India’s auto components industry is set for a steady 7-9% revenue growth in FY26, according to a recent analysis by Crisil Ratings. The growth, mirroring last year’s performance, will be fueled by strong demand from two-wheelers (2Ws) and passenger vehicles (PVs), particularly utility vehicles, which together contribute nearly 50% of the sector’s total revenue.
Key Growth Drivers & Market Trends
- OEM Demand: Automotive original equipment manufacturers (OEMs), which account for two-thirds of total revenue, are expected to grow 8-9% YoY, driven by higher safety, emission norms, and electronic content.
- Commercial Vehicles & Tractors: These segments, contributing 17% of total revenue, are projected to see moderate sales growth.
- Aftermarket Business: The replacement parts segment, which makes up 15% of revenue, is expected to grow 5-7% YoY, supported by an aging vehicle base.
- Export Challenges: While 60% of India’s auto component exports go to the US and Europe, weak demand for internal combustion engine (ICE) vehicles and slower EV adoption in these regions may impact growth.
Profitability & Investment Outlook
- Stable Margins: Operating profitability is expected to remain at 12-12.5%, supported by high-margin components like ADAS (Advanced Driver Assistance Systems), infotainment units, and advanced braking systems.
- Raw Material Costs: Falling prices of steel (45-50% of input costs), aluminum (15-20%), and plastics (10-12%) will help maintain profitability.
- Capital Expenditure: The sector is expected to invest ₹22,000 crore in EV production, automation, and precision manufacturing, with most funding coming from internal cash flows.
Challenges & Global Headwinds
- US Tariffs: The proposed 25% tariff by the US government could pressure Indian exporters’ margins, especially those heavily dependent on the market.
- Export Margin Compression: Companies with high export dependence on the US may see margins drop by 125-150 basis points, due to limited ability to pass on new tariffs.
With strong domestic demand and strategic investments, India’s auto components sector is poised for steady growth in FY26, despite global headwinds.
For more updates on market trends and industry insights, stay tuned!
