JOIN USAuto parts makers look to ride new norms for profitability: Report
A series of upcoming rules and regulations for vehicle safety and emissions, along with increasing adoption of electric vehicles, are likely to help auto parts makers boost revenue and profitability.
Starting from April 1, India's auto industry will move to the Bharat Stage VI-B standard, with passenger vehicle makers required to share the corporate average fuel economy (CAFE-II) scores with the government by the beginning of the new fiscal year, The Economic Times reported.
"Every time emission standards have become tighter and fuel economy regulations tougher, companies like Cummins have succeeded and managed to increase business with every automaker," Ashwath Ram, managing director at engine maker Cummins India, told the publication.
The new norms are also likely to lead to price increases across categories due to requirements of new components, the report said.
"The regulations will help us grow our share in the pie and grow our pie," Ram said, adding that the company has ambitions to expand its business at twice the pace of the country's GDP growth. "We also want to increase our profits by 1 per cent every year till we get to our highest historical levels of profit of 18-20 per cent," he added.
Mandatory deployment of some safety-related features like six airbags, seat-belt reminders for rear-seat passengers and ESC (electronic stability control) has also led to parts manufacturers to watch the space closely.
"Addition of every airbag will improve the realisation for the airbag manufacturer and cost for the buyer," Crisil Research's Hemal Thakkar told the publication, adding that the cost of the vehicle would go up anywhere between Rs 15,000 and Rs 25,000 for four additional airbags.
Be it regulations or electrification, a component maker needs to seize the opportunity at the right time, Anil Kumar, president and MD of SEG Automotive said.