RACL Geartech Ltd Management Discussions

Global Economy in FY 2024–25: A Brief Detailed Note

The global economy witnessed modest yet uneven growth of around 2.7%, marked by persistent macroeconomic uncertainties, geopolitical tensions, and evolving trade dynamics. After a prolonged period of slowdown brought by COVID-19 pandemic, major economies like U.S., Europe, and Japan demonstrated tentative signs of stabilization with a sluggish growth of 1.5-2%. The recovery was supported by easing inflation, improved consumer confidence, and a moderate rebound in investment. In the European Union, the economy returned to positive growth territory after a period of stagnation, while the unemployment rate declined to 5.9%, indicating gradual labour market improvement.

The United States economy maintained a relatively stronger performance, aided by resilient consumer spending, a robust labour market, and continued fiscal support. However, tighter monetary policy to control inflation kept growth moderated, and trade frictions, particularly with China, continued to influence global supply chains. On the other hand emerging markets such as India, Indonesia, and Vietnam played a pivotal role in global economic resilience as they outperformed with 5-7% growth driven by strong domestic demand, manufacturing expansion and foreign investment. While Chinas growth slowed due to its ongoing property sector crisis and declining domestic consumption, India stood out as the fastest-growing major economy, supported by infrastructure spending, manufacturing expansion, and a demographic location. Other developing nations, like Argentina, Turkey, and Egypt remained grappled in double-digit inflation. Geopolitical conflicts such as the ongoing war in Ukraine and heightened tensions in West Asia disrupted energy markets and key shipping routes. It brought volatility in oil prices and fuelled food insecurity in vulnerable regions. Meanwhile, escalating U.S.-China trade tensions pushed multinational corporations to relocate supply chains to politically aligned countries like India, Vietnam, and Mexico emerging as alternative manufacturing bases. This prompted policymakers at Central banks worldwide to maintain restrictive monetary policies and delay major rate cuts. Global debt recorded highest in the year, surpassing $315 trillion with low income countries like Pakistan, Ethiopia, and Ghana struggling with debt defaults, forcing increased IMF and World Bank bailouts. During the end of FY 2024, a renewed U.S.-China trade war intensified as both nations imposed reciprocal tariffs on critical sectors like semiconductors, electric vehicles, and renewable energy components.

This disrupted global supply chains further, pushing manufacturing costs higher and delaying recovery in export-dependent economies. The European Union and ASEAN nations faced collateral damage, with trade volumes shrinking by an estimated 3-5% in early FY2026. While countries like India, Mexico, and Vietnam benefited from supply chain diversification, the overall impact on global GDP growth was negative, with projections revised downward by 0.4-0.6% for FY2026.

On a positive note, quick advancements in AI transformed industries such as finance, healthcare and logistics via productivity boos while displacing jobs in Customer Service and Content Creation sectors. We saw rapid move in green energy transition causing major surge in investments in solar, wind and electric vehicles. In summary, FY 2024–25 was a year of cautious optimism for the global economy. The momentum heading into FY 2026 will largely depend on policy continuity, geopolitical stability, and the ability of economies to balance growth with fiscal and monetary discipline.

The automobile industry is currently navigating a period of heightened volatility and uncertainty, driven by tariff and non-tariff variances that impact supply chains, input costs and market access. These disruptions are further intensified by ongoing geopolitical tensions, including the Russia-Ukraine conflict and instability in the Middle East, which have led to fluctuating raw material and energy prices. Within this complex environment, the industry is witnessing divergent trends the internal combustion engine (ICE) vehicle segment continues to grow, supported by robust demand in various markets, while electric vehicles (EVs), particularly in the commuter segment, are experiencing rapid adoption driven by policy support, technological advancements, and changing consumer preferences. This dual growth trajectory, coupled with external macroeconomic pressures, underscores the need for agility, resilience, and forward-looking investment across the value chain.

The Indian economy in the financial year (FY) 2024–25 performed well, maintaining its position as one of the fastest-growing major economies in the world. Despite global challenges like high inflation in some countries and slow growth in Europe and China, Indias economy grew at around 6.5% to 7%, supported by strong domestic demand, government reforms, and increased investments in infrastructure. The countrys large population, rising middle class, and digital transformation were key factors driving this growth. One of the biggest contributors to Indias economic growth post the COVID-19 pandemic was the manufacturing sector. Government initiatives like "Make in India" and Production-Linked Incentive (PLI) schemes continued to boost local manufacturing in electronics, automobiles, and pharmaceuticals. Many global companies have now set up factories in India, reducing dependence on imports and creating jobs.

The services sector, including IT, finance, and tourism, also grew rapidly. India remained a top destination for IT outsourcing with companies expanding in artificial intelligence (AI), cloud computing, and digital services. Agriculture, the backbone of nearly half of Indias workforce, performed better due to good monsoon rains and government support. Schemes like direct cash transfers to farmers, crop insurance, and better irrigation facilities helped increase farm incomes. Higher rural demand boosted sales of consumer goods, two-wheelers, and tractors, supporting overall economic growth. Inflation, which had been a concern in previous years, was brought under better control this fiscal year.

The Reserve Bank of India (RBI) kept interest rates stable to balance growth and price stability. Lower inflation (around 4–5%) helped common people afford daily necessities while encouraging businesses to invest. The banking sector remained strong, with increased loans for homes, vehicles, and small businesses, indicating growing consumer confidence. Infrastructure development remained on priority for the government. Projects like new highways, railways, airports, and smart cities improved connectivity and reduced business costs.

The Gati Shakti plan envisioned by the government helped integrate road, rail, and port networks for faster movement of goods. Investments in renewable energy (solar, wind, and green hydrogen) reduced Indias dependence on expensive oil imports and created new job opportunities. Foreign investments continued to flow into India as global companies saw it as a stable and growing market. Additionally, the government eased business rules, improved tax policies, and promoted startups to attract more investors. Strong initiatives by the Government helped digital economy expand rapidly, with Unified Payments Interface (UPI) and e-commerce transforming how people shop and pay.

However, challenges remained, such as unemployment, especially among youth, and the need for more skilled workers in new-age industries. Global economic slowdowns and rising oil prices also impacted Indias growth. The government addressed these issues through policies that encouraged job creation, skill development, and self-employment schemes like Startup India. In conclusion, the Indian economy in FY 2024–25 performed strongly, driven by manufacturing, services, agriculture, and digital transformation. While global risks existed, Indias focus on infrastructure, reforms, and domestic demand helped maintain steady growth. With these trends, India moved closer to its goal of becoming the worlds third-largest economy and achieving a $5 trillion GDP in the coming years.

In FY2025, the global automobile and auto ancillary industries showed strong growth, driven by rising demand for vehicles, especially electric cars (EVs), and improved supply chains after years of disruptions. Car sales increased worldwide, with emerging markets like India and China leading the way, while developed markets focused on electric and hybrid vehicles due to stricter environmental rules. The auto ancillary sector, which supplies parts to car manufacturers, benefited from this growth, particularly in EV components like batteries, motors, and lightweight materials, as companies invested heavily in new technologies to meet automakers needs. Supply chains stabilized compared to previous years, reducing delays in production and delivery, though higher costs for raw materials like steel and aluminium, along with rising logistics expenses, put pressure on profit margins, forcing firms to cut costs and improve efficiency. The automobile industry saw major shifts, with traditional carmakers and new EV companies competing fiercely, while governments in regions like North America and Europe offered incentives to boost green vehicle adoption. Asia remained the largest market, with China and India driving sales, while the U.S. and Europe saw steady growth in premium and electric vehicles. Challenges included economic uncertainties, trade tensions, and the need for continuous innovation, pushing smaller players to merge or adopt advanced technologies like AI and automation to stay competitive. The auto ancillary sector also faced demands for smarter, more connected vehicle parts, leading to increased investment in research and development. Looking ahead to FY2026, both industries are expected to grow further, supported by the global shift to EVs, better technology, and stronger supply chains, with companies focusing on sustainability and digital transformation to meet future demands. Overall, FY2025 was a year of recovery and progress for the automobile and auto ancillary sectors, marked by higher sales, technological advancements, and adaptation to a changing market.

During the FY2025, Indias automobile and auto ancillary sectors demonstrated robust growth, driven by strong domestic demand, government support, and a global shift toward electric vehicles (EVs). The automobile industry saw a significant rise in sales across segments, with passenger vehicles (PVs) and two-wheelers leading the recovery as consumer confidence improved and financing options expanded.

The commercial vehicle (CV) segment also grew, supported by infrastructure development and increased freight movement. A key highlight was the rapid adoption of EVs, fueled by government incentives like the FAME-II scheme, state subsidies, and growing consumer awareness, leading to higher sales of electric two-wheelers and cars, with major automakers launching new models to capture this expanding market. EV sales grew by 40-45% compared to the previous year. About 1.5 million EVs were sold, with electric two-wheelers leading at nearly 65% of total sales, followed by electric cars (25%) and electric three-wheelers (10%).

The auto ancillary industry, which supplies components to domestic and global manufacturers, benefited from this growth, especially in EV-related parts such as batteries, motors, and charging infrastructure, while traditional suppliers adapted by diversifying into electric and electronic components. Exports of vehicles and auto parts also increased, with India strengthening its position as a manufacturing hub for cost-effective, high-quality components, particularly in markets like Europe, North America, and Southeast Asia. However, challenges such as rising input costs, semiconductor shortages in early FY2025, and fluctuating raw material prices impacted profit margins, pushing companies to focus on localization, operational efficiency, and supply chain resilience.

The governments Production-Linked Incentive (PLI) scheme for advanced automotive technologies attracted investments in local manufacturing and R&D, helping the industry transition to cleaner and smarter mobility solutions. Rural demand played a crucial role, with improved agricultural income driving sales of entry-level cars and two-wheelers, while urban markets saw trends shifting to premium segment with higher sales of SUVs and feature-rich vehicles. Looking ahead, the industry is prepared for sustained growth in FY2026, supported by favourable policies, infrastructure development, and increasing EV adoption, though global economic uncertainties and competition from cheaper imports remain key concerns. Overall, FY2025 was a year of strong recovery and transformation for Indias automobile and auto ancillary sectors, marked by innovation, export growth, and a gradual shift toward sustainable mobility.

The Indian auto parts industry saw steady growth in FY2025, with total business increasing by 12-15% to reach about $70 billion. This growth came from good demand in Indias vehicle market and more exports to other countries. Sales to Indian car and bike makers went up as vehicle sales improved, while replacement part sales stayed stable. Foreign sales grew by 10-12% to over $20 billion, mainly to America and Europe, with engine and electrical parts being popular exports. Companies maintained decent profits (14-16%) by controlling costs and benefiting from stable material prices in the second half of the year. Electric vehicle parts became important, making up nearly 20% of total sales as companies made more batteries and electric motor parts. Some early-year problems with computer chips affected production, but companies managed their stock better later. Government incentives helped bring in new investments of Rs 25,000-30,000 crore for better technology and local manufacturing. Though loan interest rates were higher, companies had enough money from their operations (about 18-20% of sales) to pay debts and expand. The industry ended FY2025 in a careful but hopeful position, ready for future opportunities in new vehicle technologies and global business.

The move toward more localized production in Indias auto component industry grew stronger in FY 2025, supported by cost-saving goals, efforts to reduce supply chain risks, and government policies encouraging local manufacturing. Carmakers, especially in the passenger and utility vehicle segments, increased their focus on domestic sourcing to cut down on imports, shorten delivery times, and meet local content rules under various government programs. For auto parts makers, this shift meant higher sales and better profits, particularly for key components like engine parts, drivetrain systems, infotainment units, safety electronics, and advanced driver-assistance systems (ADAS). The push for localization also opened new opportunities for Tier 1 and Tier 2 suppliers skilled in tooling, custom design, and just-in-time delivery. These suppliers became crucial to carmakers plans to develop affordable, high-quality vehicles for both local and export markets. Indian automakers took the lead in boosting local value addition and improving supplier capabilities. Their focus on building strong supply chains, along with frequent new model launches and upgrades, kept demand steady for component makers. The growth of hybrid and electric vehicles with locally made platforms further increased the need for precision parts and digital components. Additionally, policies under the Automotive Mission Plan (AMP) pushed suppliers to improve quality and meet global standards, helping them join international supply chains. The combination of strong demand from automakers and localization incentives has strengthened Indias auto parts industry, making it more self-sufficient and competitive worldwide.

The Indian government introduced new policies in FY2024-25 to support the auto ancillary industry, which makes parts for vehicles. These policies aim to boost local manufacturing, create jobs, and reduce dependence on imports. One key policy is the Production Linked Incentive (PLI) scheme, which gives financial rewards to companies that increase production of auto parts in India. The government has also enhanced funding under the PLI scheme and the Automotive Mission Plan, helping businesses invest in new technology and infrastructure. This support encourages companies to expand operations and hire more workers. Another important step is the duty exemptions for capital goods used in making EV batteries. By reducing import taxes on machinery and equipment, the government has lowered production costs for electric vehicle parts. This helps local manufacturers compete with cheaper imports and supports Indias shift toward cleaner mobility. To attract foreign investment, the government has introduced FDI-friendly policies, including new treaties with countries like Uzbekistan. These agreements promote joint ventures and technology transfers, bringing advanced manufacturing techniques to India. As a result, global companies are setting up factories here, creating more jobs and boosting exports.

The lower taxes on raw materials like steel and aluminium have also helped small and medium businesses by cutting production costs. The focus on EV parts, such as batteries and motors, has encouraged new investments in this sector. However, some smaller firms still struggle with high competition and the cost of upgrading to new technology. Overall, these policies have strengthened the auto ancillary industry, increased exports, and positioned India as a key player in the global supply chain. While progress is strong, more support for small businesses will ensure wider benefits from these reforms.

The Indian auto component industry faced several challenges and risks in FY2024-25 that made business difficult. One big problem was export headwinds. Many companies depend on sales to Europe and the US, but demand from these markets went down. This hurt their overall performance because fewer orders meant lower revenue. Another challenge was commodity price volatility. The prices of important materials like steel, copper, and aluminium kept going up and down. Since these are key inputs for making auto parts, the changing costs made it hard for companies to plan their budgets and set stable prices.

The ongoing trade wars between major economies (US & China) also created problems for the industry. Higher tariffs (import taxes) on auto parts in key markets like the US and Europe made Indian exports more expensive. At the same time, some countries started sourcing components locally instead of importing, reducing demand for Indian products. This trade tension added to the existing export challenges, making it harder for companies to rely on international sales for growth.

Forex sensitivity was also a major issue. The value of the Indian rupee (INR) kept changing against the US dollar (USD) and the Euro (EUR). For companies that export auto parts, this was a big problem. If the rupee became weaker, importing raw materials became more expensive. But if the rupee became stronger, their exports became less competitive in global markets. These currency fluctuations made it difficult to manage costs and profits. Additionally, regulatory changes added pressure. Governments in India and other countries introduced stricter safety, emission, and quality standards. To follow these rules, companies had to keep investing in research and development (R&D) and quality improvement. This meant spending more money and resources, which increased costs. Smaller firms, in particular, found it tough to keep up with these changes. All these challenges together created a tough year for the auto component industry. Falling exports, unstable material prices, currency risks, and strict regulations made it hard to grow and stay profitable. To deal with these problems, companies needed to find new markets, control costs, manage currency risks better, and keep improving their products. Only by adapting quickly could they remain competitive in a difficult global market.

In FY2024-25, the Indian auto component industry planned big investments to grow and modernize. Companies expected to spend around 25,000-30,000 crore on key areas like increasing production capacity, making parts for electric vehicles (EVs), and improving digital technologies. This spending showed the industrys focus on preparing for future demands, especially as more people shift to EVs. A major positive sign was Teslas talks to enter India, along with renewed foreign direct investment (FDI) interest. These developments boosted confidence in the sector, attracting more global players and creating new business opportunities.

To stay competitive, many Indian auto component firms formed strategic partnerships and joint ventures (JVs). These collaborations helped them adopt advanced technologies like hydrogen fuel cells, lightweight materials, and smart, data-driven manufacturing. Hydrogen fuel cells are important for clean energy vehicles, while lightweight materials improve fuel efficiency. Data-driven manufacturing uses digital tools to make production faster and more efficient. By working with global tech leaders, Indian companies aimed to upgrade their skills and supply high-quality components for next-generation vehicles. The industrys investment plans also focused on digitization to improve efficiency. Automation, Artificial Intelligence (AI), and the Internet of Things (IoT) were key areas where companies spent money to make factories smarter and reduce waste. These technologies help in better monitoring of production lines, predictive maintenance, and cost savings. Additionally, with stricter emission norms worldwide, firms invested in research and development (R&D) to create eco-friendly and high-performance auto parts. Overall, the Indian auto component industry in FY2024-25 was in a phase of major transformation. Big investments, global partnerships, and a focus on new technologies showed a strong push towards innovation and sustainability. With Teslas potential entry and growing FDI, the sector looked forward to more growth and job creation. By adopting advanced manufacturing techniques and cleaner technologies, Indian suppliers aimed to become key players in the global automotive market.

The Indian auto component industry is entering FY2025-26 with cautious optimism. In the near term, positive factors like the 8th Pay Commissions implementation, possible tax relief and a normal monsoon forecast are expected to boost consumer spending. This will likely increase demand for entry-level cars and two-wheelers, especially in rural areas where rising incomes will drive sales. The industry expects steady growth as more people in smaller towns and villages buy vehicles. However, challenges like high raw material costs and global economic uncertainty remain, so companies are staying careful with their investments. Exciting developments are happening as global automakers like Tesla prepare to enter the Indian market with great enthusiasm. At the same time, existing manufacturers are expanding their product lines to meet growing demand. This increased activity will create new opportunities for local auto component suppliers. As more companies set up production in India, the demand for high-quality parts will rise, benefiting the entire supply chain. In the long term, the industry has bigger goals. India wants to become a major global player in auto components, targeting US$ 80 billion in exports by 2026. To achieve this, the sector must grow by 4–5% every year. Companies will focus on new technologies, sustainability and improving competitiveness to meet global standards. Electric vehicles (EVs) will play a key role, as more automakers shift to cleaner technologies. This means auto component suppliers must invest in EV parts like batteries, motors and charging systems. Digitalization will also transform the industry, with smart factories, data analytics and automation making production faster and more efficient. The future of the Indian auto component industry depends on adapting to these changes. Companies that invest in R&D, adopt sustainable practices, and upgrade technology will lead the market. Partnerships with global firms and government support will also help the sector grow. While challenges like competition and changing regulations exist, the industry is moving in the right direction. With rising domestic demand, new players like Tesla entering the market, and a push for higher exports, FY2025-26 could be a turning point for India to become a top auto component hub in the world.

The Indian auto component industry experienced a year of adjustment in FY2024-25, with growth slowing to 5-7% after strong performance in the previous year due to weaker exports to key markets like the US and Europe and reduced domestic demand for commercial vehicles. However, the electric vehicle (EV) components segment showed remarkable growth, supported by government policies, expanding charging infrastructure, and increasing environmental awareness, with India producing 100,000 electric cars and 900,000 electric two-wheelers in 2024. The overall industry turnover reached 6.14 lakh crore in FY 2024, growing 9.8% from the previous year, with exports rising to $21.2 billion and the first half of FY 2025 seeing an 11% growth to 3.32 lakh crore. Indias position as the worlds fastest-growing major economy helped drive domestic vehicle sales to record levels, including 43 lakh passenger vehicles and strong two-wheeler sales growth of 9.1% fueled by rural demand and new models. While car and bike parts manufacturers performed well, tractor parts makers saw mixed results, and commercial vehicle parts makers benefited from infrastructure projects. Government initiatives like duty exemptions on EV materials, tax-free import of 35 items, and the PLI scheme attracting 45,016 crore in investments provided significant support. Although traditional petrol/diesel vehicles still dominated with 20 million two-wheelers and 5 million cars produced in FY 2025, EV adoption grew rapidly, with total sales reaching 1.97 million units (16.9% growth), led by electric two-wheelers at 21.2% growth. Companies invested 25,000-30,000 crore in new factories, technology upgrades, and EV component production, with digitally advanced firms handling challenges better. Looking ahead to FY2025-26, the industry expects improved performance due to factors like the 8th Pay Commission implementation, potential tax relief, and good monsoon forecasts that should boost rural demand for entry-level vehicles. With India aiming for $80 billion in auto component exports by 2026, the industry is focusing on technological advancement, sustainability, and quality improvement to enhance global competitiveness. The entry of global players like Tesla and expansion by existing manufacturers presents new opportunities for local suppliers. Despite FY2024-25s challenges, the industry demonstrated resilience and adaptability, positioning itself for future growth by embracing EV transition, digital transformation, and innovation, supported by favorable government policies and strong domestic demand fundamentals that will drive Indias mobility transformation in coming years.

RACL Geartech Limited is a top automotive parts supplier in India and is known around the world. The company supplies auto parts as a Tier 1 provider to major vehicle manufacturers and key system makers globally. It has a strong presence in Europe, Asia-Pacific, and North America. In the financial year 2024-25, the companys total revenue was 427.28 Crore. Out of this, 290.97 Crore came from exports, 92.97 Crore from domestic sales, and 43.35 Crore from other sources. Exports made up 68% of total sales, while domestic sales contributed 32%. Compared to the previous year, revenue grew by 1%, but EBITDA fell by 8.02%, and Profit Before Tax dropped by 36.04%. RACL has a loyal customer base that trusts the company as a dependable supplier. The company is known for its engineering skills and ability to design and improve products efficiently. It delivers high-quality products on time, every time. RACL holds a strong position in the competitive gear market, focusing on specialized products for this segment. To stay ahead, the company is working on upgrading technology, improving skills, enhancing quality, and developing its workforce. These efforts will help RACL meet future challenges, including the growing demand for electric mobility solutions. The company remains committed to strengthening its market position and serving its customers with excellence.