Auto component industry to witness 20-23 pc growth in FY22: ICRA

The Indian auto component industry is expected to report 20 to 23 per cent revenue growth in FY2022, supported by strong exports demand, and recovery in domestic original equipment and aftermarket segments.

The Indian auto component industry is expected to report 20 to 23 per cent revenue growth in FY2022, supported by strong exports demand, and recovery in domestic original equipment and aftermarket segments. The growth will come in on low base of last two fiscals and look optically strong because of the exceptionally weak H1 FY2021.

The industry has bounced back handsomely during the second half of last fiscal with many auto component suppliers registering record revenue and profits during Q4 FY2021. Exports which accounts for 29 per cent of industry's turnover, also witnessed healthy recovery supported by strong traction in key target markets -- the United States and Europe.

But chip shortages, slow vaccination rollout in some regions, logistics challenges and further lockdowns/curfews could be demand dampeners going forward. Ashish Modani, Vice President and Sector Head at, ICRA, said the Covid 2.0 applied temporary brake on auto component industry's recovery prospects in Q1 FY2022.

The aftermarket sales were also impacted for four to six weeks because of the curfews/lockdowns and closure of workshops. The industry's revenues declined by 30 to 40 per cent on a quarter-on-quarter basis despite support from exports. While the Q-o-Q decline was relatively sharp, revenues were more than double of Q1 FY2021 levels.

"For the full year FY2022, we expect a revenue growth of 20 to 23 per cent aided by growth across segments and commodity pass through, albeit on a low base," said Modani. "However, headwinds such as sharp increase in commodity prices, supply chain disruptions partly arising from semi-conductor shortage and premium freight expenses are expected to weigh in industry margins in FY2022, partially offsetting benefits arising from improved operating leverage."

Operating margin of auto component suppliers (ex-tyres) is likely to witness year-on-year improvement of 50 to 75 basis points in FY2022 due to operating leverage benefits, though sharp increase in commodity prices will keep overall margin expansion under check. (ANI)

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