Sona BLW, Samvardhana Motherson: ICRA cuts FY26 revenue growth outlook for auto component sector to 6-8% on US tariff

Credit rating agency ICRA has revised downward its revenue growth forecast for India's auto component industry led by heavyweights like Samvardhana Motherson, Sona Sona BLW Precision Forgings, UNO Minda, Minda Corp and among others, projecting a growth of 6-8% for FY2026, compared to an earlier estimate of 8-10%.

The revision follows the steep hike in import tariffs recently imposed by the United States, which is expected to trigger a mid to high single-digit decline in exports to the US.

According to ICRA, the new US tariffs could add an incremental cost burden of around Rs 9,000 crore across the supply chains. How this cost is ultimately distributed between US consumers, importers and Indian exporters will depend on factors like competitiveness and price elasticity.

The agency also warned that operating margins could moderate by 50-100 basis points to 10.5-11.5% in the current financial year. Exporters could face a sharper margin erosion of 150-250 basis points.

“The situation remains fluid as tariff actions are evolving and trade negotiations are ongoing," ICRA noted in its latest report.

Despite the headwinds, India's auto ancillary industry remains resilient, with more than 70% of revenue coming from domestic markets. The US accounted for around 8% of total industry revenues in FY2024. Between FY2020 and FY2024, auto component exports to the US registered a strong compounded annual growth rate (CAGR) of 15% on the back of rising supplies to new platforms, vendor diversification by global original equipment makers (OEMs), higher value addition and favourable forex movements.

ICRA does not foresee an immediate loss of business from US customers, citing high switching costs and lengthy product development and approval cycles. Moreover, it highlighted potential medium-term opportunities for Indian manufacturers due to improved cost competitiveness against Chinese suppliers. Some exporters have already reported an uptick in enquiries from US importers in recent weeks, ICRA noted.