Major auto component firms are likely to invest Rs 25,000-30,000 crore in the next fiscal for capacity expansion and localisation, including electric vehicle (EV) parts, ratings firm ICRA said on Thursday.
The sector is also expected to invest in capacity enhancements and upcoming regulatory changes.
"ICRA's interaction with large auto component suppliers indicates that the industry is estimated to spend Rs 15,000-20,000 crore in FY2025 and another Rs 25,000-30,000 crore in FY2026," Vinutaa S, Vice President and Sector Head, Corporate Ratings, ICRA Ltd said in a statement.
The incremental investments would be made towards new products, product development for committed platforms and development of advanced technology and EV components, apart from capex for capacity enhancements and upcoming regulatory changes, she added.
The rating agency said it expects the revenue growth of the Indian auto component industry (represented by a sample of 46 auto ancillaries with aggregate annual revenues of over Rs 3 lakh crore in FY2024) to ease to 7-9 per cent in the ongoing fiscal and 8-10 per cent in the next financial year (FY2026), from the highs of 14 per cent in FY2024.
"Demand from domestic Original Equipment Manufacturers (OEMs), which constitutes over half of the industry revenues, is estimated to grow by 7-9 per cent in FY2025 and 8-10per cent in FY2026," Vinutaa S stated.
Part of the growth would stem from premiumisation of components and higher value addition, she added.
Growth in replacement demand is pegged at 5-7 per cent in FY2025 and 7-9 per cent in FY2026, driven by an increase in vehicle parc, higher average age of vehicles/used car purchases, preventive maintenance and growth in organised spare parts, among other reasons, she said.
"Exports, which account for close to 30 per cent of the industry's revenues, are likely to be impacted by subdued vehicle registration growth in the target markets," Vinutaa S noted.
However, factors like rising supplies to new platforms because of vendor diversification initiatives by global OEMs/Tier-I and higher value addition, partly stemming from an increase in outsourcing, augur well for Indian auto component suppliers, she added.
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