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Rating agency ICRA has revised downwards the revenue growth forecast for the auto components industry in the current fiscal (FY22) by 200 bps to 15-17 percent from the earlier estimates, citing the impact of the Omicron wave, delayed recovery in semiconductors shortage and muted two-wheelers demand. It, however, said despite the potential Omicron impact, the domestic aftermarket demand is expected to grow 8-10 per cent in FY22 while exports remain a bright spot in the Indian auto component story with an estimated growth of over 20 per cent this fiscal.

According to the report, most domestic original equipment sub-segments are expected to register healthy volume growth in FY2022, albeit, on a low base of the last fiscal. It said pass-through of commodity prices will also inflate revenues by 4-5 per cent. However, certain segments like two-wheelers (2W) and buses will be impacted by the Omicron wave. It also stated that easing of COVID 2.0 related lockdown restrictions and improvement in personal mobility, healthy freight movement and pent-up demand arising from deferment of purchases last year, supported replacement sales for auto components in Q2 and Q3 FY2022. It added that while there could be some impact on mobility because of the ongoing COVID wave, freight movement and deferment of fresh vehicle purchases will result in healthy replacement demand in Q4 FY2022.

On the export front, the rating agency said the Indian auto component suppliers have reported a healthy improvement in sales volumes to Europe in year-to-date FY22 and have a strong order book for the next few months, partly aided by the 'China+1' strategy. It said the third quarter has been relatively dull because of supply-chain issues, and the export order book for Indian auto component suppliers would have been even better if not for the chip shortages. It noted that relatively high infections and prolonged lockdowns in India's key export markets like Europe and the US remain a downside risk. However, over the long term, it said premiumisation of vehicles and focus on localisation will translate into relatively stronger growth for auto component suppliers.