Two-Wheeler OEM Demand in India Projected to Experience Double-Digit Growth in FY25
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New Delhi, Dec 3 (NationPress) The demand from two-wheeler original equipment manufacturers (OEMs) in India is anticipated to witness double-digit growth this fiscal year (FY25), according to a report released on Tuesday.
The operating profitability of auto component manufacturers is expected to maintain levels of 12-13 percent this fiscal year and the following year due to improved realizations and cost-cutting measures, as per a Crisil Ratings report.
Investment in capital expenditures is forecasted to increase, mirroring the trends observed in the automobile OEM sector, where passenger vehicle (PV) manufacturers are expanding their production capacities over the next 3-4 years.
Nonetheless, much of this capital investment will be financed through healthy cash flow generation, with minimal dependence on debt, thereby keeping credit profiles stable, the report stated.
Crisil Ratings Senior Director Anuj Sethi mentioned that demand from two-wheeler OEMs is likely to exhibit double-digit growth this fiscal and the next, while other OEM segments may experience modest demand, which could limit the overall growth of OEMs.
The replacement segment is expected to maintain a revenue growth of 8-9 percent, supported by strong automobile sales from previous years.
India's increasing share of high-margin, critical components—which represents approximately 60 percent of export revenue in the fiscal year 2024—will bolster profitability.
Furthermore, cost optimization and moderate realization growth driven by premium offerings in PVs and two-wheelers, along with advanced electric vehicle (EV) components, will enhance sector profitability at 12-13 percent, the report highlighted.
At present, a significant portion of EV components is imported from China and other nations.
Crisil Ratings Director Poonam Upadhyay noted that with the expected surge in EV adoption, companies are progressively investing in capacities for EV-related components.
Moreover, pledges to the PLI 2 scheme and increased expenditures by OEMs are likely to boost the capital expenditures of automotive component manufacturers.
“The companies rated by us are projected to invest Rs 16,500 crore each in the current and next fiscal years, representing a 25 percent increase from fiscal 2024. However, strong balance sheets and cash flows will limit the need for external borrowing, ensuring that debt protection metrics remain stable,” Upadhyay added.
