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ICICI Securities Report
Post getting impacted by 18-20% total cost of ownership inflation across sub-segments in the sector along with demand disruption on account of Covid-19 led lockdowns, demand across majority of the sector has gone back to levels seen ~10 years ago.
Elevated raw material costs further added to the weak operating leverage of the players. We believe, in FY23E-FY24E, with no major driver of total cost of ownership and stabilising raw material basket cost, auto original equipment manufacturer space is set for both demand and margin revival.
Within the space, we are more positive on commercial vehicles on account of sharp cyclical revival expectation. Electric two-wheeler mix is expected to reach ~10% of two-wheelers by FY24E, post which the real upsurge is likely to happen as local battery pack manufacturing kick starts.
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