Auto Component Makers Bet Rs 22000 Cr On EV Capabilities Crisil

India’s automotive component industry is expected to maintain a stable credit outlook this fiscal, supported by strong cash flows and limited debt, despite a continued capex of around Rs 22,000 crore to scale up electric vehicle (EV) capabilities, according to a Crisil Ratings analysis.

The sector is projected to record 7–9% revenue growth, mirroring last year’s performance, driven largely by demand in the two-wheeler and passenger vehicle segments, especially utility vehicles, which together account for nearly half of the industry’s revenue.

Despite rising automation and precision manufacturing linked to the growing number of EV model launches, EVs continue to form just 4% of passenger vehicle volumes, limiting their immediate revenue impact.

Crisil said that core financial metrics remain healthy, with interest coverage at around 9 times and debt-to-EBITDA at 1.3 times, similar to last fiscal. However, it cautioned that global demand trends, volatile input costs, and new US tariffs on auto components could weigh on exports.

“Demand from automotive OEMs, contributing two-thirds of total revenue, is expected to grow 8–9%, with value rising faster than volume due to increased safety, emission, and electronic content,” said Poonam Upadhyay, Director, Crisil Ratings. She added that the aftermarket segment is likely to grow 6–7%, while exports could slow to 7–8%, hit by weaker demand in the US and Europe.

The US accounts for only 5% of total sector revenue, but makes up 28% of exports. The planned 25% tariff on certain components by the US could pressure margins for export-reliant firms.

“The share of high-margin, tech-intensive components has risen to 27% of revenue from 18% pre-COVID, helping maintain operating margins at 12–12.5%,” said Anil More, Associate Director, Crisil Ratings. “But for firms heavily dependent on the US, margins could shrink by 125–150 basis points due to limited ability to pass on the added cost.”

Declining input prices for key materials like steel, aluminium, and plastics, which comprise the bulk of manufacturing costs, are expected to support profitability.

Despite global headwinds, high capex will continue, largely funded by internal accruals, keeping external borrowing low and credit profiles intact, the report said.