Auto component replacement demand is estimated to grow 6-8% in the following fiscal pushed by components equivalent to the rise in mobility and wholesome freight motion, amongst others, credit score rankings company Icra mentioned in a report on Friday.
The enchancment in demand has resulted in a constructive affect on money flows for aftermarket sellers and garages whereas the liquidity stays snug, Icra mentioned.
Also, there have been comparatively minimal points in the gathering of receivables, in accordance to the report.
Icra additionally mentioned whereas the medium-term demand prospects are beneficial, EV adoption, implementation of scrappage coverage, component lifetime elongation, and doable elevated use of public transport vis-à-vis non-public autos might cap the expansion.
The aftermarket section constitutes round a fifth of the general demand and stays an important cog in the Indian auto component business, it mentioned.
The common age of medium and heavy business autos had elevated to nearly 10 years, whereas the typical age of passenger autos had risen to 7.3 years in FY22, the very best in the previous twenty years, in accordance to Icra.
“Icra projects replacement demand growth at 6-8% in FY24, supported by underlying demand drivers, including the increase in mobility, improving economic activity, and healthy freight movement,” it mentioned.
The replacement section has additionally benefited from the postponement of latest car purchases due to growing inflationary stress and elongated ready durations, particularly in the PV section, it famous.
“Original equipment manufacturers (OEMs) have undertaken periodic price hikes across segments in the last two to three years because of the changes in regulatory norms and cost inflation.
Further, the semiconductor shortage and supply-chain issues have resulted in an increase in vehicle wait times.
“The increase in vehicle prices, along with higher wait time, have resulted in deferred purchases and necessitated replacement, wherever required,” mentioned Shamsher Dewan, senior VP and Group Head for Corporate Ratings at Icra.
With the deferral of auto purchases since FY20, the proportion of the business car fleet older than 10 years elevated significantly and was nearly half of the M&HCV (medium & heavy business car) inhabitants in FY22 and first half of FY23.
Similar developments are seen for LCVs (gentle business autos) older than 5 years, which now account for nearly two-thirds of the LCV inhabitants, it mentioned.
The credit score rankings company additionally famous that the rise in car half and ageing of autos on the highway augurs nicely for auto component replacement demand.
Demand for used vehicles, in accordance to Mr. Dewan, stays wholesome, aided by the expansion of organised gamers, elongated wait durations for brand new vehicles, and enhancing financing penetration.
This aside, lowered imports and progress in the proportion of branded elements, deeper penetration in rural/semi-urban areas, amongst others, are probably to facilitate progress in replacement demand over the medium time period, emphasised Mr. Dewan.
“EVs will have significantly fewer parts compared to a traditional ICE vehicle, thus reducing maintenance requirements. Also, the sale of engine and transmission products could be impacted by EV adoption,” he added.
According to the credit score rankings company, whereas car eligibility for scrappage by classic stays important, precise scrappage is probably going to be decrease as older vehicles are typically used in hinterlands for short-haul operations by operators and are unlikely to get replaced.
