EV Push Grows, but Auto Ancillaries Still Navigating Challenges

As part of our smallcase rebalance reading this month, we analysed key sectors to understand where underlying tailwinds and risks are building. This article takes stock of India’s auto ancillary sector in Q4 FY25, a quarter marked by uneven global demand, shifting electrification strategies, and widening performance gaps among players.

The auto ancillary space in Q4FY25 reflected a sector navigating a highly bifurcated growth landscape, with strong momentum in domestic and EV-focused businesses, and continued drag from export markets, cost inflation, and policy overhangs. Even as OEMs stabilised, ancillaries saw diverse performance shaped by end-customer exposure, product mix, and electrification bets.

Demand Trends: India Up, Global Still Soft

Domestic demand provided a modest lift, especially in premium or EV-linked categories. However, exports remained a consistent drag, particularly in Europe and select APAC markets.

• Endurance saw 9% domestic revenue growth and a 17% jump in Europe despite weak car registrations, highlighting strong OEM relationships.
  
• CIE Automotive reported a 19% revenue fall in Europe, worse than the region’s 7% volume drop.
  
• Sundram Fasteners, Exide, Amara Raja, and Apollo Tyres all flagged weak export demand, especially from Europe and Southeast Asia.

Domestic growth pockets included UNO Minda (switches, casting) and Amara Raja (home inverters, 4W batteries).

Margins: Wide Divergence, One-offs Common

Margin performance was highly uneven, with several companies impacted by one-offs, higher input costs, or expansion-related inefficiencies.

• Endurance and UNO Minda delivered strong EBITDA stability with industrial scale-up and government incentives aiding Endurance margins (up 110 bps QoQ).
  
• Sona BLW, Suprajit, and Apollo Tyres saw margin erosion due to model transitions, restructuring costs, and high input expenses.
  
• Tyre makers (Apollo, Balkrishna) battled volume stagnation and higher raw material costs, leading to margin declines of 400–420 bps YoY.

Cost pass-throughs were partially effective:

• Exide and Amara Raja implemented multiple price hikes to combat lead and antimony cost inflation.

Suprajit faced headwinds from receivable write-offs and customer losses, with recovery expected by Q2FY26.

EV Bets: Who’s Doubling Down and Who’s Holding Back

EV-linked revenue, product development, and capex were key differentiators this quarter, with several suppliers accelerating EV-specific capacity, JVs, and product lines.

• Sona BLW’s EV revenue grew 38% YoY, now 36% of total revenue, and 77% of its ₹2.4 lakh crore order book is EV-based.
  
• UNO Minda approved a ₹420 crore EV powertrain plant and entered high-voltage components via a JV with Shuzhou Innovations.
  
• Tube Investments’ TI Clean Mobility grew 116% in EV volumes YoY and aims for EBITDA breakeven in FY26.
  
• Endurance is entering EV battery packs and 4W braking/suspension through multiple partnerships.
  
• Exide and Amara Raja have invested aggressively in lithium-ion gigafactories (6 GWh and 16 GWh plans respectively), with trial production targeted between CY25–27.

However, EV demand normalisation in Europe and the withdrawal of subsidies in some markets led to slower-than-expected scale-up at players like Suprajit and Sundram, who flagged under-recoveries on US EV supplies.

Global Exposure: Tariffs, Europe Weakness, and Rebalancing

Export-exposed players continued to grapple with policy shocks and weak macro:

• CIE and Sundram highlighted rising uncertainty from the U.S.–China and EU trade tensions.
  
• Sona BLW and Samvardhana flagged tariff risks from U.S. and European policy changes, though both are working on USMCA/localised compliance strategies.
  
• Suprajit is shifting sourcing from China to India/Morocco to manage tariff risk, and Sona is investing in Mexico despite some uncertainty.

Europe-heavy players like Apollo and Balkrishna suffered margin pressure and volume declines, while Endurance was one of the few outperformers in that market.

Strategic Bets & Capex Discipline

Capex guidance remained focused yet bold, especially for firms betting on long-cycle electrification and premiumisation.

• UNO Minda, Endurance, Amara Raja, and Exide announced greenfield/brownfield projects to serve EVs, energy storage, or premium segments.
  
• Balkrishna Industries has set a bold ₹23,000 crore revenue target by FY30, expanding into TBR, PCR, and OHT, backed by ₹4,000 crore capex.
  
• Tube Investments is also investing in railway orders and adjacent sectors (e.g., medical, CDMO), despite writing off underperforming bets like Moshine.

Companies like Sundram and Suprajit remained cautious, prioritising recovery and operating leverage ahead of fresh expansion.

Conclusion: Transition in Motion, But Not Without Friction

Auto ancillaries closed FY25 in a state of strategic flux—optimistic on domestic scale-up, EV tailwinds, and long-term order books, but challenged by global demand headwinds, cost spikes, and trade barriers.

The quarter reinforced that companies with EV readiness, diversified geographies, and operational agility are best placed to ride the next wave of industry transformation, even as caution remains on near-term margins and exports.

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