CHENNAI: The domestic auto component industry is expected to grow by 9-11 per cent during FY18, propelled by robust growth expectation in domestic passenger vehicles (PV) and two-wheelers (2W) segments.
According to ratings agency ICRA, the growth in the auto components industry will be relatively higher than the underlying growth in the automotive industry in the medium to long term on the back of technological advancement, regulatory measures and increasing localisation by OEMs.
“Domestic original equipment manufacturers (OEMs), especially 2W and PV industry, which together constitute about two-third of overall domestic OEM demand, is expected to grow at a healthy pace in FY18. Moreover, expected recovery in rural income will provide upside for sub-segments like light commercial vehicles, motorcycles and tractors,” said Subrata Ray, senior vice-president, ICRA.
Currently, the domestic auto components industry is valued around Rs 2.9 lakh crore.
The report further stated that auto ancillaries have witnessed revenue growth of 13.5 per cent during the first two quarters of the ongoing fiscal fuelled by higher realisation in the backdrop of steady increase in commodity prices.
Exports witnessed a decline but the trend seems to be reversing with incremental order inflow for Class-8 trucks.
ICRA also noted that commodity prices have been rising over the past 4-5 quarters, putting pressure on profitability. Among all ancillaries, tyre manufacturers were the worst hit due to sharp volatility in rubber prices.