Growth trajectory of auto components sector

20% Domestic Production
15% 10)-(12)%
10% 8% 7% ™% roe

5% 5% rr 5yo5%

5% aa 13%
wa) | | Dam?

5% ~FY15to FY20 "7 I FY20-24P
-10%
(aS

-15% 9 OY (yo), Xu i (12)%
-20% 17%
=OEM mReplacement mExports mlmports

Source: CRISIL Research

Domestic market

Demand for automotive components (domestic consumption)

5000 ) 2 billion 20%
4500 9
15%
4000 5 ee : °
3500 10%
3000 me
2500
2000 0%
1500 5%
1000
500 (9)-(11)% -10%
0 -15%

 

FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY24P

 

=m Domestic demand Growth (RHS)

Source: CRISIL Research

CRISIL Research projects domestic auto component consumption to decline by 9-11% in fiscal 2021 on account
of subdued demand across all automobile asset classes amid continued weakness in the economy and lower
demand from the replacement market owing to less movement of vehicles. However, higher component intensity
due to the BS-VI norm is expected to aid average realisations. In long term, CRISIL Research expects the domestic
consumption to grow at a pace of 5-7% CAGR between fiscals 2020-2024. In fiscal 2021, imports are expected
to decline by 10-12% owing to subdued demand from OEMs and the aftermarket. Besides, domestic auto
component manufacturers have also been operating at below-normal utilization levels owing to weak demand.
Imports declined by 33% on-year during the first quarter. Going ahead, with improving domestic production,
demand for imports is expected to pick up on a sequential basis. In the long term, i.e. between fiscals
2020 and 2024, CRISIL Research expects domestic auto component production to log a CAGR of 6-8% to ~%
4,225 billion. OEM demand is expected to clock a CAGR of 7-9% between fiscals 2020 and 2024 to reach ~Rs
2,772 billion, on the back of healthy growth in the OEM segment on a low base of fiscal 2020 and 2021 due to
BS-VI norms and the Covid-19 pandemic, respectively.

Replacement demand

As for the replacement market, demand weakened for the first time in over a decade owing to lower movement of
vehicles on the back of imposed nation-wide lockdowns, followed by state-wide lockdowns until August 2020.
The auto component replacement market is projected to grow at a steady rate of 3-5% CAGR between fiscals
2020and 2024. Replacement demand is expected to be lower as compared to the growth logged between fiscal
2015-2020 due to increased durability of components (better quality), better road infrastructure and increase in
service intervals leading to lower preventive maintenance is resulting in a slower growth rate in the long

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