Following a robust 16-18% growth driven by high demand from automobile original equipment manufacturers (OEMs) in the fiscal year 2023, small and medium enterprises (SMEs) in the auto component sector are anticipating a more moderate 8-10% growth in the fiscal year 2024. This growth is bolstered by continuing domestic demand from passenger vehicles, which is expected to build on the record highs of the fiscal year 2023. Commercial vehicles are poised to surpass pre-Covid levels, while two-wheelers are on a path to recovery, although they are expected to remain below their 2019 peak.

Despite facing challenges, export demand in 2024 is anticipated to experience moderate growth, supported by a slight increase in demand from key markets such as the US, Germany, Italy, and Japan. OEMs are actively exploring new sourcing opportunities to diversify their supply chains. This shift is motivated by observed improvements in critical components such as engines, gearboxes, and transmissions. However, global constraints are limiting further expansion.

The replacement market is expected to see a modest increase in 2024, following its improvement in 2023, driven by higher sales in the fiscal year 2019. SMEs in the sector contribute to approximately 25-30% of the total industry turnover, primarily in segments related to suspension, braking, and body/chassis. Auto component manufacturers are categorised into tier-1, tier-2, and tier-3, with most Indian OEMs sourcing components from tier-1 manufacturers. These tier-1 suppliers, in turn, rely on tier-2 suppliers, followed by tier-3 manufacturers in their supply chains.

Margins for auto component manufacturers are anticipated to improve due to corrections in raw material costs and increased demand leading to higher capacity utilisation.

Source: Business Standard