Auto component industry to grow at 10% in FY 2017

The Dollar Business Bureau

Rating agency ICRA said that the auto component industry is expected to grow by 10 percent in the current financial year, considering the sales growth in motorcycle segment and passenger vehicles.

In its quarterly note on the auto component segment, ICRA said that it expects the auto component sector to gain momentum and register a growth of 8.5 percent to 10 percent in 2016-17 as against the growth of 2.8 percent in the last financial year.

Taking into consideration the rising localisation by original equipment manufacturers (OEMs), high component content in every vehicle and increasing exports from the country, the growth in the auto component sector will be more than the underlying growth in automotive industry, over medium and long-term, the note stated.

“In ICRA's views, implementation of the 7th Pay Commission is expected to support urban/semi-urban segments like PV and scooter, whereas rural demand will be driven by expected above-average monsoon,” it added.

The strong demand for passenger vehicles in the markets of North America and Europe is likely to balance the drop in the segment of medium and heavy commercial vehicles, in these markets.

Subrata Ray, Senior VP and Co-Head - Corporate Sector Ratings at ICRA said that comparatively better original equipment and demand for exports, supported by stable aftermarket demand, is possibly push overall growth in the auto component industry.

The surplus capacities and subdued demand have taken the industry into consolidation mode in the last two years. The industry has been taking steps to deleverage the balance sheets, the rating agency said.