India Nippon Electricals Ltd Management Discussions

GLOBAL ECONOMY

The global economy entered 2025 navigating a delicate balance between slowing momentum and the emergence of new risks. Amid rising trade tensions, lingering inflation, and political uncertainty, the International Monetary Fund (IMF) projects global GDP growth to slow to 2.8% in 2025 - a modest but positive pace that underlines the fragility of the current recovery. While the global economy is not in contraction, growth remains well below the pre-pandemic average, particularly in advanced economies where persistent headwinds continue to weigh on output and sentiment.

GDP Growth Projections (in %)

In a dramatic departure from decades of trade liberalization, the US unveiled sweeping new tariff measures in April 2025, invoking a national emergency over global trade imbalances. A blanket 10% import tariff now applies to all inbound goods, effectively redrawing the map of global commerce. The most severe escalation has emerged in US-China relations, where tariffs on Chinese imports surged to 145%, prompting Beijing to retaliate with 148% duties on American exports. The repercussions were immediate, disrupting supply chains, inflating input costs, and injecting fresh volatility into global markets.

Amid mounting international backlash, the US moved to temper tensions by announcing a 90-day moratorium on additional tariff hikes for 59 countries, including major partners such as the EU, Canada, Mexico, South Korea, and

Vietnam. These countries now face only the 10% baseline tariff, escaping more punitive measures for the time being. However, China remains conspicuously excluded from this pause, keeping geopolitical frictions high and trade uncertainties elevated. This sharp pivot toward protectionism marks a structural rupture from previous US trade policy, casting long shadows over global growth, inflation dynamics, and diplomatic relations.

The economic ripple effects are already manifesting. Emerging and developing economies are now projected to grow by just 3.7% in 2025, down from 4.3% in 2024, as they grapple with constrained policy space amid high debt burdens, depreciating currencies, and persistent capital outflows. Nations such as Argentina, South Africa, and Mexico are particularly exposed, confronting tighter financing conditions and entrenched inflationary pressures. Complicating the picture have been the very trade tensions reshaping the global landscape. The surge in protectionist measures, particularly the latest tariff hikes, could reverse some of the gains from disinflation. Higher import costs risk filtering through to consumer prices, reigniting inflationary pressures just as central banks seek to anchor expectations. In this volatile environment, global policymakers face the dual challenge of stabilizing prices while navigating an increasingly fragmented trade order.

(Source:https://www.imf.org/en/Publications/WEO/ Issues/2025/04/22/world-economic-outlook-april-2025)

Outlook

The global economic landscape is increasingly shaped by a blend of enduring structural shifts and immediate geopolitical disruptions. While the rise of protectionism has captured much of the spotlight, deeper, more gradual forces, especially in technology and automation, have been quietly transforming labor markets and manufacturing systems for years. These forces have ushered in both opportunities and upheavals, driving job displacement, stagnant wages, and a growing sense of inequality, particularly within advanced economies. Addressing these challenges requires a more sophisticated policy approach, one that moves beyond the simplistic dichotomy of trade winners and losers and instead focuses on building a robust and inclusive global trade framework that fosters broad-based economic prosperity.

(Source:https://www.imf.org/en/Publications/WEO/ Issues/2025/04/22/world-economic-outlook-april-2025)

INDIAN ECONOMY

Indias economy is reported at 6.5%, highlighting the strength of Indias domestic economic structure and the effectiveness of its policy measures in navigating global challenges, such as trade tensions and tariff disruptions. Central to this stability is robust domestic consumption, particularly from rural areas, driven by solid agricultural performance and government initiatives. However, maintaining this growth momentum will require broader demand recovery across both rural and urban regions, especially with ongoing labor market challenges and persistent inflation pressures.

GDP Growth Projection (in %)

Key structural reforms, rapid digital adoption, and significant infrastructure investments are reinforcing Indias macroeconomic fundamentals. Yet, additional reforms are essential to attract more investment and enhance the competitiveness of the manufacturing sector. Favorable global conditions, including lower oil prices and a manageable current account deficit, contribute to the countrys stability. Nevertheless, inflation remains a critical issue, guiding the Reserve Bank of Indias cautious approach to monetary policy.

Outlook

India is projected to maintain a real GDP growth rate of 6.5% through 2025-26 to 2027-28, underpinned by improving fundamentals across critical sectors. This sustained expansion is being fuelled by rising manufacturing and export competitiveness, strong momentum in services exports, and accelerated digital transformation. Together, these drivers are set to boost productivity, streamline operations, and strengthen Indias long-term growth trajectory.

(Source: https://ddnews.gov.in/en/indias-real-gdp-growth-projected-at-6-5-in-fy-2025-26-rbi/)

GLOBAL AUTOMOTIVE INDUSTRY

The global automotive industry in 2025 is navigating a transformative era marked by technological advancements, evolving consumer preferences, and strategic shifts among manufacturers. Electric vehicles, autonomous driving technologies, and digital connectivity are reshaping market dynamics and redefining mobility solutions. Additionally, sustainability initiatives and regulatory pressures are driving innovation in design, production, and supply chains, pushing the industry toward a more eco-conscious and resilient future.

Global light vehicle sales reached 84.0 Million units in 2024 and are poised for a modest uptick to 85.1 Million units in 2025, reflecting a steady year-on-year growth rate of 1.3%. Driving much of this momentum is the Asia-Pacific region, which continues to command nearly half of global sales, underlining its critical role in shaping the industrys trajectory. Central to this regional strength is China, which retains its status as the worlds largest automotive market, with passenger vehicle sales expected to exceed 26 Million units in 2024. India is also gaining ground, achieving its highest-ever sales of over 4.1 Million units in 2024, highlighting the countrys growing demand and evolving automotive landscape.

(Source: https://www.marketsandmarkets.com/Market-Reports/global-automotive-industry-outlook-77960341.html)

The integration of robotics, artificial intelligence (AI), and the Internet of Things (IoT) is reshaping the landscape of automotive manufacturing, bringing unprecedented levels of precision, speed, and intelligence to production lines. These advanced technologies are streamlining operations by boosting efficiency , enabling real-time monitoring, and supporting predictive maintenance to minimize downtime and optimize workflows. Complementing this digital transformation is the rise of gigacasting technology an innovative process that casts large, single-piece components. By reducing the need for complex assembly, gigacasting not only shortens production time but also enhances structural integrity, paving the way for lighter, more fuel-efficient vehicles with improved overall performance.

Amid th wave isof technological advancement, the automotive industry must also contend with external pressures that add layers of complexity to its operations. Geopolitical instabilities, particularly in regions like the Middle East and Eastern Europe, have disrupted energy supplies, leading to fuel price volatility and rising production costs. At the same time, the increasing digitalization of vehicles has heightened cybersecurity concerns. Regulatory mandates such as UNR155 and UNR156 are pushing manufacturers to adopt stringent cybersecurity protocols to safeguard against potential threats, as noted by arXiv. On the consumer front, the aftermarket sector is evolving rapidly. The growing age of vehicles and rising annual mileage are fueling demand, while trends such as the global expansion of Chinese EV brands and the integration of online-to-offline (O2O) channels are redefining how automotive parts and services are accessed and delivered.

(Source:https://www.marketsandmarkets.com/Market-Reports/global-automotive-industry-outlook-77960341.html)

GLOBAL TWO-WHEELER INDUSTRY

The global two-wheeler market is projected to be valued at USD 706 Billion in 2025, with expectations to reach USD 777.2 Billion by 2029, exhibiting a compound annual growth rate (CAGR) of 2.43% over the forecast period (2025 2029).

(Source:https://www.mordorintelligence.com/industry-reports/global-two-wheeler-market)

The industry is undergoing a dynamic shift fueled by rapid technological advancements and evolving consumer demands. Leading manufacturers are ramping up investments in research and development to broaden their portfolios and stay ahead in an increasingly competitive landscape.

Production strategies are transitioning swiftly toward sustainability, with electric two-wheelers at the forefront of this evolution. One of the most notable developments is the sharp decline in lithium-ion battery costs - down nearly 80% over the last decade to around USD 220 per kilowatt-hour. This drop has significantly boosted the affordability and appeal of electric two-wheelers for a broader consumer base.

Looking ahead, the markets trajectory is being shaped by innovation and green initiatives. Industry players are focusing on next-generation electric powertrains, the integration of lightweight and durable materials, and advanced safety technologies. Additionally, there is a strategic shift in supply chain operations, as companies establish regional manufacturing hubs to improve responsiveness, reduce costs, and cater more effectively to local markets.

(Source:https://www.mordorintelligence.com/industry-reports/global-two-wheeler-market)

INDIAN AUTOMOTIVE INDUSTRY

The Indian automotive market is one of the fastest-growing in the world, driven by rising middle-class income, urbanization, and government initiatives like Make in India. It encompasses a wide range of segments including passenger vehicles, two-wheelers, commercial vehicles, and electric vehicles (EVs). India is the worlds largest two-wheeler market and a key manufacturing hub for global automakers.

The Indian passenger car market is poised for robust growth, with its size projected to rise from USD 42.72 std. in 2025 to USD 53.04 std. by 2029, reflecting a CAGR of 5.56% during the forecast period. This expansion is underpinned by a dynamic shift in consumer preferences, technological innovation, and a more accessible financing environment. Automakers are increasingly integrating advanced technologies such as connected car systems, enhanced safety features, and fuel-efficient solutions across vehicle categories to meet evolving customer expectations. Concurrently, the industry is witnessing a strategic pivot toward localization and indigenous manufacturing, as companies ramp up production capacity and establish new facilities to cater to rising demand while optimizing cost structures. These developments collectively signal a transformative phase for Indias passenger car segment, driven by innovation, affordability, and scalability.

(Source:https://www.mordorintelligence.com/industry-reports/india-passenger-car-market-outlook)

DOMESTIC SALES TREND FOR AUTOMOBILES

(No.s)

Category	2019-20	2020-21	2021-22	2022-23	2023-24	2024-25
Passenger Vehicles Number/Units	27,73,519	27,11,457	30,69,523	38,90,114	42,18,746	43,01,848
Commercial Vehicles	7,17,593	5,68,559	7,16,566	9,62,468	9,67,878	9,56,671
Three-Wheelers	6,37,065	2,19,446	2,61,385	4,88,768	6,91,749	7,41,420
Two-Wheelers	1,74,16,432	1,51,20,783	1,35,70,008	1,58,62,087	1,79,74,365	1,96,07,332

The India Free Trade Agreement (FTA) is set to deliver a -UK strong impetus to Indias automotive industry by unlocking new opportunities for exports, investments, and technological collaboration. The agreement paves the way for reduced tariff barriers and deeper supply chain integration, enabling Indian automakers to expand their footprint in the UK and broader European markets.

According to a statement by the Indian Government, the FTA will particularly benefit labour-intensive sectors, with key gains projected for engineering goods, auto components, engines, and organic chemicals. The deal promises tariff elimination on approximately 99% of tariff lines, effectively covering nearly the entire trade value between the two countries, an ambitious step toward boosting bilateral commerce.

On the other side, the UK government highlighted a major breakthrough for automotive trade, with Indian import tariffs set to fall dramatically from over 100% to just 10%. Additionally, the agreement includes provisions for import quotas on vehicles from both nations, ensuring a balanced and structured trade growth.

(Source: https://www.autocarpro.in/news/india-uk-free-trade-agreement-to-boost-auto-sector-126295)

Indian Two-Wheeler Market

Indias two-wheeler market is on a stable upward trajectory, projected to grow from USD 315.9 Billion in 2025 to USD 347.4 Billion by 2029, reflecting a compound annual growth rate (CAGR) of 2.40%. This steady momentum highlights the sectors resilience and responsiveness to evolving consumer behavior, particularly in the realm of urban mobility. Demand is increasingly shifting toward feature-rich, tech-enabled two-wheelers, prompting manufacturers to roll out models with smart connectivity, enhanced safety technologies, and elevated performance standards.

(Source: https://www.mordorintelligence.com/industry-reports/india-two-wheeler-market)

The com landscape is becoming more dynamic, as petitive established brands consolidate their market positions while agile newcomers introduce disruptive innovations. On the infrastructure front, the sector has made notable strides most prominently in the electric vehicle (EV) ecosystem. Concurrently, the industry is embracing digital transformation to reimagine the customer experience. The emergence of smart dealerships and integrated digital platforms is reshaping sales and service channels. To support this evolution, companies are investing in upskilling initiatives and modernizing after-sales networks, ensuring they are equipped to manage increasingly sophisticated and electrified vehicle models.

The Hybrid and Electric Vehicles (HEVs) segment is witnessing rapid momentum in Indias two-wheeler market, with an estimated growth rate of around 21% between 2024 and 2029. This surge is fueled by rising environmental awareness, robust government incentives, and ongoing advancements in battery technology. Escalating fuel costs are also nudging consumers toward more sustainable mobility solutions, accelerating the shift to electric alternatives.

(Source:https://www.mordorintelligence.com/industry-reports/india-two-wheeler-market)

Manufacturers are actively capitalizing on this trend by launching next-generation electric two-wheelers that offer extended range, enhanced performance, and smart features. At the same time, the rollout of charging infrastructure in urban centers and a steady decline in battery prices are significantly improving accessibility and affordability. The segment is also becoming a hotbed of innovation, as both legacy manufacturers and nimble startups enter the space driving competition, pushing technological boundaries, and enabling more cost-effective offerings.

Internal Combustion Engine Market

The India Internal Combustion Engines (ICE) Market is set to reach USD 8.3 Billion by 2031, expanding at a compound annual growth rate (CAGR) of 7.6% from 2025 to 2031. This growth is primarily driven by the increasing demand for vehicles, particularly passenger cars, as well as the rising adoption of advanced combustion engines and their components within the automotive sector. Additionally, stringent government regulations aimed at improving fuel efficiency are further fueling the markets expansion. Government initiatives, such as the Make in India campaign and the allowance of 100% foreign direct investment (FDI), have also attracted significant global investments into Indias automobile industry, creating a favorable environment for continued market growth.

(Source: https://www.6wresearch.com/industry-report/ india-internal-combustion-engines-market-2020-2026)

Key Growth Drivers Surging Vehicle Demand

The rising global population, combined with increasing disposable incomes, particularly within the expanding middle class, has significantly boosted the demand for both two-wheelers and four-wheelers. In developing countries like India, this trend is even more pronounced. Rapid urbanization and the development of new infrastructure have further intensified transportation needs across sectors such as logistics, delivery services, and personal mobility. These factors are contributing to robust growth in the internal combustion engine (ICE) market.

Technological Advancements in Combustion Engines

The internal combustion engine continues to evolve through advancements such as electronic fuel injection systems, turbocharging, and improved combustion efficiency. These innovations are driving product enhancements in terms of performance, fuel economy, and emissions. As automakers ramp up investments in R&D, modern IC engines are becoming more refined, reliable, and cost-effective - factors that are fueling increased adoption and market expansion.

Regulatory Push for Fuel Efficiency and Emission Compliance

Governments worldwide, including India, have introduced stricter regulations to improve vehicle fuel efficiency and reduce emissions. Policies such as Bharat Stage VI (BS-VI) in India and equivalent global emission standards are compelling manufacturers to optimize engine performance. In response, there is a growing shift toward more efficient IC engines that meet or exceed regulatory benchmarks. This compliance-driven innovation is further accelerating demand across automotive segments.

HYBRID VEHICLE ENGINE MARKET

The Indian hybrid vehicle market is undergoing a dynamic transformation, propelled by technological advancements, evolving consumer preferences, and supportive infrastructure development. Valued at USD 0.53 Billion in 2025, the market is projected to reach USD 1.28 Billion by 2029, exhibiting a strong CAGR of 24.81%. This growth reflects the increasing consumer shift toward environmentally conscious mobility options, especially in a country where urbanization and transportation demands are rapidly expanding. Supporting this ecosystem is the parallel development of infrastructure, which is critical to addressing consumer concerns around practicality and accessibility. The expanding EV infrastructure, combined with ongoing improvements in hybrid powertrain technology, is helping alleviate range anxiety and enhancing the viability of hybrid vehicles for daily use. Manufacturers are also investing in the localization of hybrid production, tailoring offerings to suit domestic market conditions more effectively. Another key enabler of market growth is the declining cost of battery technology. In CY 2023, battery pack prices dropped to 171 USD/kWh, making hybrid vehicles more affordable and cost-competitive in the Indian market. Alongside price drops, advancements in battery efficiency and power management are allowing manufacturers to deliver high-performance vehicles without compromising affordability. The integration of smart and connected technologies is further enhancing the appeal of hybrid cars to tech-savvy consumers.

The robust expansion of Indias used car market, which reached USD 37.57 Billion in 2023, also points to growing acceptance of hybrid vehicles and increased confidence in their resale value. This shift is prompting manufacturers to broaden their hybrid portfolios and offer innovative financing solutions to reach a wider customer base. The industry is also seeing greater collaboration between automotive firms and tech providers, aiming to develop efficient, localized, and economically viable hybrid solutions.

(Source:https://www.mordorintelligence.com/industry-reports/india-hybrid-vehicles-market)

ELECTRIC VEHICLES MARKET

Indias Electric Vehicle (EV) market is poised for exponential growth, with its value projected to rise from USD 54.41 Billion in 2025 to USD 110.7 Billion by 2029, reflecting a robust CAGR of 19.44% during the forecast period. This rapid expansion signals a major shift in the countrys mobility landscape, underpinned by strengthening domestic manufacturing capabilities and continuous technological innovation.

(Source:https://www.mordorintelligence.com/industry-reports/india-electric-vehicle-market)

The industry has seen a significant ramp-up in local production, with manufacturers increasingly localizing key components, particularly in the battery and powertrain segments, to reduce reliance on imports and tailor solutions to Indian conditions. Indigenous technology development is gaining momentum, setting the stage for a more self-reliant and sustainable EV ecosystem.

Government policies have played a catalytic role in this transition. The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, first launched in 2015, laid the foundation for widespread EV adoption. Its second phase, FAME II, which extended until April 2022, significantly boosted electric vehicle sales, especially in 2021, through targeted incentives, including subsidies of 10,000 for EVs with battery capacities up to 15 kWh.

The Union Budget 2025 26 marks a pivotal moment for Indias electric vehicle (EV) and battery manufacturing ecosystem, with several strategic measures introduced to accelerate domestic production, ensure critical mineral access, and enhance sustainability through recycling. These initiatives are expected to provide significant momentum to the EV industry across various segments, from large-scale manufacturers to MSMEs. One of the major announcements is the launch of a National Manufacturing Mission focused on fostering the production of EV batteries, motors, and controllers. The mission aims to support enterprises of all sizes - particularly micro, small, and medium enterprises (MSMEs) - and strengthen Indias position in the global EV supply chain.

In line with this vision, the budgetary allocation for key EV-linked schemes has seen a substantial increase. The PME-DRIVE (Prime Minister Electric Drive Revolution in Innovative Vehicle Enhancement) scheme received a funding boost from 1,870.76 Crore in 2024 25 to 4,000 Crore in 2025 26 signaling the governments strong commitment to next-generation mobility solutions. Similarly, the outlay for the Production Linked Incentive (PLI) scheme for Automobiles and Auto Components has surged from 346.87 Crore in 2024-25 to 2,818.85 Crore for 2025-26, aiming to attract higher investments and drive innovation across the sector.

In a move to foster sustainability and cost efficiency, the government has removed Basic Customs Duty (BCD) on lithium-ion battery scrap, encouraging the recycling of EV batteries. This policy shift could lower battery production costs and support the creation of a circular economy, although the industry must navigate regulatory and operational challenges to fully realize its benefits.

(Source:https://www.downtoearth.org.in/energy/ b u d g e t - 2 0 2 5 - 2 6 - e v s - t o - b e c o m e - a f f o r d a b l e -government-announces-support-for-manufacturing-tax-relief-for-critical-minerals#:~:text=In%20the%20 Union%20Budget%202025,EV%20and%20battery%20 manufacturing%20industry.)

Challenges Faced by the Electric Vehicles Industry High Initial Costs

One of the foremost challenges hindering the widespread adoption of electric vehicles (EVs) in India is their high upfront cost. EVs are typically 20 30% more expensive than their internal combustion engine (ICE) counterparts, primarily due to the costly lithium-ion batteries that account for nearly half the vehicles total cost. Although EVs offer lower operating and maintenance expenses over time, the steep initial investment deters many buyers in a price-sensitive market like India. This affordability barrier remains a key constraint, particularly in the passenger vehicle segment.

Inadequate Charging Infrastructure

Indias EV charging infrastructure is still at a nascent stage, with the number of public charging stations falling well short of demand. Most EV users currently depend on home charging, which is not viable for a large section of the population, especially those living in urban apartments without dedicated parking. The limited availability of fast, reliable charging stations intensifies range anxiety and discourages consumers from embracing electric vehicles, especially for long-distance journeys.

Supply Chain and Battery Dependency

The Indian EV ecosystem is heavily reliant on imported batteries and critical components, as domestic manufacturing capabilities are still emerging. This dependence exposes the industry to global supply chain disruptions and price volatility. Moreover, India lacks domestic reserves of essential raw materials like lithium, cobalt, and nickel, deepening its external reliance. Compounding the issue is the absence of a well-developed battery recycling and disposal system, which raises concerns about long-term environmental sustainability.

Policy and Regulatory Uncertainty

While the Indian government has introduced various policies and incentives to promote EV adoption, inconsistency and short-term planning continue to undermine progress. Many state-level EV policies are nearing expiration, and central incentives vary across segments, creating ambiguity for stakeholders. The absence of a coherent, long-term national roadmap affects investor confidence and slows infrastructure development. A stable and forward-looking regulatory framework is essential for sustained growth in the EV sector.

Consumer Awareness and Perception

Limited public awareness about electric vehicles and their advantages remains a significant barrier. Many potential buyers are unaware of the long-term cost savings, environmental benefits, and government subsidies associated with EVs. Misconceptions about battery safety, limited driving range, charging time, and inadequate infrastructure further dissuade consumers. Enhancing public education and transparent communication about EV technologies and incentives is vital to accelerate adoption.

Power Grid and Energy Infrastructure Constraints

The growing adoption of EVs will place increasing demands on Indias power grid, necessitating substantial investments in grid infrastructure and energy management. The integration of renewable energy sources with EV charging systems is crucial for achieving sustainability goals, but progress in this area is slow. Without proactive planning, the surge in electricity demand could lead to grid instability and operational inefficiencies, diminishing the environmental benefits of electric mobility.

Investment and Localization Challenges

Indias EV industry continues to grapple with inadequate investment in research, development, and domestic manufacturing. High production costs and limited localization of critical components hinder the industrys ability to scale and drive down prices. Collaboration between government entities and private sector stakeholders is often fragmented, slowing innovation and the establishment of a robust domestic supply chain.

INDIAN AUTO COMPONENT INDUSTRY

The Indian automotive industry stands at a pivotal juncture, poised for significant growth and transformation driven by emerging trends and technological advancements. In 2024, the sector reached a valuation of USD 74 Billion, surpassing its previous peak of USD 69 Billion in 2023. While challenges persist in specific segments, such as domestic two-wheeler (2W) sales, the component industry continues to recover steadily, supported by a rise in exports and an expanding vehicle parc, which has also fueled growth in the aftermarket segment.

Although ICE powertrains still dominate, the industry is witnessing the emergence of nine alternative powertrain technologies. This shift is expected to reshape the auto component landscape by driving demand for specialized parts, particularly as electric vehicles and other next-generation powertrains move toward standardization. Simultaneously, the growing trend of premiumization, especially in 2Ws and passenger vehicles (PVs), is influencing component design and manufacturing, as consumers increasingly seek software-defined features and as regulatory mandates push for advanced safety systems. Software integration is set to play an even greater role with the anticipated shift toward zonal electrical/electronic (E/E) architectures, enabling enhanced vehicle functionality and efficiency . This technological transformation underscores the need for the auto components industry to stay agile and innovation-driven.

Furthermore, India has a strategic opportunity to position itself as a global automotive powerhouse. Disruptions in global supply chains have opened avenues for Indian manufacturers to access high-demand international markets. By strengthening domestic supply chains and aligning with emerging technological trends, the Indian auto components industry can enhance its competitiveness, increase exports, and contribute to the countrys broader goal of self-reliance. These developments not only hold the potential to solidify Indias status as a leader in next-generation mobility solutions but also to redefine its role in the global automotive value chain.

(Source: https://www.acma.in/uploads/publication/64-annual-session/ACMA_Fostering_self_reliance_Report_v3_Print.pdf)

SWOT ANALYSIS OF THE AUTOMOTIVE INDUSTRY Strengths

Robust Market Demand: The industry benefits from increasing disposable incomes, an expanding middle class, and accelerating urbanization, particularly in emerging economies such as India, which drive sustained vehicle demand.

Established Industry Players: A mature ecosystem comprising both domestic and international manufacturers fosters healthy competition, continuous innovation, and consumer trust.

Technological Advancement: Rapid integration of cutting-edge technologies such as electric vehicles (EVs), connected mobility, and autonomous systems positions the sector as a leader in the future of transportation.

Supportive Policy Frameworks: Government initiatives promoting infrastructure expansion, and local manufacturing create a favorable environment for growth and investment.

Market Versatility: The industrys capacity to serve a wide spectrum of consumer needs, from two-wheelers and passenger cars to commercial and specialized vehicles, ensures resilience and reach.

Weaknesses

Cost and Operational Pressures: Rising input costs, fuel price volatility, and persistent supply chain disruptions pose ongoing risks to profitability and operational efficiency.

Lagging Technological Adoption: Some legacy players are slow to embrace advanced technologies and elec reducing their competitive edge as consumer preferences evolve.

Limited Premium Appeal: Certain segments continue to lack modern features and aspirational design, constraining their appeal in urban and affluent markets.

Infrastructure Gaps: Inadequate EV infrastructure, particularly in charging and battery-swapping facilities, slows down the transition to sustainable mobility.

Regulatory Complexity: Stricter emissions and safety standards increase compliance costs and engineering challenges for manufacturers.

Opportunities

EV Market Expansion: Growing environmental consciousness and supportive government policies are fueling the rapid expansion of the EV sector, offering vast potential for innovation and investment.

Export Growth: As global markets seek cost-effective suppliers, Indias auto component and value-added vehicle exports can gain significant traction.

Technology-Driven Innovation: Emerging technologies such as Advanced Driver Assistance Systems (ADAS), autonomous mobility, and connected vehicle platforms offer opportunities for differentiation and new revenue streams.

Rural Market Penetration: Underserved rural areas offer growth prospects for affordable two-wheelers and compact passenger vehicles, supported by rising rural incomes and infrastructure development.

New Mobility Models: Trends such as shared mobility, subscription-based ownership, and fleet partnerships open up fresh business models and customer engagement strategies.

Threats

Disruptive Competition: Tech-driven entrants, both domestic startups and global players, are challenging traditional automakers, especially those slow to adapt to digital transformation.

Policy Uncertainty: Shifts in emission norms, regulatory frameworks, and subsidy schemes can hinder long-term planning and investment confidence.

Macroeconomic Instability: Global economic downturns, geopolitical tensions, and currency fluctuations can adversely impact production, costs, and consumer sentiment.

Evolving Consumer Expectations: Shifts toward sustainability, safety, and digital integration demand rapid innovation; companies lagging in response risk becoming obsolete.

Cap ital-Intensive Transition: The shift toward electrification and smart mobility requires substantial investment. Firms that cannot achieve scale or localization may struggle to remain competitive.

INDUSTRY OUTLOOK

The Indian automotive industry is poised to emerge as a significant force in the global arena. With the countrys economy showing resilience and urban centers expanding rapidly, the sector is well-positioned for sustained growth in 2025. Key drivers include innovation in vehicle technology and supportive government initiatives, especially within the commercial vehicle segment. As infrastructure for electric and hybrid vehicles continues to evolve, the industrys adaptability to consumer trends and environmental priorities will be critical in maintaining momentum and expanding its international footprint.

Meanwhile, the Internal Combustion Engine (ICE) segment is witnessing dynamic expansion, spurred by advancements in engineering, growing consumer demand, and strategic policy support. Technological innovations are not only improving the performance and reliability of ICE systems but also enabling them to align with evolving environmental standards. The surge in urban population and changing transportation needs are further fueling demand. In parallel, government incentives, ranging from subsidies to emission control mandates, are promoting the development of cleaner, more efficient ICE solutions. Additionally, reductions in manufacturing costs, aided by technological progress and competitive scaling, are making these solutions increasingly viable and appealing across diverse markets.

COMPANY OVERVIEW

Since its foundation in 1984, India Nippon Electricals Limited (INEL or the Company) has grown into a key player in the automotive mechatronics landscape, recognized for its precision engineering and reliable solutions. The Company caters to a diverse range of segments including two-wheelers, three-wheelers, portable generators, and small gasoline engines. Over the years, INEL has emerged as a preferred supplier for leading Indian automobile manufacturers, particularly noted for its contributions to the electronic ignition systems segment. Today, INEL continues to diversify its offerings by integrating cutting-edge components such as sensors, control units, converters, and advanced engine management systems.

As part of its progressive growth journey, the Company is also expanding its footprint in the electric vehicle space, embracing the future of sustainable mobility.

Building on its reputation for excellence, INEL has developed a comprehensive suite of high-performance, differentiated products that meet the evolving needs of domestic and global clients. The Companys dedication to enhancing its aftermarket services and strengthening its export base has enabled a successful foray into international markets, notably across North America, Europe, and ASEAN. Strategic collaborations with major OEMs have further boosted INELs global standing, paving the way for continued growth and increased market penetration.

INELs strong track record of adapting to shifting industry dynamics is evident in its financial and operational milestones. The Company achieved a record turnover of 845 Crores in 2024-25, reflecting a robust year-on-year growth of 16%. INEL has maintained its leadership position in the competitive two-wheeler segment. Additionally, aftermarket sales experienced significant growth of 12% during the year, underlining the Companys responsiveness to customer expectations and its commitment to quality and service.

The Companys manufacturing capabilities are supported by three strategically positioned facilities in Hosur (Tamil Nadu), Puducherry, and Rewari (Haryana). These plants are certified under ISO 14001:2015 and ISO 45001:2018 standards, highlighting INELs dedication to sustainable practices and workplace safety. Beyond manufacturing, the Company is heavily invested in research and innovation. INELs state-of-the-art R&D center, recognized by the Department of Scientific and Industrial Research (DSIR), is a hub for next-generation product development and technological advancement.

At the core of INELs innovation ecosystem lies the INEL Tech Center, which focuses on emerging technologies and value-driven solutions for the mobility sector. Alongside proven offerings like flywheel magnetos, ignition coils, regulator rectifiers, and CDI/TCI units, the Company is pioneering developments in EFI systems, ISG controllers, motor control units for EVs, DC-DC converters, smart displays, and advanced sensor technologies. INEL Tech Center employs over 100 engineers engaged in comprehensive product development, from concept to commercialization, in accordance with IATF TS16949 standards and guidelines.

The Cen holds ISO/IEC 27001:2022 certification for ter its Information Security Management System, reflecting its commitment to data security and risk management. INEL is also proactively working toward achieving TISAX Level 3 certification, a key requirement for many European customers. In addition, INEL Tech Center maintains compliance with ISO 14001:2015 for Environmental Management and ISO 45001:2018 for Occupational Health and Safety, underscoring its dedication to sustainable and safe operational practices.

OPERATIONAL OVERVIEW

During 2024-25, INEL made significant strides in product development and innovation across four strategic categories: conventional ICE products, next-generation ICE+ systems, EV components, and products with broader cross-sector applications such as sensors, displays, and controllers.

Advancements in Conventional ICE Products

INEL focused on extending its existing portfolio of ignition system products, including AC generators, ignition controllers, ignition coils, and voltage regulators, into new applications. The Company successfully developed tailored solutions for two-wheeler, three-wheeler, and general-purpose engine markets. By leveraging its broad array of standard offerings, INEL was able to respond swiftly to customer needs, offering custom solutions with minimal lead times. Through targeted value engineering efforts, INEL also achieved substantial cost savings for customers.

Progress in ICE+ Technologies

Under the ICE+ category, INEL introduced several advanced and efficient systems. A highlight of the year was the development and patenting of a power boost regulator, which improved generating system efficiency by approximately 25%. This innovation was successfully introduced for multiple customers, with at least one application entering production in 2025.

The Company also launched an Electronic Fuel Injection (EFI) ECU for motorcycles, developed through a technical licensing partnership with global collaborators. During the year, the R&D team took efforts to extend this solution to scooter applications. Another notable development was the creation of an Integrated Starter Generator (ISG) controller.

Leadership in Electric Vehicle Components

INEL further consolidated its leadership in the EV segment by expanding its range of DC-DC converters to serve the rapidly evolving electric mobility market. Proprietary process technologies implemented during 2024 25 significantly improved productivity, allowing the Company to scale production volumes while managing a diverse product mix. Additionally, INEL adopted an innovative design approach for electric motors and controllers targeting sub-3 kW applications. The resulting product successfully passed in-house validation and underwent customer trials, with full-scale market introduction scheduled for the end of 2026.

Strategic Customer Engagement and Global Expansion

To strengthen aftermarket engagement and loyalty, INEL introduced a dedicated loyalty points program for mechanics. At the same time, the Company expanded its global footprint by targeting growth in Latin America and Africa and leveraging its parent companys presence to establish business development offices in the US and Europe. Commission agents were also appointed in various regions to further broaden international reach.

Risk Mitigation and Operational Efficiency

With the scaling of aftermarket sales, INEL remained vigilant about associated financial and operational risks. Looking ahead, the Companys plans to reduce distribution complexity while expanding its supplier base. Strategic sourcing, particularly for electronic components, will be key to achieving economies of scale and sustaining volume growth.

Strengthening Compliance and Governance

INEL made meaningful progress in improving financial transparency and regulatory compliance. It implemented legal compliance software during 2024 25 and will further integrate its GST IMS with SAP in 2025 26.

FINANCIAL OVERVIEW

Standalone Financial Snapshot

Particulars	2024-25	2023-24	Y-o-Y Change (in %)
Gross Sales	84,055	72,603	16%
Net Sales	83,194	71,670	16%
Operating Profit	7,328	5,138	42%
Depreciation	2,056	1,509	36%
Profit after Tax (PAT)	8,203	5,930	38%

Details of Key Standalone Financial Ratios

Ratios	2024-25	2023-24	Y-o-Y Change (in %)
Debtors\u2019 Turnover Ratio	5.43	5.54	(0.11)
Inventory Turnover Ratio	8.12	8.0	0.12
Current Ratio (x)	2.38	2.49	(0.11)
Operating Profit Margin	9%	7%	2%
Net Profit Margin	12%	10%	2%
Return on Net Worth	12%	10%	2%

RISKS AND MITIGATION

Risk	Impact	Mitigation
Economic Risk	Economic fluctuations present a risk of impacting the Companys daily operations and may also hinder its efforts to expand and grow the business.	The Company takes a proactive approach by regularly evaluating the business environment and implementing strategies to mitigate any potential disruptions to its operations or growth initiatives.
Geopolitical Risk	Disruptions in supply chain and cost escalation due to US-China trade tensions impacting rare earth magnet availability.	The Company is exploring alternative sources and methodologies across the globe to mitigate this risk.
Customer Risk	The Company faces several challenges, including a heavy reliance on a small group of key customers, which could lead to vulnerabilities if any of these relationships	To optimize strategic focus, it is crucial to create a clear distinction between current operations and future growth initiatives. This approach will ensure that both areas receive the attention they
insufficient wer to shift. Additionally, there is		require. Additionally, expanding market reach
	awareness and proactive engagement with emerging business opportunities, potentially limiting growth. Furthermore, the Company has a limited presence in international export markets, which increases its exposure to geopolitical risks that could impact operations and profitability.	should be prioritized by combining direct sales efforts with strategic partnerships. At the same time, exploring export opportunities will help broaden the Companys presence in international markets.
People Risk	The Company faces challenges in retaining and attracting top talent, which could hinder its long-term success. Additionally, there is a misalignment between the organizational structure and the strategic goals, potentially affecting overall efficiency and the achievement of business objectives.	The Company is placing a strong emphasis on branding initiatives, including ramping up social media engagement to attract top talent. In addition, enhanced training programs are being implemented to develop effective managers, with a particular focus on establishing key result areas (KRAs) to drive performance and improve employee retention.

Risk	Impact	Mitigation
IT and Cyber Risk	There are inadequate measures in place to confidential safeguard and sensitive information from potential threats, both internal and external.	The Company has taken several steps to enhance information security, including conducting a SIEM (Security Incident Event Management) audit and implementing countermeasures based on the findings. Additionally, the ISMS (Information Security Management Systems) surveillance audit has been successfully completed. Periodic cybersecurity awareness programs have been conducted throughout the year to ensure staff are well-informed. An audit trail has been enabled across all critical business applications, and importantly, no outages or attacks have been reported.
Competition Risk	The intense competition within the automotive industry poses a risk to the Company\u2019s market share, margin profile, and return on capital employed, potentially impacting overall profitability and long-term growth.	The Company leverages its technological expertise, strategic partnerships, strong customer relationships, and innovative solutions to mitigate the risks posed by intense competition and maintain its market position.
Technology Risk	The Company\u2019s growth and long-term success are challenged by the rapid pace of technological advancements, which require ongoing innovation and adaptability. In the electric vehicle (EV) segment, the Company faces intense competition from both established industry giants and agile startups, underlining the need for differentiation and strong strategic positioning. Additionally, product obsolescence poses a significant risk, as the fast-evolving technological landscape demands continuous updates and improvements to maintain consumer interest and relevance.	The Company aims to explore strategic technology partnerships in niche areas to drive innovation. Additionally, it seeks to leverage existing relationships with OEMs to unlock new opportunities. By closely tracking market trends and emerging technologies, the Company plans to launch innovative products that meet evolving customer needs. Furthermore, significant investment in R&D will ensure that new products are technologically advanced, sustainable, and adaptable to future market demands.
Supplier Risk	The procurement process has been optimized, though it relies heavily on single-source vendors and has limited geographic diversity among import suppliers. While lead times for electronic components are slightly reduced, automotive parts still have higher lead times. Additionally, the supply chain remains vulnerable to fluctuations in commodity prices and other cost increases, which can impact overall costs and operations.	The Company has developed strategic sourcing strategies aimed at mitigating risks associated with high-risk vendors. Additionally, there is a strong focus on expanding the indexation coverage for commodities that are currently excluded from customer settlements, ensuring more comprehensive cost management.
Regulatory Risk	The automotive industry is under constant pressure to adhere to strict safety and environmental regulations. Non-compliance with these standards can lead to hefty fines, tarnished brand reputation, and significant legal repercussions.	INEL has implemented a strong compliance framework, supported by a software-driven tool designed to track and assess regulatory requirements on an ongoing basis. Additionally, the Company ensures continuous communication with regulators to stay updated on any changes to regulatory policies.

HUMAN RESOURCES

INEL recognizes that its people are its greatest strength and the driving force behind the Companys continued growth and success. The Company is committed to creating a supportive, inclusive, and empowering work environment that promotes both personal and professional development. Through comprehensive HR initiatives, INEL strives to attract and retain highly capable individuals while fostering a culture of continuous learning and collaboration. The Companys focus remains on building a motivated and future-ready workforce by investing in training, development programs, and career advancement opportunities.

As of 31st Mar 2025, INEL proudly employed 2,315 ch, individuals across various functions.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

INEL is deeply committed to building a sustainable future while delivering meaningful economic impact. With a proactive CSR Committee in place, the company has crafted a well-defined CSR Policy that guides its efforts and aligns with the vision of the Board of Directors. In the reporting year, INEL contributed 115.10 Lakhs towards transformative CSR initiatives, targeting critical areas such as education, rural upliftment, healthcare, and sanitation. The Companys goal is to create lasting, positive change in the communities it engages with, thereby strengthening its role as a dependable, purpose-driven partner in social progress.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has established a robust internal control system covering business processes, operations, financial reporting, fraud prevention, and compliance with applicable laws and regulations. INELs audit function provides reasonable assurance regarding the effectiveness and efficiency of operations, safeguarding of assets, accuracy of financial records and reporting, and adherence to regulatory requirements. To enhance oversight and real-time monitoring, the Company utilizes an ERP system that strengthens analysis, control, and compliance through integrated tools. Regular internal audits and inspections ensure that responsibilities are effectively discharged. The Audit Committee conducts periodic evaluations of the performance of both statutory and internal auditors. It also reviews the adequacy and effectiveness of the internal control framework and recommends enhancements in response to evolving business needs.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis section that describe the Companys objectives, expectations, or make predictions may be forward-looking within the meaning of applicable laws and regulations. These forward-looking statements by the Company are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward-looking statements based on any subsequent developments, information, or events. Thus, the Companys actual performance/results could differ from projected estimates made in the forward-looking statements. Discussion on the Companys operation outcomes and financial condition should be read together with the audited, consolidated financial statements and notes to these statements as included in the Annual Report.