While analysts have forecast a slowdown in the auto-components industry with growth moderating to 5-7 per cent in FY25, as opposed to 14 per cent last fiscal, several companies are trying to focus on diversifying their markets, forging international collaborations, strengthening supply chains to minimise disruption risks, and optimising costs to navigate the anticipated slowdown.
Industry players are optimistic about improving operating margins, driven by factors such as better operating leverage, increased component value, and higher content per vehicle. However, the sector remains vulnerable to fluctuations in commodity prices and exchange rates, which could pose challenges to margin stability.
While the industry grapples with these headwinds, several companies are proactively implementing strategies to mitigate the impact of slower growth.
Naoya Nishimura, chief executive officer for India and Africa at Musashi, emphasised the company’s resilience, stating, “As of now, it is too early to predict the year’s actual growth due to market volatility. However, our business operations and revenue projections remain unaffected, and we expect healthy growth. Our strategic expansion into new business areas and entry into the EV sector will help us navigate any potential slowdown.” He further highlighted the potential for steady growth in car sales and the auto component industry due to India’s growing population and low per capita car ownership.
Although the auto component sector is expected to face challenges, the electric vehicle market is growing due to consumer demand and government subsidies. Jitendra Patil, managing director of ARENQ, an EV batteries manufacturer, commented on the potential impact of the projected slowdown. He stated, “While there is an expected slowdown in the auto components industry, our EV battery business might be less affected. EV adoption is surging, potentially offsetting the slowdown. Limited EV battery production in India creates a supply shortage, benefiting our company. Government support for EVs could further insulate our business.” Patil also noted the importance of re-evaluating revenue projections based on EV market research and exploring new markets beyond domestic original equipment manufacturers (OEMs) to navigate the slowdown effectively.
To mitigate the impact of the anticipated slowdown, ARENQ is implementing various strategies such as diversifying its market, which includes looking beyond domestic OEMs and seeking partnerships with international players, and focusing on cost optimisation to ensure competitiveness in a challenging market. “These strategies position us to navigate the slowdown and become a leader in India’s EV battery market,” Patil added.
In efforts to diversify their market, Swapnil Jain, managing director of Pavna Industries, commented on the anticipated slowdown, “The slowdown will not impact our business operations and revenue projections as we are still in a developing stage. To mitigate the impact of slower growth, we are increasing our customer base in South India, focusing on growth in the EV sector, and diversifying into the manufacturing of agricultural components. We are also implementing cost reduction at the plant level to ensure competitiveness.”
Bharat Forge’s joint managing director, Amit Kalyani, echoed a similar sentiment in the fourth-quarter investment call, stating, “FY25 will see a lot of progress in and growth in the e-mobility vertical. I am confident that given the multiple growth engines, we should see strong growth for FY25 and our ROC to incrementally keep growing and cross the 20 per cent mark in the next two years. By the next quarter, our US capacity utilisation will reach 100 per cent for Phase-1, and by 2026-27,” Kalyani said.
Industry experts believe that while the slowdown is a concern, factors such as stable replacement demand, growing preference for premium vehicles, and potential EV production growth could offer opportunities for growth and recovery.
First Published: Jul 15 2024 | 7:24 PM IST
