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Rating agency ICRA in its latest report has said that the auto component industry is likely to see a lower contraction in revenue at 6-8 percent in the just-concluded financial year (FY21) as against previous forecast of 12-15 percent, on account of better-than-expected demand pick up across most of the sectors. It said passing of commodity prices and change in emission norms has also resulted in a 4-6 percent increase in realisations, partly supporting revenue growth during H2 FY21.

According to the report, the rebound in the current financial year (FY22) is expected to be strong at 20-23 percent, benefitting from demand pickup, the low base of FY21 and the impact of commodity prices on realisations. It said that industry revenue collapsed by approximately 60 percent Q1 FY21. It added that headwinds from disruption in automotive production due to supply chain constraints (primarily due to semi-conductor shortage globally) could play spoilsport in Q1 FY22 and maybe even beyond.

The report further said localised lockdown due to the recent spike in COVID-19 infections could also derail the growth momentum of the industry as footfalls to dealerships may shrink and remains monitorable and added that the overall revenue CAGR during FY20-2025 is likely to remain modest at 7-9 percent. It stated that automobile production volumes during H2 FY21 was significantly better than H1, capping the overall production volume decline for the fiscal. It said the aftermarket segment also witnessed sequential recovery from Q2 FY21, with the opening up of the economy, pent-up demand, delayed replacement of vehicles and festive season demand.