New regulations to boost profits for auto parts companies

Manufacturers of automotive components have benefited greatly from the enormous trend toward electrification and the forthcoming slew of safety and emission regulations. According to top executives at auto component companies the new regulations and the trend toward electrification are resulting in an increase in the amount of content per vehicle, thereby increasing their revenue and profitability.

According to Ashwath Ram, Managing Director, Cummins India, businesses like Cummins have succeeded and managed to increase business with every automaker whenever emission standards have become stricter and fuel economy regulations have become more stringent. Beginning on April 1, the auto industry in India will switch to Bharat Stage VI-B emission standards. By the beginning of the following fiscal year, manufacturers of passenger vehicles would also be required to share with the government their corporate average fuel economy (CAFE-II) scores.

Companies must also comply with RDE (Real Driving Emissions) regulations in accordance with BSVI-B standards. Because vehicles will require new components, this is likely to result in an increase in prices across all categories. According to Hemal Thakkar, Director, CRISIL Research “The price increase for gasoline vehicles could be less than two per cent, while it could be between 3.0 per cent and 3.5 per cent for diesel vehicles.

Ram of Cummins stated the regulations will help the company grow and the intention is to expand its business at a rate twice as fast as the country's GDP growth. "While we are doing that, we want to increase our profits by one percent annually until we reach our highest historical profit levels of 18 to 20 percent," he said.