Despite the input cost pressures from multiple fronts, Indian auto component manufacturers have been able to largely protect their operating profit margins (OPM) in Q1 FY2027, supported by price pass-through arrangements and negotiations with customers. Additionally, focus on operating leverage, investments in automation, renewable energy, efficiency improvement and cost control measures have helped offset some of these cost pressures. ICRA expects the margins to remain range-bound at 11.0-11.5% for FY2027, supported by cost-saving and efficiency improvement measures and input price indexation mechanisms largely in place.

• Key commodities such as aluminium, copper, rubber and plastic components, which contribute around 40-45% of the raw material costs of a typical passenger vehicle (PV), have reported significant price volatility in recent months, on account of the geopolitical headwinds, thereby impacting manufacturing costs and earnings of auto component manufacturers.
• The INR has also weakened to record lows in recent months, reaching around Rs. 96/$, with sustained foreign institutional investor (FII) outflows, a strong US dollar and heightened geopolitical uncertainties in global markets.