By FY26, the Indian auto component market is predicted to reach $200 billion in revenue. This expansion will be supported by robust export demand, which is projected to expand at a 23.9% annual rate to reach US$ 80 billion by 2026.

Additionally, India is becoming a more desirable location for design and production as a result of the rise in original equipment manufacturers’ (OEM) procurement from the nation and the rising indigenization of global OEMs.

The other interesting development that is happening is in the Electric Vehicle (EV) space. The global shift to electric vehicles will present new business opportunities for suppliers in the automotive industry. By 2030, India’s widespread adoption of electric vehicles might create a $300 billion domestic market for EV batteries.

So, the Indian automobile parts manufacturers are focusing on producing components for this growing EV industry. One such company that also has good future prospects in this space is CIE Automotive India. Over a period of three years, the stock has given a return of 145 per cent.

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Corporate Overview of CIE Automotive India

CIE Automotive India is a multi-product, multi-technology automotive component supplier that places a high priority on sustainability, quality, and innovation. India’s Mumbai serves as CIE Automotive India’s headquarters, and it operates in more than 20 nations, including the USA, Spain, Germany, Brazil, Mexico, and China.

It functions as a division of CIE Automobile, a Spanish industrial conglomerate with a focus on supplying parts and subassemblies to the automobile sector. CIE Automotive is a global company that is traded on the Madrid Stock Exchange.

CIE Automotive India provides a broad range of goods and services, such as engine, gearbox, chassis and other component assembly, forging, casting and machining.

To address the changing needs of the automobile industry, the organisation also offers research and development skills, design and engineering services, and other services. It is a dependable partner for clients in the automotive sector because of its extensive global reach, wide range of product offerings, and dedication to client satisfaction.

Indian Operations Of CIE Automotive India

Sales reached ₹ 5,530 crores, up 5% from CY22. The business segment originating from India makes up approximately 63% of the total revenue. The growth of the Indian automotive market in CY23 was not uniform among customers, quarters, or segments.

The growth in the Light vehicles segment was reasonable but the two-wheelers and tractors were underwhelming. Some of CIE Automotive India’s most important clients experienced flat or negative demand growth, which further impacted their performance. The business announced last year that capacity was being expanded across all business verticals.

The sales increase was hampered by a delay in the ramp-up of several of these orders, particularly at CIE Hosur and the aluminium verticals. Nonetheless, the business anticipates these orders to be a success in CY24. In addition, it anticipates gradually raising margins while regaining economic momentum in India.

European Operations Of CIE Automotive India

Sales increased by 10% from CY22 to ₹ 3,280 crores. The revenue from the European business makes up about 37% of the total. Sales growth in Q1 CY23 was robust, but the subsequent quarters saw extremely poor growth. Price rises for steel offset the positive exchange rate impact.

CIE Automotive India is highly bullish about the European business, which has strong margins, high returns, and very good cash generation, despite the dampened market predictions in Europe.

Another noteworthy observation is that the production of automobile crankshafts accounts for a sizable portion of the forgings vertical’s sales in European operations. The shift to electric vehicles puts crankshafts at risk. 

While the business does not anticipate a significant negative impact shortly, it does anticipate a gradual reduction in crankshaft sales starting in 2026. The business intends to start making steel suspension items and aluminium forged parts for automobiles.

The BEV market accounted for over 40% of the new orders that the automotive forgings vertical received in CY22. By 2027, it’s anticipated that forged aluminium components will account for a sizable portion of automobile forging sales.

Financials Of CIE Automotive India

CY2023CY2022CY2021CY2020
Revenue (in ₹crore)9,2808,7536,7656,050
Net Profit (in ₹crore)1,125-136393106
ROE18.79%-2.677.56%2.16%
ROCE17.77%16.07%10.70%3.69%

In the calendar year 2023, CIE Automotive India saw an increase in revenue, surging by 6% to reach ₹9,280 crore as opposed to ₹8,753 crore in CY2022. Analyzing a span of four years, encompassing CY2020 to CY2023, CIE Automotive India displayed a  robust Compound Annual Growth Rate (CAGR) of 15.33% in revenue.

CIE Automotive India made a profit of ₹1,125 crore in the calendar year 2023, when compared to the loss of ₹136 crore in CY2022. However, the loss in CY2022 was due to discontinued operations worth ₹847.5 crore. Over the cumulative four-year period from CY2020 to CY2023, the net profit showcased 120% CAGR.

In CY23, CIE Automotive India maintained favourable financial metrics with a Return on Equity (ROE) of 18.79% and a Return on Capital Employed (ROCE) of 17.77%.

Future Plans Of CIE Automotive India

Maximising Profit: Spinning Off German Truck Forging Entity

Since CFG-CIE Forgings – Germany was affecting CIE Automotive India’s EBITDA margins (3-5% vs. portfolio at 13-15%), CIE’s decision to hive off the business is viewed as a positive move. EBITDA margins from European operations are predicted to increase from their present levels of 13% to 150 bps following the hive-off.

Consequently, CIE Automotive India’s consolidated EBITDA margins will increase faster and eventually reach a target of 17–18%, which will be consistent with the parent company’s CIE global operations. The business has already recorded a ₹900 crore one-time loss on goodwill impairment.

Focus on EV space

The popularity of electric vehicles, or EVs, is growing as climate change takes centre stage. We are currently in a period of uncertainty associated with the rate of this shift to electric vehicles, which varies greatly throughout segments and areas.

The business has created a thorough EV strategy and a list of products to pursue in the EV market. There is a push for localization since businesses are being held accountable for their carbon footprints and more.

Additionally, near-shoring reduces bottlenecks in the supply chain. Certain environmentally harmful operations, such as the casting of aluminium and steel, are moving to developing countries while developed ones strive to fulfil strict CO2 reduction objectives.  

In the sector, safety and lightweight are two major concerns. The first will result in a drive towards materials such as aluminium castings, forgings, and composites, which are CIE Automotive India’s three main areas of focus.

Higher precision, tighter tolerances, and higher quality components are needed for the switch to electric vehicles (EVs), lightweighting, and safety. Herein lies CIE Automation India’s potential for expansion.

Conclusion

In summary, CIE Automotive India is well-positioned to capitalize on the growing opportunities in the Indian and global automotive markets, especially in the electric vehicle segment. 

However, the transition to electric vehicles also poses challenges, which the company is actively addressing through its strategic initiatives. What are your thoughts on CIE Automotive India’s prospects in the rapidly evolving automotive industry? Do you think the company’s strategies will enable it to thrive amidst the disruptive changes? Let us know your opinions in the comments below !

Written by Nalin Suriya 

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