Major auto component firms to invest up to Rs. 30,000 crore (US$ 3.46 billion) next fiscal: ICRA

India’s auto component industry is set to witness significant investments of Rs. 25,000-30,000 crore (US$ 2.89- US$ 3.46 billion) in the next financial year for capacity expansion and localization, including electric vehicle (EV) parts, according to credit rating agency ICRA. The industry is projected to invest Rs. 15,000-20,000 crore (US$ 1.73-2.31 billion) in FY25 and another Rs. 25,000-30,000 crore (US$ 2.89-3.46 billion) in FY26. These investments will primarily focus on new product development, advanced technology, and compliance with upcoming regulatory changes. Demand from domestic Original Equipment Manufacturers (OEMs) contributes to over half of industry revenues.

The Indian auto component industry, represented by 46 key companies with combined annual revenues exceeding Rs. 3,00,000 crore (US$ 34.63 billion) in FY24, is also expected to experience moderate growth in the replacement market, with demand rising by 5-7% in FY25 and 7-9% in FY26. This is attributed to the increasing number of vehicles on the road, higher average vehicle age, and a shift towards preventive maintenance and organized spare parts. Meanwhile, exports, which contribute nearly 30% of industry revenues, may face headwinds due to sluggish vehicle registration growth in key markets. However, Indian suppliers are well-positioned to benefit from vendor diversification initiatives by global OEMs and Tier-I suppliers. This leads to higher outsourcing and increased supply to new platforms, boosting long-term prospects for the sector.

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