Indian auto components industry to clock 8-10% growth in FY 2017: ICRA

The Indian auto component industry is expected to register growth of 8-10 percent in FY 2017, according to credit ratings agency ICRA.

M&HCV demand is likely to stay robust albeit slow down to 13-15% given the increased base of FY2016.

The recent ban on diesel vehicles in the NCR and additional levy of 1-4 percent infrastructure cess on passenger vehicles in the Union budget will impact overall demand momentum in the PV segment which accounts for bulk of the domestic OE demand for auto components.

Over the medium to long term, growth in the auto component industry will be higher than the underlying automotive industry growth given the increasing localisation by OEMs, higher component content per vehicle and rising exports from India, says ICRA in its latest research update on auto component industry.

According to Subrata Ray, senior group vice president, corporate ratings, “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.”

In FY2017, the rural demand (impacting motorcycles, tractors and passenger vehicle segments) will be contingent on the monsoon, though government efforts in the Union Budget of FY 2017 could benefit the rural economy, he said.

With anti-lock braking system (ABS) becoming mandatory in 125 cc+ two wheelers from April 2018, the domestic ABS market will witness exponential growth. Also, increasing awareness regarding safety aspects and likely implementation of mandatory crash test for passenger vehicles will further drive demand for ABS in passenger vehicles.

At present, ICRA estimates ABS penetration of 30 percent in PV segment and minimal (less than 5%) in the two-wheeler segment. The ABS market could turn out to be a Rs. 6,500 crore opportunity for suppliers by FY 2019 in the backdrop of implementation of safety regulations.