Rating agency ICRA said a supportive framework for electric vehicle transition was imperative and a clear roadmap on faster adoption on hybrid and electric vehicles would help the auto-component industry to firm up investment plans.
According to the agency’s report ‘Indian Auto Component Industry, the Way Forward’, incentives for taking up research and development investments and a supportive framework for electric vehicle transition was “imperative”.
“A clear roadmap and continuation of faster adoption and manufacture of hybrid and electric vehicle scheme would help the industry firm up its own electric powertrain investment plans, it said.
For the domestic auto-component industry to grow, a supportive policy framework was critical, it said. The auto-component industry is expected to post revenue of 10-12 percent between FY2018 and FY2022 while average industry operating margin was expected to be around 13.5 percent to 14.5 percent over the near term.
The auto-component industry has recorded an 8.3 percent compounded annual growth rate (CAGR) between 2014-18 and it was likely to post revenue growth driven by higher net realisation and increased content per vehicle.
“OEM (original equipment manufacturers) demand for components would be supported by increasing localisation by OEMs and higher component content per vehicle”, ICRA, senior group vice-president, Subrata Ray said.
“Indian exports have grown at a CAGR of 7 percent over the past five years. Future export growth will depend on global demand for vehicles and Indian inroads into newer products and global platforms”, he said.
Noting that there was significant gap between auto-component makers and with their global players, the report said, “as Indian emission and safety requirements tighten sharply in the coming years, this gap should gradually reduce”.
Capital expenditure by auto-component industry was likely to be at 7-8 percent over the next three years compared to 4-6 percent for global majors, the report said.