Premiumisation Fuels Indian Auto Component Suppliers' Growth in the Face of Changing Market Trends

Image Source : financialexpress.com

The Indian automotive industry is experiencing a major shift towards premiumisation, with consumers increasingly turning to higher-end vehicles with sophisticated features. This trend is driving long-term growth for auto component suppliers, as noted in a recent Ambit Capital report. Here's a closer look:

Consumer Preferences:

The proportion of passenger cars with prices over ₹1.5 million has risen by 20 percentage points in the past decade.
Sunroofs, automatic transmission, and sophisticated driver-assistance systems (ADAS) are fueling demand for high-priced components.

Two-Wheeler Segment:

There is premiumisation in two-wheelers, too, with the 125cc and higher category having seen a 19 percentage point rise over the past 10 years.

Impact of Electric Vehicles (EVs):

EVs are opening opportunities for suppliers to supply components such as lithium-ion batteries, traction motors, and battery management systems.
Advanced technology opportunities facilitated by EVs like regenerative braking and intelligent cockpits are also increasing demand further.
India is only contributing 2% to the global auto component industry worth $450 billion but stands poised to up its share in light of the huge domestic market and competitive edges.
Harmonizing emission and safety requirements with international standards increases India's competitiveness.

Challenges and Risks:

Disruption by EV threatens risks to suppliers who rely on internal combustion engine (ICE) parts.
Increased import volume for EV-specialized parts might enhance competitive pressures in the short term.

Future Outlook:

We forecast incremental penetration of EV in two-wheelers (21% by FY29E) and passenger vehicles (10.4% by FY29E) with quicker pickup in three-wheelers.
Premiumisation and technologies should continue to fuel growth for component suppliers.

This trend highlights the revolutionary effect of premiumisation and EV adoption in India's auto industry, creating opportunities for innovation and global competitiveness.

Sources: Tribune India