According to the rating company Crisil, the revenue of the Indian market for electric vehicle (EV) components is predicted to increase at a compound annual growth rate of 76 %to INR 72,500 crore in fiscal 2027 from INR 4,300 crore last fiscal.
According to Crisil’s most recent report, this will increase the share of EVs in the market for automotive components from the present minimal 1 percent to 9–11 percent, even while the supply of parts for ICE-powered vehicles also increases.
“Improving cost viability of EVs versus ICE vehicles, and rising consumer demand for environmentally cleaner mobility will drive the transition to EVs. Among the key auto segments, two-wheelers and passenger vehicles (PVs) are seen driving the transition, with their penetration rising to 19% (from -2.5% currently) and 7% (from less than 1% currently), respectively, over the next five fiscals,” Pushan Sharma, Director, Crisil Research.
He added that due to poor economic conditions, the penetration rate for commercial cars, the second significant auto market, will be 3 percent rather than the current 0.3 percent.
According to a Crisil survey of 220 manufacturers, who make up a third of the auto components market, the switch to EVs will present both possibilities and problems for local manufacturers of vehicle components.
“EV components such as batteries (60% of EV component revenue by FY27), drivetrains (15%), electronics (15%), and others (10%) present an opportunity for auto component makers to diversify their revenue base beyond ICE vehicles. Companies are already investing in developing electric components, both with established ICE original equipment manufacturers (OEMs) and with new-age, pure-play EV makers. Almost 90% of the EV component supplies will be for two-wheelers and PVs,” Naveen Vaidyanathan, Director, Crisil Ratings, said.
According to the rating agency, body parts, chassis, suspension, electrical, brakes, lighting, and seating provide around 75% of the revenue for producers of conventional vehicle components. These components are also found in EVs, therefore growth shouldn’t present a problem for them. Companies may need to partially re-engineer their goods for EVs, but Crisil indicated that they will be able to do so with small investments.
The move to EV could present difficulties for the remaining 25% of car component suppliers that cater particularly to ICE engines and transmission components.
“These include parts such as starters, alternators, fuel injectors, radiators, gearbox, clutch, pistons, cylindrical block and exhaust system critical in an ICE vehicle but redundant in EVs,” the report said.
However, since the changeover in two-wheelers is predicted to be quicker, auto component manufacturers with concentrated exposure to this market will be more at risk than those who supply PVs or CVs. As an example, the revenue of auto component companies evaluated by Crisil Ratings is only around 6% accounted for by engine and transmission component manufacturers who primarily sell two-wheelers.
Relevantly, it was discovered that the bulk of car component manufacturers (50%) serve several end markets. By providing EV components and expanding their portfolios of non-auto and industrial items, companies are also attempting to reduce the risk associated with their models.
All said, given the pace of transition to EVs, individual companies could gain or lose disproportionately depending on their product portfolio, customer mix, ability to re-engineer, and balance sheet strength. These would be monitorable in the road ahead.
All things considered, depending on their product portfolio, client mix, ability to re-engineer, and finance sheet health, individual companies could win or lose disproportionately given the velocity of the shift to EVs. These could be kept an eye on in the future.
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