MSME component manufacturers hopeful but not sure of double digit growth in auto sector

New Delhi, 26 Oct (KNN) According to CRISIL SME Tracker, growth in demand for automotive components is on track to accelerate in the current fiscal year (FY 22), due to various factors such as increase in automobile purchases after relaxation of pandemic restrictions and reopening.

The analytical company noted that despite of semiconductor shortage, the increasing desire for personal mobility is driving passenger vehicle and two-wheeler sales growth.

“Small and medium enterprises (SMEs), which account for one-third of the sector, were badly hit in FY 21 due to the pandemic and countrywide lockdowns. Now, they are set to rebound due to demand recovery in the auto segment, states the CRISIL SME Tracker.

Having said that MSMEs do not see any substantial reason to estimate such a growth.

To get insights in view of MSMEs, KNN spoke to Gurugram based industrialist, S.K. Jain, Managing Director (MD) of Solo Components Private Limited and he said, “Definitely this year is better than the previous year for automobile sector and in context of exports, things are going well but the lack of shipping containers is gradually going to create an impact,” opined Jain.

Further CRISIL has stated that, revenues of auto-component SMEs could increase 10-14 per cent year-on-year (YoY) in FY 22, primarily due to demand recovery from tier-1 units catering to original equipment manufacturers. Replacement demand, the other major source of revenue, is picking up as well due to pent-up demand.

Exports are also expected to recover strongly, since demand from key destinations such as the US and Europe has been picking up steadily.

It has expected that SME clusters in Pune, Chennai, the national capital region, and Aurangabad to grow 11-15 per cent and operating margins for the SME sector to expand 180-230 bps YoY due to demand revival.