India
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 profit margins.
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 an overhang.
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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