Auto parts industry expected to grow 8-10% in FY23: report

According to rating agency Icra, the Indian auto parts industry is expected to grow 8-10% in FY23, helped by the easing of supply chain issues and commodity inflation in the second half of the year.

For 2021-22, industry revenue growth is projected at 13-15%, driven by domestic OEM, replacement, export volumes and commodity price pass-through. However, the healthy volume growth will come from a low fiscal 2021 base, the agency said in a statement.

“Demand for auto components comes from domestic OEMs, replacements and exports. Domestic OEM demand has remained mixed across all segments in FY2022, with a slowdown in two-wheelers (2Ws) and semiconductor shortages dragging down overall production volumes,” said Icra Ltd. Assistant Vice President & Sector Head – Corporate Ratings, said Vinutaa S.

Exports remain a bright spot in the history of Indian auto components, helped in part by the ‘China+1’ strategy. This is despite supply chain issues, she added.

“ICRA believes FY2022 export growth would have been even better without semiconductor shortages. While auto accessories has a healthy export order book for the next few months, the impact of geopolitical and supply chain issues on actual offtake remains monitorable,” Ms. Vinutaa said.

For FY2023, Icra said, “Revenues likely to grow 8-10%, supported by easing of supply chain issues and commodity inflation in H2 FY2023 Auto Parts.”

The rating agency said cost inflation and semiconductor shortages continue to be headwinds for the industry.

“Operating margins for auto accessories are likely to be impacted by increased commodity, fuel and freight prices in the near future. While the semiconductor situation has been improving in the past 1-2 months, the Russia-Ukraine conflict could put a strain on the globalized chip value chain,” it said.

In the aftermarket segment, the agency said improvements in personal mobility, healthy freight traffic and the postponement of new car purchases due to cost inflation have supported replacement sales in recent months.

Part of the sales growth also comes from the transfer of goods. While January to mid-February was relatively cloudy due to the Omicron wave, demand has picked up in recent weeks.

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