Ratings agency ICRA has said it has revised its outlook on the auto component industry from negative to stable, on the back of demand revival across original equipment manufacturers (OEMs), replacements and exports. ICRA expects the domestic auto component industry's revenue to grow 16-18 per cent in the financial year starting April 2021, supported by factors such as increasing content per vehicle, low base effect, and higher realisations.
It said that long-term demand drivers include increased focus on localised supply chains by Indian OEMs. Diversification of supply chain risk by global OEMs is also expected to lead to increased sourcing from India in the coming years.
It added OEMs, which account for over 56 per cent of the auto component demand, have recorded a sharp increase in demand since September across all segments, barring the medium and heavy commercial vehicle (M&HCV) industry. Volumes of the automotive industry will take 2-3 years to revert to the pre-COVID-19 highs. Schemes such as production-linked incentives could encourage OEMs and large auto component vendors to advance their investment plans, targeted at exports.
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