NEW DELHI: Owing to weak demand from domestic original equipment manufacturers (OEM), the replacement market and exports, India’s auto component sector’s revenues are estimated to decline by 14-18 per cent in FY2021, according to rating agency ICRA.
In a report released on Friday, ICRA said it expects the recovery to be gradual and slow-paced, with the industry pinning hopes on revival in rural income to support growth during the festive season and thereafter.
Estimated revenues of ICRA’s auto component sample set (excluding Tyre-makers) declined by 19.9 per cent in Q4FY20, the steepest quarterly year-on-year decline over the last several years.
For FY20, revenues declined by 12.3 per cent, a fall far steeper than that experienced during the financial crisis of the FY08.
Subrata Ray, Senior Group Vice-President, ICRA, said, “The aftermarket component demand which accounts for 18% of the industry turnover, is also expected to be subdued in the near term, the exception being components like batteries.”
The global light vehicle outlook too is expected to remain negative in the next 12-18 months and these factors will have a serious bearing on auto component industry’s prospects, added Ray.
“Though auto and auto component production has partly restarted across various zones in India since early May 2020, production levels continue to be sub 30 per cent,” he said.
Lockdowns in auto component clusters, like the current one in Chennai, and the ensuing supply chain disruption will keep the industry’s recovery on a slow footing, ICRA said, adding that the shortage of labour and productivity loss because of social distancing will also impact the output of automobile factories.