Crisil Forecasts India Auto Component Margin Decline

S&P Global — CRISIL Ratings has released a report forecasting a decline in the operating margins of India's auto component sector by 100-150 basis points this fiscal year. This moderation from approximately 12% last year is primarily attributed to rising input and freight costs, which are linked to the ongoing conflict in West Asia. Geopolitical tensions are also reshaping global supply chains, prompting manufacturers to maintain higher buffer stocks, increasing inventory levels by 15-20 days. Despite these cost pressures, S&P Global — CRISIL Ratings expects demand from Original Equipment Manufacturers (OEMs) to remain stable, supported by new vehicle launches, infrastructure-led commercial vehicle activity, premiumisation in two-wheelers, and growing electric vehicle adoption. Exports are also projected to grow by 8-9% year-on-year, aided by tariff corrections in the United States, India's largest export market. Larger companies are better positioned to manage the increased working capital burden due to their stronger bargaining power and scale. Overall, resilient revenue growth is anticipated to help maintain stable absolute operating profits for the sector.