Companies like Airbus (EADSF) and Rolls-Royce (RYCEF) are among a growing number of aerospace manufacturers looking to India for more advanced parts and sourcing to offset supply chain pressures.
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“India is the best solution to supply chain challenges,” Huw Morgan, senior vice president for aerospace procurement at Rolls-Royce, told Reuters reporters at an industry event. He said traditional supply chains are unable to support engine order growth of 20%, which will see Rolls-Royce double sourcing from India over the next five years. “India is … the best cost market,” added Morgan.
Airbus also wants to double sourcing from India, which currently contributes about €1 billion annually to the airplane manufacturer’s supply chain, according to the same Reuters report.
With global demand for aircraft soaring the aerospace industry, traditionally dominated by a handful of companies, has been beset by supply chain problems, strikes and labor shortages since 2020 at least, and India may help to fill the gap.
AIA Launches to Push for More Orders
As part of the shift, India’s nascent aerospace sector has formed the new Aerospace India Association (AIA) advocacy group, which is not to be confused with the U.S. Aerospace Industries Association, also known by the acronym AIA. India is projected to be the world’s third largest aviation market by 2030, but exports are worth just $2 billion annually at present, or about 1% of the global aerospace supply chain.
Last week the government of India held talks with leaders from the burgeoning industry on strengthening domestic production and enhancing India’s global competitiveness in the field of aircraft component manufacturing.
“It is imperative that we build a comprehensive ecosystem—encompassing skill development, design, manufacturing, maintenance, certification, and knowledge sharing—through close collaboration among our ministries and departments with industry,” said Civil Aviation Minister Ram Mohan Naidu Kinjarapu. India is set to become both a major hub for civil aviation and a center for aircraft component manufacturing, he added.
Deals Flying Both Ways
The likes of Airbus have traditionally won substantial business from India, however growth in Indian manufacturing industry suggests the relationship is becoming more equal. In 2024 Airbus awarded its second aircraft door contract to an Indian supplier within a year.
Air India in December disclosed a 100 Airbus aircraft order and services contract. The airline’s total orderbook for Airbus aircraft now stands at 344 with six A350-900s having already been delivered. These orders are also helping to fuel broader growth across India’s aviation industry, according to Air India.
Is Rolls-Royce a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating on RYCEF, based on four Buys and three Holds. The average RYCEF price target of $8.56 implies about 9% upside from current levels. The stock also trades under the tickers $RYCEY and $GB:RR.
