Auto parts sector to grow 7-9% in FY26, driven by two-wheelers (2Ws), Passenger Vehicles (PVs) demand: Crisil

India’s auto components industry is projected to grow 7–9% in FY26, maintaining the growth pace of FY25, supported by strong domestic demand from two-wheelers (2Ws) and passenger vehicles (PVs), especially utility vehicles, which together account for nearly half of the sector’s Rs. 7,90,000 crore (US$ 92.29 billion) revenue. Crisil’s analysis, based on component manufacturers contributing 35% of this revenue, also points to a moderate recovery in commercial vehicles and tractors, which generate around 17% of total revenue. The aftermarket segment, contributing 15%, is expected to grow 5–7%, driven by an ageing vehicle fleet. However, exports may face pressure due to subdued demand in the United States (US) and Europe, with export growth likely to moderate to 7–8%.
Operating profitability is expected to remain stable at 12–12.5%, supported by a rising share of high-margin, technology-driven components like Advanced Driver Assistance Systems (ADAS), infotainment, and advanced braking modules. Falling input costs for steel, aluminium, and plastics—over 70% of raw materials—will also aid margins. However, potential US tariffs of 25% could reduce exporter margins by 125–150 basis points, especially as the US contributes 28% of export earnings despite forming just 5% of overall revenue. Original Equipment Manufacturers (OEM) demand, accounting for two-thirds of industry revenue, is expected to grow 8–9%, with value growth outpacing volumes due to rising safety, emissions, and electronic requirements in 2Ws and PVs. Capital expenditure is estimated at Rs. 22,000 crore (US$ 2.57 billion), focusing on electric vehicle (EV) capabilities and automation. While EVs currently make up only 4% of PV volumes, their future potential is significant. Despite global headwinds, the industry’s credit outlook remains stable, supported by healthy accruals, efficient working capital, and low external debt dependence.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.