Thursday | Mar 27 2025 | 06:55:03 AM
Major auto component companies are expected to invest Rs 25,000 to 30,000 crore in the next financial year to expand production and increase local manufacturing, including electric vehicle (EV) parts, rating agency Icra has said. The industry is also likely to invest in boosting capacity and adapting to new regulatory requirements.
ICRA's analysis of major auto component suppliers suggests that the industry is likely to invest Rs 15,000 to 20,000 crore in FY2025, followed by Rs 25,000 to 30,000 crore in FY2026, according to Vinutaa S, Vice President, and Sector Head of Corporate Ratings at ICRA.
These additional investments will focus on developing new products, advancing technology, and manufacturing EV components, along with capacity expansion and compliance with upcoming regulatory requirements.
The rating agency also projected that revenue growth for the Indian auto component sector, based on a sample of 46 companies with combined annual revenues exceeding Rs 3 lakh crore in FY2024, will slow down. It is expected to moderate to 7 to 9 per cent in the current fiscal year and 8-10 per cent in FY2026, compared to 14 per cent in FY2024.
According to Vinutaa S, demand from domestic Original Equipment Manufacturers (OEMs), which contributes to over half of the industry's revenue, is expected to grow by 7 to 9 per cent in FY2025 and 8 to 10 per cent in FY2026. She noted that part of this growth would come from the premiumisation of components and increased value addition.
Replacement demand is projected to rise by 5 to 7 per cent in FY2025 and 7 to 9 per cent in FY2026, driven by factors such as a growing number of vehicles on the road, an increase in the average age of vehicles, higher used car purchases, preventive maintenance, and the expansion of the organised spare parts market.
Exports, which make up nearly 30 per cent of the industry’s revenue, may be affected by slow vehicle registration growth in key international markets. However, rising supplies to new platforms due to global OEMs and Tier-I suppliers diversifying their vendor base, along with increased outsourcing and value addition, are expected to benefit Indian auto component manufacturers.
