Auto component manufacturers have emerged from the demand slump leaner and tougher, having streamlined costs, improved productivity, made judicious investments and acquisitions apart from conserving cash. Now back on the growth path, it is estimated that the sector is to report 33.7% earnings compounded annual growth rate (CAGR) over FY09-12.
Driven by strong domestic demand, export recovery and cost-efficiency gains, it is expected that companies such as Bharat Forge, Apollo Tyres, Motherson Sumi and Amtek Auto to post sound domestic growth. The auto sector as such is likely to report a 12% volume CAGR over FY09-12, said a research done by Anand Rathi Financial Services Ltd.
Boosted by a strong growth in two-wheelers and cars, India is already one of the world?s largest two-wheeler markets and an established small-car global manufacturing hub. It is expected that the nascent recovery in export demand to gather steam as the US and European Union auto demand will recover in FY11 after hitting bottom in calendar year 2008 and 2009. The last few months recovery should drive exports and improve overseas subsidiaries? growth, the research pointed out.
Auto component companies have emerged leaner and more efficient from the downturn in the second half FY09. They have conserved cash, reduced costs, improved productivity and in many cases, made judicious investments and acquisitions. It is evident from the fact that companies such as Bharat Forge, Apollo Tyres, Amtek auto and MSS have shown strong business model; improved operating performance, incorporating synergies of merger and size and diversified into other areas to offset downturn, the research pointed out.
To prove it further, the auto sector?s cumulative production growth between April and August this fiscal will see a sharp rise in demand for the components in the months to come. A 11.5% production growth of the overall auto sector, particularly the 13.5%, 12%, 22% and 18% growth of passenger cars, passenger vehicles, light commercial vehicles and two-wheelers, respectively will definitely spur the demand for components, the research pointed out. In addition to the above, a strong revival on the exports front would also fuel further demand for the components.