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Auto Components Industry To Record Higher Growth Of 13-15% For FY18: ICRA

Earlier, ICRA had estimated the growth of Indian auto component industry to be somewhere around 9-11 per cent

Photo Credit : Reuters


The Indian auto component is likely to register growth of 13-15 per cent for the financial year 2018, as per Indian credit ratings agency ICRA. Earlier, ICRA had estimated the growth to be somewhere around 9-11 per cent.

The increased growth rate has been attributed to robust demand for auto components from domestic original equipment manufacturers (OEMs), especially high volume two-wheeler (2W) and passenger-vehicle (PV) industry that together constitute about two-third of overall ancillary industry size.

Moreover, stellar growth in commercial vehicle (CV) as well as tractor segment has further supported overall volume growth. This will be strongly supported by improved demand outlook in key end user segments as well as expected pickup in rural income. Going forward, pickup in infrastructure activity will further drive growth in construction & mining equipment as well as the tipper segment (classified under M&HCVs).

Says Subrata Ray, Sr. Group Vice President, Corporate Sector ratings, ICRA, “During Q3FY2018, auto component vendors dependent on CV and 2W segment witnessed double digit growth in volume, which along with improved realization due to increase in commodity prices resulted in strong revenue growth.”

“However, while domestic PV demand remained strong, muted PV exports has dragged overall PV production volume growth during the last two quarters. We expect PV exports related aberration to abate during coming quarters, and it will be more than offset by robust demand momentum in domestic market, effectively supporting auto component demand.”

ICRA’s sample of 48 auto ancillaries, comprising around 26 per cent of the industry’s turnover, grew 18.5 per cent revenue-wise during Q3 FY2018. The same appeared stronger on low base of last fiscal, where overall performance was impacted by demonetization.

Overall, during 9MFY2018, the sample space grew by 12.3 per cent which was better than the earlier 9 per cent-11 per cent growth estimate for FY2018e. Given strong revenue growth the growth estimates have been revised upward for FY2018e to 13-15 per cent.

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