India auto sales seen rising 7-9% in FY24: Passenger & commercial vehicles to drive demand
- There is a consensus amongst analysts that FY24 would ring in high single-digit growth for the Indian automobile as well as auto component sectors despite export headwinds.
- CareEdge expects two-wheeler and three-wheeler sales volumes to cross pre-pandemic levels in the next financial year.
- Price hikes due to BS6 Phase 2 norms and inflationary pressures, El Niño and its impact on the rural sentiments will be amongst the key factors to watch out for in FY24.
AdvertisementThe Indian auto industry is expected to register sales volume growth of 7-9% in FY24, building on the robust momentum of FY23, according to a report by CareEdge. Passenger vehicle (PV) and commercial vehicle (CV) segments are both expected to drive growth in the next financial year, with the latter especially benefiting from the government’s thrust on capital expenditure.
Despite a challenging global environment in FY23, Indian auto companies made the most of the first disruption-free year after the Covid-19 pandemic. Overall, domestic sales rose 21% year-on-year in the 11 months of FY23 when compared to the same period in FY22.
Urban demand, festive sales and pre-buying due to the BS6 Phase 2 transition helped boost the overall volumes – once again driven by passenger vehicles and commercial vehicles – despite supply chain challenges and a semiconductor chip shortage, according to the research firm.
Exports, however, registered a decline of 14% in the 11 months of FY23, largely on account of weakness in foreign markets.
Analysts expect high single-digit growth in FY24
There is a consensus amongst analysts that FY24 would ring in high single-digit growth for the Indian automobile as well as auto component sectors despite export headwinds.
“The growth momentum is expected to continue after the robust demand seen in FY23, supported by favourable demand sentiments and various government initiatives for rural and urban development,” said Tanvi Shah, director, CareEdge.
According to a report by ratings agency ICRA, the auto components industry is also expected to witness 5% to 8% growth in revenue in FY24, primarily due to strong demand from the domestic market.
“Over the long term, opportunities in the electric vehicle market, premiumisation of vehicles, a focus on localisation, improved export potential, and changes in regulatory norms will result in healthy growth for auto component suppliers,” ICRA said.
The ratings agency underlined that the rise in mobility due to the reopening of schools and offices, improved freight movement and purchases being pushed back due to elevated inflation should boost sales in FY24.
Advertisement“We believe, in the coming months, with a favourable base for both PVs and 2-wheelers till H1 FY24, maintaining current retail volume levels would help both the segments deliver 10%+ growth in FY24E,” said a report by ICICI Securities.
2W and 3W sales expected to rise to pre-pandemic levels
Sales in the two-wheeler (2W) segment have stagnated in the past three months due to factors like continued price hikes, hot inflation and weakness in rural demand.
While the threat of El Niño still looms large and could play spoilsport for two-wheeler sales by affecting crop output and hence incomes in rural areas –traditionally a large market for 2Ws, analysts at CareEdge remain optimistic about not just 2Ws but also three-wheeler sales going into FY24. The ratings agency expects sales volumes in these two segments to cross pre-pandemic levels in the next financial year.
What to watch for in FY24 – steep price hikes, El Niño and rural sentiments
AdvertisementAnalysts also underlined factors which could have a significant impact on the auto industry’s performance in the upcoming financial year, ranging from price hikes to weather.
The implementation of BS6 Phase 2 norms from April 1, 2023 is expected to drive steep price hikes – leading automakers like
The adherence to new emission norms, in addition to inflationary pressures, could lead to more price hikes down the road and “potentially affect demand”, according to CareEdge.
El Niño could lead to a drier year and further dampen rural sentiments, which could delay the much-anticipated recovery in the two-wheeler segment and derail tractor sales.
However, overall, the Indian auto industry looks well placed heading into FY24 – the passenger and commercial vehicle segments are expected to retain their momentum, while the two- and three-wheeler sales are expected to inch back to pre-pandemic levels.
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