Automotive Components Sector Research

Industry Overview

The Indian auto components industry is poised for significant growth, with a projected market size of USD 200 billion by FY28, driven by increasing domestic demand, government initiatives like 'Make in India', and the transition to electric vehicles (EVs). The industry contributes 2.3% to India's GDP and is expected to contribute 5-7% by 2026, supported by rising exports and localization of advanced components

Key Growth Drivers

• Domestic Demand: Growing urban and rural demand, new model launches, and premiumization are boosting content per vehicle, driving industry expansion.
• Government Initiatives: Policies like the Production Linked Incentive (PLI) Scheme and FAME II are accelerating the EV transition and localization of advanced components.
• Export Potential: Auto component exports are expected to reach USD 30 billion by FY26, with India becoming a global sourcing hub for components like shafts, bearings, and fasteners.

Segment-wise Performance

• Passenger Vehicles (PV): The PV segment grew by 6% YoY in Q1 FY25, with SUVs leading the growth.
• Two-Wheelers: The two-wheeler segment showed strong recovery, growing by 19.8% YoY in Q1 FY25, driven by rural demand and premiumization.
• Commercial Vehicles (CV): The CV segment faced challenges, with a 1.4% YoY decline in Q1 FY25, but is expected to rebound post-monsoon due to infrastructure projects.

EV and Hybrid Trends

• EV Adoption: The EV segment experienced a slowdown post-FAME subsidy, but two-wheeler EVs are expected to outperform passenger vehicle EVs.
• Hybrid Vehicles: Hybrid vehicles are outpacing EVs in growth, driven by consumer preferences for flexibility and existing fuel infrastructure.

Company-specific Insights

• NDR Auto Components: Focused on expanding OEM partnerships and introducing innovative products, with a strong order book of Rs. 400-450 crore and plans for land acquisition to support growth.
• Lumax Auto Technologies: Reported 20% YoY revenue growth in Q1 FY25, with a strong focus on increasing content per vehicle and introducing EV-agnostic products.
• Sharda Motor Industries: Capitalizing on the 'China+1' strategy, with a potential export market size of USD 2.2 billion for its current product range.

Challenges and Risks

• Supply Chain Disruptions: Geopolitical risks and high energy costs are impacting supply chains and production costs.
• Economic Slowdown: Weak economic growth in key markets like Europe and the US is reducing demand for vehicles, particularly in the CV segment.
• Competition: Increasing competition from Chinese manufacturers and slower-than-expected EV adoption are key challenges.

Future Outlook

The long-term outlook for the auto components sector remains strong, with significant opportunities for companies that innovate and deliver value. The industry is expected to benefit from the localization of advanced components, rising exports, and the transition to EVs and hybrids.