OEMs to drive 16-18% increase in auto parts MSME revenue: CRISIL SME Tracker

0

CRISIL Research expects automotive components industry revenue to grow 19-21% year-over-year (YoY) in the current fiscal year (FY23), driven by four winds supportive: strong demand from the original equipment manufacturer (OEM) segment, with passenger vehicle (PV) sales expected to exceed pre-Covid levels and resilient demand for tractors; commercial vehicle (CV) and two-wheeler sales are recovering from the crisis caused by the pandemic in fiscal years 21 and 22; improved exports triggered by global OEM supply chain risk reduction strategy; and demand from the aftermarket segment.

Micro, small and medium-sized enterprises (MSMEs) in the automotive components sector are also expected to experience higher growth, but will lag behind the sector’s average revenue growth due to lack of vertical integration.

Improving rural incomes and the reopening of schools and colleges are expected to boost two-wheeler sales, while improved carrier profitability, increased freight demand and healthy construction activity will drive the resume growth.

Revenues for automotive components MSMEs, which account for a quarter of the industry, rebounded strongly in FY22 after plunging in FY21, and are expected to rise 16-18% year-on-year in in FY23 due to the recovery in demand from Tier 1 suppliers serving OEMs.

Replacement demand, the other major source of revenue, continues to grow due to increased vehicle movement.

Exports appear sluggish due to the global economic slowdown.

Lower commodity prices, such as steel, aluminum and plastic, coupled with increased demand, lead to positive operating leverage, which in turn will result in improved margins of 20 to 40 basis points year-over-year at 7.5 to 8.5%.

We expect MSME clusters in Pune to grow by 14-17%, and in Pantnagar and Aurangabad by 19-22%.

Share.

About Author

Comments are closed.