Demand for automobile component replacement will grow between 6 to 8 per cent in FY2024 on the back of an increase in mobility and freight movement.  

According to ICRA, the improvement in demand has had a positive impact on cash flows for aftermarket dealers and garages.

The automobile replacement segment has also benefited from the postponement of new vehicle purchases due to increasing inflationary pressures and extended waiting periods, particularly in the passenger vehicle segment.

“The semiconductor shortage and supply chain issues have increased vehicle wait times. Original Equipment Manufacturers (OEMs) have undertaken periodic price hikes across segments in the last two to three years on account of the changes in regulatory norms and cost inflation. The increase in vehicle prices, along with higher wait time, have resulted in deferred purchases and necessitated replacement,” said Shamsher Dewan, Senior Vice-President and Group Head – Corporate Ratings, at ICRA.

The average age of Medium and Heavy Commercial Vehicles (M&HCV) has increased to 10 years. Similarly, the average age of light commercial vehicles is older than five years. 

The average age of passenger vehicles at 7.3 years in FY2022 is the highest in the past two decades. 

“Demand for used cars remains healthy, aided by the growth of organised players, extended wait periods for new cars, improved financing options, and awareness about vehicle safety and the importance of periodic maintenance among consumers in in rural and semi-urban areas, which are likely to facilitate growth in replacement demand over the medium term. Electric vehicles will have significantly fewer parts compared to a traditional ICE vehicle and, thus, maintenance requirements will reduce,” added Dewan. 

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