(MENAFN- KNN India)
New Delhi, Jul 12 (KNN) In a significant development for India's automotive sector, the auto component industry is poised to make substantial investments in the coming fiscal year.
According to a recent report by credit rating agency ICRA, the industry is expected to allocate between Rs 20,000 crore to Rs 25,000 crore as capital expenditure (capex) in FY2025.
This investment surge comes on the heels of an anticipated revenue growth of 5 per cent to 7 per cent in FY2025, following an impressive growth rate of over 14 per cent in FY2024.
ICRA projects that the industry's capex will constitute approximately 8 per cent to 10 per cent of its operating income over the medium term.
The substantial capex is primarily aimed at capacity expansion and technological advancements. The Production Linked Incentive (PLI) scheme is also expected to play a crucial role in accelerating investments towards advanced technology and electric vehicle (EV) components.
Vinutaa S, Vice President and Sector Head of Corporate Ratings at ICRA, provided insights into the industry's growth trajectory. She noted that demand from domestic original equipment manufacturers (OEMs), which accounts for over 50 per cent of sales in the Indian auto component industry, is expected to moderate in FY2025.
The replacement demand is forecasted to grow at 5 per cent to 7 per cent, following a period of robust growth in recent years.
Exports, contributing nearly 30 per cent of the industry's revenues, may face challenges due to subdued growth in end-user markets. However, Vinutaa highlighted that ancillaries are likely to benefit from supplies to new platforms as global OEMs diversify their vendor base and increase outsourcing.
Regarding investments, Vinutaa emphasised that the focus would be on new products, product development for committed platforms, and the development of advanced technology and EV components. Upcoming regulatory changes are also driving these investments.
The export outlook remains cautiously optimistic despite expectations of tepid new vehicle registrations in Europe and the US due to global macroeconomic weaknesses and geopolitical tensions.
Indian auto component exporters may find opportunities in metal casting and forgings, particularly with the closure of some plants in the European Union due to viability issues.
Furthermore, the aging of vehicles and increased sales of used vehicles in global markets are expected to boost the export of components for the replacement segment in overseas markets.
(KNN Bureau)
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