Indian automotive component sector likely to clock 7-9% revenue growth in FY26: Crisil

Ratings agency Crisil has said that the domestic automotive component sector is expected to clock 7-9% revenue growth this fiscal (FY26), mirroring last fiscal, driven by sustained demand momentum from two-wheelers and passenger vehicles segments, especially utility vehicles, which account for nearly half of the overall revenue. It also said that while a moderate uptick in commercial vehicles and tractors sales (around 17% share) will provide an additional tailwind, the aftermarket segment (15% share in revenue) is seen ticking along steadily at 5-7%.

However, weak demand for new vehicles in the US and Europe (around 60% of India's exports) presents headwinds. Poonam Upadhyay, Director at Crisil Ratings, said, ‘Demand from automotive OEMs, contributing two-thirds of total revenue, is expected to grow 8-9% this fiscal, with value outpacing volume on rising safety, emission and electronic content, especially in PVs and 2Ws.’

The aftermarket segment will log a steady 6-7% growth, supported by an ageing vehicle base, she said, adding export growth, however, will moderate to 7-8% amid weak demand for internal combustion engine vehicles and a deceleration in electric vehicle adoption across the US and Europe. The US, while contributing just around 5% to total revenue, commands a dominant 28% share of export earnings and is the fastest-growing auto component market, said Crisil.

Besides, ratings agencies said the 25% tariff planned by the US can hurt companies heavily reliant on this geography. According to it, operating margins are seen stable at 12-12.5%, driven by the growing share of high-margin components such as ADAS (Advanced Driver Assistance System) modules, infotainment systems and advanced braking.