India Auto Components Inc likely to register up to 15% revenue growth in FY2024

Robust demand for vehicles across segments expected to enable component industry to sustain its growth momentum in FY2024 despite headwinds in global markets.

By Mayank Dhingra calendar 10 Mar 2023 Views icon3448 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp

With all major categories of vehicles registering robust sales in the domestic market in the ongoing fiscal (FY2023), the Indian automotive components industry is anticipating sustained momentum in FY2024, and expecting the sector to register up to 15 percent year-on-year (YoY) growth in the next financial year.

India Auto Components Inc is buoyed with optimism and is betting big on the domestic market, which enabled the industry to clock revenues of Rs 2.65 lakh crore in the first nine months of FY2023, registering a significant 34.8 percent YoY growth. According to the Automotive Component Manufacturers Association of India (ACMA), the Indian automotive components sector is likely to maintain its growth trajectory.

"We estimate the components industry to register growth in the range of 10-15 percent in FY2024, with the key pillar of this marked uptick going to be the sustained momentum in India's domestic vehicle market, which is what we are banking upon," Vinnie Mehta, director general, ACMA, told Autocar Professional.

"The domestic market continues to register robust growth, be it the passenger vehicle, tractor, or commercial vehicle segments, with the latter particularly witnessing good growth in the M&HCV category owing to the government push on infrastructure development. Despite being a cyclical industry, the tractor segment is also holding up well for the last three years," he added.

While Mehta flagged some concerns in the two-wheeler segment, he remained optimistic about witnessing growth continuity in the segment, based on the economic revival in rural India which determines the bulk of the two-wheeler sales in the country. Moreover, with vehicle safety norms also likely to be revised once again in FY24, with the government's intent to mandate six airbags in all new cars, ACMA is confident that the supplier ecosystem is well prepared to cater to the growing volumes for airbags.

"I believe the components industry has invested in enough capacity to meet the upcoming market demand, but if a challenge crops up due to semiconductor-related concerns, that is going to be a different issue," he said.

According to ACMA, the rising content of electronics chips in every vehicle will lead to the unfolding of different scenarios, with the collective need for the industry to adapt to the new dynamic. While such external disturbances could still be expected intermittently in the future, ACMA remains confident about the resilience of the Indian automotive industry.

The component industry body is also bullish about rising investments in the electrification space with suppliers intensifying capex towards localisation of EV-related products, as well as developing the entire EV ecosystem. The government's push in the form of automotive PLI schemes to drive Indian manufacturers towards increased localisation of advanced automotive technologies is not just going to deliver in spades for the local EV market, but also going to boost exports of such advanced components from India.

Headwinds in global markets
In terms of the outlook for exports in FY2024, the components body, however, is adopting a wait-and-watch approach as uncertainties continue to loom large in Europe due to the prolonged Russia-Ukraine conflict. "Although the component industry's exports performance has been good in FY23, it is difficult to say how things would pan out in Europe. So far, exports continue to hold well despite recessionary trends in the US as well as European markets," Mehta pointed out.

In the nine-month period from April-December 2023, the Indian automotive components industry achieved export revenues pegged at roughly US$ 15.1 billion, compared to US$ 19 billion in the entire 12-month period of FY2022. On the other hand, exports of automotive components grew by 8.6 percent to US$ 10.1 billion (Rs 79,033 crore) in the H1 of FY2023, from being pegged at US$ 9.3 billion (Rs 68,746 crore) in the H1 of FY2022. While North America, which accounts for a third of component exports from India, registered a 12 percent YoY uptick in H1 FY2023, Europe and Asia had also reported a growth of 4 and 11 percent, respectively, in the same period.

The key enablers to this performance were the Indian component manufacturers' endeavours to localise technology in India and offer high-quality components at competitive prices. “Moreover, as companies in the West decide to build capacities outside of China, India is well positioned to capture this opportunity. India must be very smart in attracting some of the opportunities. While de-risking the supply chain does play in the minds of companies, scaling up capacities to serve global demand could be a challenge for Indian players in the short term,” said Mehta.

“Having said that, the mood seems to be very positive with respect to sourcing from India as there is a certain level of frustration due to intermittent disruptions in the supply chain in China, and that augurs well for made-in-India component exports. We are already seeing a lot of queries coming in, and that could be the first step before investments start flowing in. Furthermore, a lot of foreign players too are expanding capacities in India, and that is something to look forward to,” he signed off.

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