India's Auto Component Sector, Hit by Slowdown and Hammered by COVID-19, May Record 15-18% Dip in FY 2021 Revenues

Chennai, September 5: Amid the COVID-19 pandemic, Brickwork Ratings on Thursday reported that auto component manufacturers are expected to suffer about 15-18 per cent decline in their revenues in FY 2021. Brickwork Ratings also claimed the sector may see a decline of an average of 100 basis points (bps) in their EBITDA due to sharp contraction in demand over what the industry experienced during FY 2020.

Releasing the report, Brickwork Ratings stated that India's auto component manufacturers saw a decline in the revenues by 8-10 per cent after a year-on-year (YoY) increase until FY 2019. This was due to the shrinking order book from Original Equipment Manufacturers (OEMs) due to lower automobile sales in the last fiscal.

Elaborating more, the report stated, "BWR (Brickwork Ratings) expects export revenues to decline as well in FY21 as more than 50 per cent of our exports are to markets in Europe, the UK and the US, and demand from these markets is expected to decline amid the Covid-19 outbreak and postponement of model launches or deferment/cancellation of orders."

Adding more, Brickwork Ratings predicted auto components players will be affected adversely in the first quarter of the current fiscal and the dip in revenues may continue in the second quarter. Though they expect a gradual recovery in vehicle sales from the second half of the current fiscal, the sales of automobiles are expected to decline in FY 2021 due to the postponement of model launches, reduced production levels, supply chain disruptions and the slowdown in new capacity additions.

It is to be known that India exports around 27 per cent of its automotive components production to the US, Germany, UK, Italy, Turkey, UAE and Thailand. Over 50 per cent of exports are to markets in Europe, the UK and the US.

Apart from this, the domestic market has also been impacted due to the shutting-down of dealerships and OEMs until mid-May 2020. Other reasons include labour shortage, the shortage in raw material availability, lower income levels and weaker consumer sentiments.