Report from ICRA Foresees Around 10% Growth for Auto-Components Industry this Year
Published On Mar 30, 2016
Credit ratings agency ICRA recently published a survey on the auto industry, in which it estimated that the auto component industry would grow at 8-10 percent in the next fiscal year.
“Over the medium term, ICRA expects OPBDIT margin for the auto-component industry to stabilise at 14-14.5 percent level, given expected bottoming out of commodity prices in the current year,” commented Subrata Ray, Senior Group Vice President, Corporate ratings. He added, “In FY2017, the rural demand (impacting motorcycles, tractors and passenger vehicle segments) will be contingent on monsoon, though government efforts in the Union Budget of FY 2017 could benefit the rural economy.”
With the ABS system now made mandatory, the auto-component market is expected to further surge upward. At present, less than one third of the vehicles in the market have been incorporated with ABS. As a result, with the new mandatory implementation coming into effect, the components industry could draw additional business in thousands of crores in the coming years. Along with this, new regulations regarding crash tests would also drive the industry up.
The recent ban on diesel vehicles in the Delhi region, along with heightened taxes is expected to impact the passenger vehicle segment. This would influence auto-component sales to a certain extent in the domestic market. ICRA estimates that growth in the auto-component would expected to surpass the auto industry's growth, a result of rising exports and a higher content of components needed per vehicle.
The company also foresaw that demand in the M&HCV demand would continue to stay relatively strong, but decline slightly to 13-15 percent.