Auto component industry to see moderate growth this fiscal: ICRA

PTI, Jul 11, 2024, 2:56 PM IST

The Red Sea crisis is likely to impact the margins of the auto component industry over the next few quarters amid higher container rates and shipping time, credit ratings agency ICRA said on Thursday, projecting a moderate growth for the industry this fiscal.

Close to two-thirds of the auto component exports are made to North America and Europe, and one-third of the imports is made from these regions, as per the ratings agency.

“The disruption along the Red Sea route has resulted in a surge in container rates by 2-3 times in YTD (year-to-date) this calendar year compared to CY2023, while shipping time has also increased by around two weeks,” ICRA said.

The operating margins are set for a year-on-year improvement of around 50 basis-points in FY2025, benefitting from better operating leverage, higher content per vehicle, and value additions, while remaining exposed to any sharp volatility in commodity prices and foreign exchange rates, it said.