India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the auto sector for FY25, forecasting a moderate domestic sales volume growth rate of 6%-9% as against 12%-14% growth in the previous fiscal.
The personal-mobility segments namely passenger vehicles (PVs) and two-wheelers (2Ws) would continue to grow, though at moderated rates, driven by improving consumer sentiments and higher disposable income, it said on Wednesday.
However, slower pace of infrastructure and other industrial activities in 1HFY25, amid the upcoming Lok Sabha 2024 elections along with higher base achieved over FY22-FY24, could lead to flattish sales in the commercial vehicles (CV) segment, the firm predicted.
“Demand would be backed by personal consumption factors including higher disposable income, and recovery in consumer sentiments, though drying up of pent-up demand will moderate the growth rate, “said Shruti Saboo, Director, Corporate Ratings, Ind-Ra.
Also, despite continued infrastructure spending, ongoing capex and improving industrial production, CV sales could moderate due to the interruptions related to the 2024 Lok Sabha elections, she further said adding, “Trends of premiumisation will continue, supporting sales of utility vehicles and more than 150CC motorcycles, “
Neutral for ancillary segment
India Ratings and Research (Ind-Ra) has maintained a neutral outlook for the auto ancillary sector for FY25, as it will continue to benefit from the increasing content per vehicle amid the premiumisation trend, regulatory changes, transition to electric vehicles (EVs) and increasing order book as global original equipment manufacturers (OEMs) look to diversify their manufacturing/supply base.
However, a moderation in demand from domestic commercial vehicle (CV) OEMs and subdued exports could limit the revenue growth to 6%-8% yoy in FY25, after recording double-digit growth over FY23-FY24, the firm said.
“Auto ancillaries are likely to experience demand tailwinds on the back of increasing premiumisation, EV push, and localisation. However, FY25 could be impacted due to a moderate demand from domestic CV OEMs and subdued exports. Profitability could remain flattish due to stable raw material prices and better operating leverage,” said Ms. Saboo.
