capex is anticipated to hover around 8-10 per cent of operating income over the medium term, with the PLI scheme also contributing to accelerating capex towards advanced technology and EV components.
On the exports front, new vehicle registrations in Europe and the US are expected to remain tepid over the next few quarters, impacted by the weak global macroeconomic environment and geopolitical tensions.
The ageing of vehicles and increased sales of used vehicles in global markets are also expected to aid in the export of components for the replacement segment in overseas markets.
The report further mentioned that the electric vehicle (EV) linked opportunities, premiumisation of vehicles, focus on localisation, and changes in regulatory norms to support stable growth for auto component suppliers.
EVs to account for around 25 per cent of domestic two-wheeler sales and 15 per cent of passenger vehicle sales by 2030. This would translate into a strong market potential for EV components by 2030, the report said.
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