Auto component industry's revenue growth to moderate to 5-7%: ICRA

Annual revenue growth of leading auto component manufacturing companies will come down to 5-7 per cent in the next fiscal due to moderation in domestic volumes and a drop in exports, rating firm Icra said on Tuesday.

According to Icra estimates, its sample of 45 auto ancillaries, with aggregate annual revenues of Rs 2.7 lakh crore in FY23, is likely to grow by 9-11 per cent in FY24, driven by healthy domestic demand despite a high base and moderate growth in exports.

For FY25, the growth is likely to be relatively lower to 5-7 per cent, with expected moderation in domestic volume growth and a weak outlook for exports, Icra said.

It also noted that capex towards capacity enhancements and technological development resulted in higher investment in FY24, which is likely to continue in 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 stated.

The capex would also go into EV components, capacity enhancements and upcoming regulatory changes, it added.

Factors like rising supplies to new platforms because of vendor diversification initiatives by global original equipment manufacturers (OEMs), higher value addition and aftermarket demand potential in overseas markets, with the ageing of vehicles augur well for Indian auto component suppliers, Icra said.

Over the medium to long term, Icra expects EV opportunities, premiumisation of vehicles, focus on localisation, and changes in regulatory norms to support stable growth for auto component suppliers aided by higher content per vehicle, it added.