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Exciting Times Ahead For The Indian Automobile Industry
The auto industry is expected to be in the fast lane this festive season
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The Indian automobile industry constitutes almost 6.5 per cent of India's GDP and 35 per cent of manufacturing GDP (2021-22) and is a leading employment provider. The industry attracted Foreign Direct Investment (FDI) equity inflow worth USD 32.84 billion between April 2000-March 2022, accounting for 6 per cent of the total equity FDI during the period.
The Indian passenger car market was valued at USD 32.5 billion in 2021, and it is expected to reach a value of USD 55 billion by 2027, with a CAGR of ~9 per cent.
The global semiconductor situation is improving leading to positive sentiment in the sector. To keep up with the evolving demand, most auto manufacturers are investing heavily in various segments of the industry in recent times.
The domestic passenger vehicles segment, with OEMs (Original Equipment Manufacturers), continuously launching new models - especially in the compact SUV segment - is growing and expected to sustain the demand. The rise of EVs (Electric Vehicles) is also a growth driver pushing sales in the segment.
The automobile industry was heavily affected by the pandemic with OEMs registering negative growth in sales of vehicles during FY20-21. However, the segment has seen a rapid recovery post-pandemic due to strong demand from consumers.
2016-17 (# units)
2017-18 (# units)
2018-19 (# units)
2019-20 (# units)
2020-21 (# units)
2021-22 (# units)
Table 1: Pre-pandemic vs post-pandemic sales in the passenger vehicles segment in India
The increase in production of passenger vehicles shows a high trust of OEMs in the Indian market with produced units touching 36,50,698 for 2021-22. The domestic sales of passenger vehicles dipped almost 18 per cent in 2019-2020 to 27,73,519 and remained stagnant for the following year. The recovery in sales is seen in 2021-22 with domestic sales touching 30,69,499 units with an expectation to reach pre-pandemic levels by 2022-23. Export trends are yet to show a full recovery to pre-pandemic levels with 5,77,875 units in 2021-22 as opposed to 6,76,192 units in 2018-19.
August 2021 (# units)
August 2022 (# units)
Table 2: Car sales of prominent passenger vehicle manufacturers in India show a growing sales trend
Passenger vehicle sales continue to grow as a surge in demand due to the festive season has kicked in, led by strong demand for SUVs as well as a pull towards personal mobility post-Covid-19. August witnessed top players such as Maruti, Hyundai, Mahindra & Mahindra, and Tata Motors report stellar growth in dealer deliveries. With the beginning of the festive season with Onam and Ganesh Chaturthi, the market is now moving towards the more widely celebrated festivals of Navratri and Diwali, prompting companies to stock up on inventory.
The festive seasons usually bring in as much as 25-30 per cent of annual sales. To make the situation even more lucrative for automobile manufacturers, this year, the festive season is spread across many months and is likely to keep the spirits high for a much longer duration. This is bound to impact sales positively.
Passenger vehicles’ registrations jumped by 41 per cent in August compared to the pre-Covid baseline. It is expected to be a bumper festive season for the Indian passenger vehicle market with about 1.3 million people likely to drive home their dream cars during the August-November period - which accounts for the key festivities - generating a turnover of more than Rs 1 lakh crore for the industry.
This will be 20 per cent higher than the previous year for the same time period. Not only is it expected to be a record in terms of volume, but it will also lead to a swift recovery in the profitability of passenger vehicles manufacturers and take it closer to pre-Covid levels due to a boost from higher sales of top-end trims and a softening of commodity prices. The waiting periods in the next few months are also expected to go down due to the enhanced availability of semiconductor chips.
The passenger vehicle segment is here to stay and is showing signs of gradual recovery. The onset of the festive season is expected to further increase sales of passenger vehicles and the Indian automobile industry promises exciting times ahead.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.