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May 04, 2018

Sector Report: Automotive Components

This report is available to users in India for ₹40,000 + applicable taxes

 

Table of Contents

 

  • Summary
  • Domestic - Short term demand
  • Domestic - Long term demand
  • Exports - Short term demand
  • Exports - Long term demand
  • Profitability

 

Summary

 

Domestic auto-component production grew at 6.9% in fiscal 2017

 

  • In fiscal 2017, original equipment manufacturers' (OEM) off-take grew about 8%
    • Domestic sales accelerated with a buoyant monsoon aiding growth in rural-dependent segments
      • Tractor sales grew at a healthy 17% in fiscal 2017. However, the cash crunch after demonetisation watered down the positive impact of a good monsoon, particularly for two-wheelers (H1 growth: +17% YoY; 2016-17 growth: +6.9%).
      • For commercial vehicles (CV), lower demand in the medium and heavy commercial vehicles (MHCV)segment was offset by healthy 8% growth in light commercial vehicle (LCV) segment. Lower replacementdemand by large fleet operators (LFO) led to 1% decline in MHCV sales in fiscal 2017
  • We estimate exports to have grown marginally, by 1%, in fiscal 2017, mainly due tofall in demand from USA and stable demand from Europe

Domestic auto-component production to grow at 11-13% in fiscal 2018

 

  • In fiscal 2018, OEM off-take is projected to grow at 13-15%
    • Demand from two-wheeler segment is expected to accelerate (12-14%) as cash situation improves
    • Commercial vehicle sales are expected to grow 14-16%, driven by LCV sales,due to better demand from consumption-driven sectors. Demand from freightgeneratingsectors, such as infrastructure, container traffic, auto carriers, andcement is expected to drive volumes in the MHCV segment
    • Passenger vehicle sales will accelerate 9-11% on account of momentumwitnessed in premium hatchbacks and compact sports utility vehicles ( SUV)
  • Realisation will grow on account of sale of high value BS IV components and passingon of raw material price increase. Exports, after growing marginally in fiscal 2017 willsee positive 7-9% growth in fiscal 2018, owing to revival in Class 8 truck sales in US. Also, European Union (EU) and South Asia are showing revival signs.
  • We expect the organised aftermarket to benefit from the goods and services tax and increasing presence of LFOs