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Shifting Gears

The demand for sub-10 lakh rupees passenger cars is picking up fast as life returns to normal post-Covid. But there are many inherent challenges facing the automotive manufacturers

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The last five years have been a one hell of a bumpy ride for India’s domestic automotive sector, completely devoid of any charm and cheer. Passenger vehicle sales over the years have largely been a tale of setbacks for the carmakers. The outbreak of the corona virus only added to the misery in the last two years. 

But now, there is a faint but positive hope, especially for the four-wheeler makers. For the financial year ended 31 March 2022, the auto industry notched up sales of nearly 3 million passenger cars, which was more  than 13 per cent higher compared to 2020-21. Back then, 2.71 million units were sold. 

In actual terms, the passenger car market in India is back to the level of 2016-17. It’s not just the overall numbers that are giving positive vibes to the domestic carmakers. There are some other bright spots as well. For instance, Maruti Suzuki, India’s largest carmaker sold 1.36 million passenger vehicles during FY22, or 3 per cent higher than last fiscal. The silver lining here is that Maruti exported 2.38 lakh units in FY22 -- the highest so far in any financial year. 

The newly appointed managing director and chief executive officer for Maruti Suzuki India (MSIL), Hisashi Takeuchi said: “These export numbers are a reflection of India’s manufacturing potential and the acceptance of India manufactured vehicles all over the world.” And he is right. 

Overall, the domestic wholesale volumes also showed a 6 per cent growth on a sequential basis. “In March 2022, domestic wholesale volumes at about 320,000 units represented about 6 per cent growth on a sequential basis and only a marginal 0.4 per cent decline on y-o-y basis,” Rohan Kanwar Gupta, Vice President & Sector Head - Corporate Ratings, ICRA said. For the fiscal year 2021-22, the overall growth in passenger vehicle sales stood at 13 per cent compared to the previous fiscal. 

And this happened despite some serious supply chain bottlenecks including constraints on chip availability. Maruti’s rival and the second largest carmaker Hyundai Motors India posted a growth of 2 per cent in domestic sales to 4.71 lakh units. Overall, it clocked a 6 per cent growth in sales for FY22 selling over 6.10 lakh units. Hyundai’s exports jumped by 23 per cent for the entire fiscal.

SUVs Pushing Sales

Riding on the success of their sports utility vehicles (SUV), carmakers Tata Motors and Mahindra & Mahindra performed very well in FY22. Tata Motors’ FY22 sales, including those of its electric vehicles, grew 67 per cent compared to the previous fiscal year. It touched a record 3.70 lakh units. The company’s EV production was 353 per cent higher than the previous year at 19,106 units. 

The March sales numbers for Tata Motors were also excellent, posting a 43 per cent growth over the year ago sales numbers for March. On market challenges Tata Motors seems cautious. Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility said the company will continue to monitor the evolving situation closely. “We are refining our agile, multipronged approach to continue to fulfil customer orders,” he added.

On its part, M&M said it clocked wholesale dispatches of SUVs at 27,603 units in March, 65 per cent higher than the same month last year. “Demand continues to be strong, even as we remain watchful of the global supply chain and take appropriate action as required,” Veejay Nakra, Chief Executive Officer, Automotive Division, M&M said. Of course, semiconductor shortages coupled with the ongoing war between Russia and Ukraine and the rising fuel prices may act as points of major concern in the coming months. 

The industry, however, is keeping a close eye on all developments. “We expect supply chain problems to persist this quarter,” Shashank Srivastava, ED, MSIL said. Maruti numbers also throw up some interesting facts. Without counting the SUV segment, MSIL has a market share of over 65 per cent. But taken together with SUVs, it comes down to 43.4 per cent (used to be above 50 per cent for several years before). However, since the SUV segment is now almost 40 per cent of the overall market and growing, the overall share of the hatchback segment has come down to around 38 per cent.

Price Rise?

It is no secret that in order to tackle the massive challenges, all carmakers kept increasing the prices, sometimes each successive month. This started happening from the middle of 2021 when the demand was rock bottom, the input prices were on the upswing and the carmakers were operating at around half their capacity. 

The situation started to improve from festive period but at a snail’s pace. Is there another price hike on the anvil? “The possibility is there. That is also one of the last measures. Fortunately, things are looking up and there are some exciting new offerings in the pipeline. Let us keep our fingers crossed,” said a senior marketing executive of a leading carmaker. We hope that the bright sparks will continue for now and the challenges would be aptly tackled by our carmakers.

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Magazine 23 April 2022 automobiles