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Table of Contents
Domestic - Short term demand
Domestic - Long term demand
Exports - Short term demand
Exports - Long term demand
Auto-component production to grow at 13-15% in fiscal 2019 supported by healthy demand from OEM and exports
In fiscal 2019, OEM off-take is expected to grow by 16-18% as :-
Commercial vehicles production is expected to grow by 22-24% due to a strong government focus on road construction, infrastructure and also due to an increase in private consumption. Healthy replacement demand for light commercial vehicles and a revival in end user segments will also bolster CV growth in FY 19.
Total production of two-wheeler is expected to increase by 9-11% due to healthy rural sentiments and new model launches. The government's effort to boost farm incomes is expected to boost motorcycle and tractor volumes in FY19.
Cars and UVs contribute ~50% of OEM segment revenue and we expect a growth of 8-10% in FY19 due to new small car launches like the Maruti Swift and the upcoming Hyundai Santro coupled with a growing demand of UVs.
Realisations will grow on account of vehicle price hikes and passing on of raw material price increase. Basic raw material index is expected to increase by 11% in fiscal 2019.
We expect the organised aftermarket to benefit from the goods and services tax (GST) and replacement demand to remain healthy.
Exports are expected to grow by 9-11% in fiscal 2019 mainly on account of improving global economic conditions and thedepreciating rupee. In major export destinations, such as USA, auto sales mainly class 8 trucks have grown by 70% in CY2017 and are expected to record strong growth in 2018. Another major economy, Europe has also shown signs of revival. Autocomponent exports to other emerging economies such as South East Asia and Latin America have also shown substantialgrowth and will continue to drive demand in fiscal 19. Crude oil price is expected to move north which signals improvement inMiddle East economy.
Imports are estimated to grow at a higher pace of 9-11% despite anti dumping duties and localisation efforts by the players asdomestic demand is expected to drive growth. Higher imports of components pertaining to safety (due to various mandatoryregulations), body parts, etc. continue to contribute to the import growth. In the long term, availability of new technology due tocollaboration of the domestic players with foreign players and localisation efforts by the OEMs will keep imports in check.
We expect auto component demand to remain healthy in FY20 on account of strong growth across asset classes. As the BS VIemission norms are expected to come into effect in FY21, this would result in a price increase across all automobile segmentsand pre-buying of cheaper BS IV vehicles in FY20 is likely to drive volumes up. A strong domestic demand and a pick up inexports is expected to aid overall auto components growth in FY20.