Indian auto component industry likely to grow 8-10% in FY23

According to rating agency Icra, the Indian auto component industry might have 8% to 10% growth in Financial Year (FY) 2023, due to the easing of supply-chain issues along with commodity inflation in the next half of the year.

The revenue growth of the industry for 2021-22 is 13-15%, which is driven by replacement, domestic original equipment manufacturer (OEM), export volumes, and pass-through of commodity prices. However the healthy volume growth will come on a low base of FY21.

Icra Limited Assistant VP and Sector Head, Corporate Ratings, Vinutaa S told the media that the demand for auto components stems from domestic OEMs, replacement, and exports. Domestic OEM demand remains a mixed bag in various segments of FY22 having a slowdown in two-wheelers and the semiconductor shortage has been dragging down overall production volumes.

Exports remain a bright spot in the country’s auto component story, partially aided by the "China+1 strategy". Despite the supply chain issues.

Vinutaa added that ICRA believes that growth in FY22 exports could be even better if not for the semiconductor shortage. Auto ancillaries continue to have a healthy export order book for the next couple of months, the geopolitical and supply-chain issues impact on actual offtake remains monitorable.

For FY23 the revenues might expand by 8-10% due to the support of easing of commodity inflation and supply-chain issues in H2 FY23. In the long run, premiumisation of vehicles, as well as focus on localisation, would translate to healthy growth for auto-component suppliers.

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