Ratings agency ICRA revised downwards
the growth forecast for the auto components industry by 300 basis points for
the ongoing fiscal year citing the impact of semiconductor shortage.
According to ICRA, the components
industry is now expected to grow at 17-20% in 2021-22, partly aided by growth
driven by domestic OEM, replacement and export volumes. The healthy volume
growth would, however, come on a low base of FY2021. The growth forecasts have
been revised downward by 300 bps from the earlier estimates due to the impact
of semiconductor shortage on domestic OEM and export revenues.
The operating profit margin (OPM) of
auto ancillaries (excluding tyre manufacturers) will remain lower than normal
levels (FY2020), it said, adding the industry's exceptionally weak performance
during first quarter of 2020-21 due to the strict lockdown, dragged last year's
ICRA Assistant Vice President Vinutaa
S said the underlying demand remains strong, though near-term challenges on
supply-chain and commodity inflation persist and that pent-up demand and
increase in economic activity will support aftermarket revenues. Part of the
revenue growth for the components industry would also come in from commodity
pass-through. The export orderbook, both to the US and Europe, remains healthy.
ICRA said that auto component
manufacturers have reported healthy improvement in exports volumes and healthy
order book over the next few months. In the USA market, North American Class 8
trucks (bigger than heavy duty trucks) OEMs have continued to witness healthy
order inflow. While this will benefit auto-ancillaries' dependent on healthy
class 8 truck orders for the next few quarters, semiconductor shortage remains
ICRA also said that in the near-term, semiconductor shortages and
related supply disruptions remain a challenge. Given the fact that the
automobile supply chain being long and complex, OEMs and tier-Is typically
follow just-in-time (JIT) inventory management practices.
Source: The Economic Times
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