Auto-component units face 14-16% fall in revenue: CRISIL SME Tracker

Sales of automotive components will be dented this fiscal as demand for automobiles plunges to a decadal low after the Covid-19 pandemic acted as a brake on demand, and lockdowns caused supply-chain disruptions and labour shortages.

Small and medium enterprises (SMEs), which make up a third of the sector, have been badly hit. 

Revenues of auto-component SMEs could plunge 14-16 per cent year-on-year in the current fiscal year. Much of the decline will result from lower demand from tier-1 units catering to original equipment manufacturers (OEMs). Replacement demand, the other major source of revenue, could fall for the first time in over a decade owing to lesser usage of personal and commercial vehicles.

While discretionary purchases of vehicles have taken a back seat, lower freight demand has hurt sales of commercial vehicles.

Exports are expected to decline 10-12 per cent in value terms, as demand from key markets abroad is subdued because of the pandemic. There are some signs of revival in a few destinations, though.

SMEs in the sector are largely tier-2 and tier-3 players catering to tier-1 manufacturers, the replacement market, OEMs and exports.
 

However, demand for tractors has been resilient owing to better farm income prospects and government support. This will help SMEs catering to this segment. 

Tractor production volumes are forecast to rise about 12 per cent year-on-year, while that of other segments could plunge 15-30 per cent.