Gabriel India’s Growth in Shock Absorbers & EV Components

Introduction

As the automotive industry undergoes significant change, Gabriel India is emerging as a key player in this evolving landscape. Specializing in shock absorbers and ride control systems, Gabriel India is deeply embedded in the auto component sector, serving major OEMs (Original Equipment Manufacturers) and adapting to new industry trends. This article explores Gabriel India’s pivotal role within the broader auto component industry, examines its strategic initiatives and market positioning, and highlights how the company is navigating the shift towards electric vehicles and enhanced safety features. Dive in to understand how Gabriel India is driving growth and innovation in a rapidly changing market.

Indian Auto Industry

The Indian auto component industry is a significant contributor to the Indian economy, generating billions in revenue. Sales to OEMs (Original Equipment Manufacturers) referring to car companies that purchase the auto components were the largest category at USD 59.3 billion. 

Key export markets for Indian auto components include North America (32%), Europe (31%), and Asia (26%). Imports were nearly equal to exports, amounting to USD 20.3 billion. Including domestic aftermarket (companies selling parts and services to repair existing vehicles) sales, the total turnover reached USD 69.7 billion.

Revenue breakdown

• By category, engine components hold the largest share at 25%. Drive transmission and steering, along with suspension and braking, each account for 16%, ensuring smooth operation and vehicle control. Body, chassis, and body-in-white (BIW) make up 12%, providing the vehicle’s framework and foundation. The remaining revenue comes from electricals & electronics, interiors, and other components.
• Passenger vehicles (PVs), including private cars and SUVs, dominate with 44% of the market, followed by two-wheelers at 18% and light commercial vehicles (LCVs) at 15%. The remainder is made up of M&HCVs, tractors, three-wheelers, and construction vehicles.

Auto Component Industry – In a sweet spot

Over the past decade, the Indian auto component industry has evolved from a regional player to a key participant in the global automotive supply chain. Several factors drive this transformation:

1. De-Risking Strategy of Global OEMs

Global automakers (OEMs) are adopting de-risking strategies to reduce reliance on a single source, particularly China, for car parts. According to the EIU Business Environment Rankings, key ASEAN economies and India are well-positioned to benefit from this supply chain diversification.

2. Content boom

The Indian auto component industry is witnessing a ‘content boom,’ characterized by the increasing complexity and value of components supplied to OEMs. Consumers across all vehicle segments seek premium features and functionalities, driving demand for advanced components.

New government safety regulations, such as mandatory crash tests, airbags, and BS6 norms, are increasing the average selling price (ASP) of vehicles. To comply, automakers must incorporate advanced components, benefitting the component industry.

The transition to electric vehicles (EVs) necessitates a new set of specialized components, presenting significant growth opportunities for auto component manufacturers.

‘Make in India’ Initiative

The Indian government is promoting the ‘Make in India’ initiative in the auto sector, offering financial incentives to boost domestic manufacturing. The Production Linked Incentive (PLI) scheme, with a budget of ₹25,938 crore (USD 3.4 billion), supports both automakers and auto component manufacturers.

The Indian auto ancillary sector is well-positioned for future growth. By capitalizing on its strengths, addressing its challenges, and adapting to the evolving global market, the Indian auto ancillary sector can solidify its position as a major player on the world stage.

Gabriel India: Powering the Future

Gabriel India is a prominent player in the shock absorber/ride control domain, serving all leading domestic OEMs. The company derives 61% of its revenue from the 2W/3W segment, 25% from passenger vehicles, and the rest from commercial vehicles (CV) and railways. It generates 86% of its revenue from direct sales to OEMs, 11% from the replacement market, and 3% from exports.

Gabriel India Limited (GIL) derives approximately 64% of its passenger vehicle (PV) sales from the SUV subsegment, which holds a 35% domestic market share and is experiencing strong demand. To enhance its presence in the high-demand SUV market and align with the premiumization trend, GIL has formed a joint venture with Inalfa, the world’s second-largest sunroof manufacturer, to produce sunroof systems and related components for OEMs in India. This strategic move towards premium products like sunroofs is positive for GIL’s growth.

GIL began sunroof production in December 2023, with an output of 10,000 units per month. With Hyundai and Kia as clients, and a new Kia model expected in Q4 FY25, the business is poised for rapid growth. GIL plans to add a new production line by the end of FY25, with a capex of ₹40 crore, increasing total capacity to 0.2 million units annually. At full capacity, the sunroof business is expected to generate ₹400 crore in revenue in FY26, with targeted double-digit EBITDA margins.

The company holds a leading ~70% market share in the electric two-wheeler (E-2W) sector, providing a strong competitive edge that supports sustained growth amidst the government’s push for EVs. Its components feature in popular EV models like the Ola S1 Pro, TVS iQube, and Ather 450X. Additionally, the company is actively exploring new product applications, such as e-bike suspension and solar dampers, which could fuel future growth.

It has recently secured an order from Siemens to supply components for electric locomotives being produced for Indian Railways. Although the volumes are modest, the railway business positively contributes to margins.

The company has recovered from the COVID-19 downturn, with revenue growing at a CAGR of 10.4% since 2019. EPS has shown even better growth, at 13.5% compounded annually during the same period. Operating and net profit margins have improved due to efficiency gains, enhancing the return on equity. The company maintains very low debt levels.

Potential revenue expansion from new product lines, double-digit margin guidance from management, and consistent institutional buying have been driving momentum in the stock price.

Closing Thoughts

Gabriel India is leading the way in the evolving automotive industry with its expertise in shock absorbers and ride control systems. The company’s strategic initiatives, such as its venture into sunroof production and its strong presence in the electric two-wheeler sector, highlight its commitment to innovation and growth. With steady financial performance and minimal debt, Gabriel India is well-positioned to capitalize on the shift to electric vehicles and the support from government policies like the ‘Make in India’ initiative. As the industry evolves, Gabriel India’s focus on diversification and technological advancement ensures it remains a key player in the auto component market.

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Windmill Capital Team: Windmill Capital Private Limited is a SEBI registered research analyst (Regn. No. INH200007645) based in Bengaluru at No 51 Le Parc Richmonde, Richmond Road, Shanthala Nagar, Bangalore, Karnataka – 560025 creating Thematic & Quantamental curated stock/ETF portfolios. Data analysis is the heart and soul behind our portfolio construction & with 50+ offerings, we have something for everyone. CIN of the company is U74999KA2020PTC132398. For more information and disclosures, visit our disclosures page here.