Indian Auto Component
INDIAN AUTO COMPONENTS INDUSTRY
Replacement market and exports hold up growth at above OEMs’ levels; cost pressures, currency volatility and threat of imports remain a challenge
ICRA RATING FEATURE MARCH 2012 Rise in exports and higher domestic replacement demand partially offset the impact of lower supplies to the domestic OEM segment
The ~Rs. 1,600 billion Indian auto components industry has been witnessing a moderation in its revenue growth since the beginning of this fiscal following the deceleration in sales volume growth across all automobile segments. As per industry estimates, out of the total turnover of the Indian auto components industry, around 60% is derived from sales to domestic OEMs, around 25% comes from sales to the domestic replacement market and around 15% is derived from exports. While lower YoY volume growth of domestic OEMs in 9m 2011-12, particularly those belonging to the passenger vehicle (PV) and Medium and Heavy Commercial Vehicle (M&HCV) segments, translated into muted revenue growth for the auto components industry during this period; the sluggishness was partly arrested on the back of rise in component exports and higher domestic replacement market sales. While the long term prospects for the industry remain strong in line with the outlook for the OEM segment, the industry faces strong challenges in the form of threat of low cost imports, currency volatility and ability to invest on product development to be able to move up the value chain. Apropos our sample of 35 listed auto component manufacturers, the revenue growth of these select entities has been in low single digits over the last three consecutive quarters on QoQ basis and in double digits on YoY basis. Within our sample universe, however, there was a wide variance in the performance of individual companies with revenue growth being relatively higher for companies dependent on the domestic two-wheeler (2W) and Light Commercial Vehicle (LCV) segments; and growth being lower/
Replacement market and exports hold up growth at above OEMs’ levels; cost pressures, currency volatility and threat of imports remain a challenge
ICRA RATING FEATURE MARCH 2012 Rise in exports and higher domestic replacement demand partially offset the impact of lower supplies to the domestic OEM segment
The ~Rs. 1,600 billion Indian auto components industry has been witnessing a moderation in its revenue growth since the beginning of this fiscal following the deceleration in sales volume growth across all automobile segments. As per industry estimates, out of the total turnover of the Indian auto components industry, around 60% is derived from sales to domestic OEMs, around 25% comes from sales to the domestic replacement market and around 15% is derived from exports. While lower YoY volume growth of domestic OEMs in 9m 2011-12, particularly those belonging to the passenger vehicle (PV) and Medium and Heavy Commercial Vehicle (M&HCV) segments, translated into muted revenue growth for the auto components industry during this period; the sluggishness was partly arrested on the back of rise in component exports and higher domestic replacement market sales. While the long term prospects for the industry remain strong in line with the outlook for the OEM segment, the industry faces strong challenges in the form of threat of low cost imports, currency volatility and ability to invest on product development to be able to move up the value chain. Apropos our sample of 35 listed auto component manufacturers, the revenue growth of these select entities has been in low single digits over the last three consecutive quarters on QoQ basis and in double digits on YoY basis. Within our sample universe, however, there was a wide variance in the performance of individual companies with revenue growth being relatively higher for companies dependent on the domestic two-wheeler (2W) and Light Commercial Vehicle (LCV) segments; and growth being lower/