The automotive industry is looking to maintain its growth momentum in 2023

PTI, December 18, 2022, 11:37 am IST

India’s auto industry is embarking on a journey with hopes of sustained growth in 2023 and greater adoption of clean technologies amid the hidden speed breakers of rising interest rates and cost increases due to new emission and safety standards, after seeing a comeback from the COVID-induced downturn this year.

While the passenger vehicle (PV) segment is expected to see record sales in 2022 despite the lingering effects of supply chain constraints and semiconductor shortages, the two-wheeler space has yet to experienced sustained momentum in sales after suffering for most of the year.

According to industry estimates, PV sales may reach around 38,000 units this year.

The three-wheeler and utility vehicle segments also saw good growth in 2022 compared to 2021, but off a weak base from last year, which was affected by the second wave of COVID-19 and manufacturers will have keen to keep the momentum going for the new year.

According to industry watchers, 2023 will also see an acceleration in the adoption of electric vehicles, which already started to take hold in 2022, especially in the two-wheeler segment. For potential passenger vehicle buyers, 2023 may not be the best news as vehicle prices are expected to rise next year as companies prepare to comply with tougher emission standards that come into effect on April 1, 2023.

Many manufacturers like Maruti Suzuki, Tata Motors and Hyundai have already announced plans to raise prices from January next year. Also, rising interest rates and the not so bright global economic situation and its impact on India in the coming days are some of the factors keeping the industry in cautious mode.

“Rising prices always have some negative impact on sales. But we still don’t know how much prices will increase and what will happen to the cost of inputs and foreign exchange. These are uncertainties that will always be there,” Maruti Suzuki India Chairman RC Bhargava told PTI. He said, however, that the domestic auto industry has revived in recent months and semiconductor shortages will also ease in 2023.

“Putting all of this together, our estimate would be that next year would probably be a reasonably good year for the industry. I think we should do at least as well if not better than 2022,” Bhargava said. The country’s major automaker will continue to bring in cars, especially more SUV models, to meet customer demand, he noted.

Chief executive of industry body Society of Indian Automobile Manufacturers (SIAM), Rajesh Menon, said the passenger vehicle industry passed the second phase of fuel efficiency regulations this year from April. 2022 and is preparing to meet the strict second phase of BS VI emission standards from April 2023. Discussions are also underway to implement various new safety regulations for passenger vehicles in 2023, it said. -he declares.

“The implementation of these new regulations could increase the cost of vehicles and this, coupled with global recessionary trends, is concerning for the year 2023,” Menon pointed out. Also, with rising inflation, the RBI has been forced to raise repo rates a few times this year and this rise in interest rates may impact demand trends for all segments of the market. vehicles, he warned. Although the overall figures from January to November 2022 showed appreciable growth for all segments, including passenger vehicles, this was achieved against the backdrop of a low base in 2021, which was affected by the second wave of COVID-19, Menon said.

Mahindra & Mahindra (M&M) (automotive and agriculture) executive director Rajesh Jejurikar, however, remained confident that the industry will maintain the current sales momentum. “At M&M all models will be BS-VI.2 compliant in accordance with government deadlines and the price/cost difference may not be as significant as it was for the transition from BS-IV to BS -VI,” he claimed. .

While acknowledging that the semiconductor shortage continues to be dynamic and that rising input costs and interest rates are other challenges the industry is managing, he remains optimistic that the momentum will continue. sales next year. “Apart from these headwinds, we are looking forward to an action-packed 2023 thanks to huge customer demand,” Jejurikar said.

Managing Director of Tata Motors – Passenger Vehicles and Electric Vehicles, Shailesh Chandra, pointed out that it would be interesting to see the impact of macroeconomic factors such as inflationary pressure on the industry. “I would say the growth is going to be high this year, but next year on a very high basis, with the interaction of so many tailwinds and headwinds, it would still be growth, but how much of that growth would be on the high base, it will show,” he noted.

Kia India Sales Director Myung-sik Sohn said tougher emissions standards are positive for the industry’s collective efforts to minimize vehicle pollution. However, they will surely have an impact on vehicle prices. “You will see price increases across all OEMs, but given the current strong demand for cars, we expect little impact on sales momentum,” he noted.

The car dealers’ body, the Federation of Automobile Dealers Associations (FADA), noted that the PV segment continues to hold a strong order book for several models, which is expected to continue for a few months. “OEMs (Original Equipment Manufacturers) must continue to generate excitement through new launches, product upgrades, etc. We expect production to return to normal soon and we can bring back to normal the long waiting period,” FADA President Manish said. said Raj Singhania.

The long waiting period and flexible consumer behavior during the festive season helped the industry see movement in the segment, but once the balance between supply and demand is restored, slow patterns will be a challenge for the industry, Singhania said.

Commenting on the outlook for sales growth, ICRA Vice President and Corporate Ratings Sector Head Rohan Kanwar Gupta said the rating agency expects sector demand to remain stable and volumes increase by 6-9% in FY2024. “Capital expenditure for OEMs is estimated to remain high (estimated expenditure of Rs 650 billion in FY2023-2025, with OEMs also budgeting for a substantial expenditure on new product development, including the development of capabilities/platforms for electric vehicles,” he added.

Elaborating on the luxury car segment, outgoing Managing Director and CEO of Mercedes-Benz India, Martin Schwenk, said: “We have to see how the overall economic climate is there. Overall, the confidence is there that 2023 should be a good year. The world is dynamic but at the moment we are starting with positive momentum for next year.

Regarding the two-wheeler segment, Menon said that an increase in interest rates can impact demand trends for all vehicle segments, but the government has also increased the premium for two-wheelers. long-term insurance, which has a specific impact on the two-wheeler segment. “Demand for two-wheelers has remained weak in recent years, with consumer sentiment impacted by factors such as income uncertainty during the pandemic period and a persistent rise in two-wheeler prices driven by both by regulatory changes and inflationary pressures,” said ICRA’s Gupta. .

Add a Comment

Your email address will not be published. Required fields are marked *