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India's automotive component sector is projected to register a revenue growth of seven to nine per cent in the financial year 2025鈥�26, according to Crisil Ratings. This growth mirrors the previous fiscal and will be driven by continued demand for two-wheelers and passenger vehicles, especially utility vehicles which account for nearly half the revenue.

The report notes a moderate recovery in commercial vehicle and tractor sales, while the aftermarket segment is expected to grow steadily at five to seven per cent. However, weaker demand in the United States and Europe鈥攁ccounting for approximately sixty per cent of exports鈥攑oses challenges.

Crisil anticipates stable operating margins between twelve and 12.5 per cent, aided by rising contributions from high-margin components like infotainment systems and advanced driver-assistance systems. Lower input costs for steel, aluminium, and plastics will also support profitability. Nonetheless, new tariffs by the United States could impact margins for exporters.

Despite a capital expenditure of Rs 220 billion, mostly to enhance electric vehicle (EV) capabilities, the sector鈥檚 credit outlook remains stable, supported by strong cash flows and limited borrowing. EVs currently represent only four per cent of passenger vehicle volume, contributing marginally to revenue.

Source:Financial Express