Ease of Doing Business for MSMEs: Auto-components industry’s revenue is likely to grow by 19-21 per cent year-on-year in the current fiscal year, said ratings and risk advisory firm CRISIL Research, according to a report by the Business Standard. 

This growth will be driven by four factors: strong demand from the original equipment manufacturers (OEMs), increase in sales of passenger vehicles which is expected to surpass pre-Covid levels and stability in tractor demand, recovery in sales of commercial vehicles (CVs) and two-wheelers from the pandemic-driven slump over FY21 and FY22, improving exports triggered by the supply-chain derisking strategy of global OEMs; and demand from the aftermarket segment.

Also Read: Finance Ministry asks 92 CPSEs to register on the TReDS platform

The report anticipates that micro, small and medium enterprise (MSME) players in the automotive components sector should see increased growth as well, but the average industry revenue growth will be subdued in comparison due to lack of vertical integration.

Auto-component MSMEs revenue that accounts for a fourth of the industry’s total revenue picked up in FY22 after plunging in FY21. It is further expected to grow 16-18 per cent year-on-year in FY23 on demand recovery for Tier-1 suppliers catering to OEMs.

Besides that, two-wheeler sales may boost amidst improving rural incomes and re-opening of schools and colleges. Factors that will influence growth in demand of commercial vechicles are surging freight demand, improving transport profitability and better construction activities. 

Another source that boosts the revenue of the sector is replacement demand which is increasing due to higher vehicular movement. However, the slow movement of exports is a clear result of the global economic slowdown.

Also Read: Shiprocket goes live on government’s e-commerce platform ONDC as its first inter-city logistics provider

A lack of increase in the commodity prices such as steel, aluminium and plastic in tandem with the increase in demand is leading to a positive operating leverage due to which the margins will improve by 20-40 basis points year-on-year to 7.5-8.5 per cent, the report added. 

Moreover, the MSME clusters in Pune are expected to grow by 14-17 per cent, and Pantnagar and Aurangabad by 19-22 per cent.