Rating agency ICRA said on Tuesday that the passenger vehicle (PV) segment in India is expected to grow by 25% in 2021-22, as the semiconductor shortage will continue.
“The Indian passenger vehicle (PV) industry is expected to register a spectacular growth of 22-25% for FY 2022, after a 2-4% growth in FY 2021,” the agency said, adding that growth would be lower mainly Based on Q1 FY2021 due to industry slowdown and epidemic effects.
Additionally, there is potential for improvement in economic activity, improvement in consumer sentiment, improvement in rural incomes (affected by the epidemic), healthy crop cycle and many government initiatives.
Ashish Modani, VP, ICRA said, “Demand remains strong throughout the festive season due to both retail and wholesale dispatch recovery. “The industry saw the best volumes during H2 FY2021, driven primarily by inventory recoaking and pent-up demand,” he said.
“In addition, as demand sentiments improve, the discounts offered during the lean phase decreased substantially. The outlook for the industry remains stable,” said Mr. Modani.
In the case of a spurt in growth, the industry may surpass the peak before FY19 in FY19, ICRA said in a statement. The agency said the semiconductor shortage was a significant challenge in Q1 FY2022 as the automotive industry accounted for 12% of global semiconductor demand. It has been said that supply disruptions as well as strong recoveries are expected at some manufacturing locations, this has led to chip shortage issues and some OEMs have experienced an impact on production volumes.
“Although some normalcy is expected to occur from June 2021, the volume of the industry will be affected during Q1 Q12022. India’s dependence on foreign suppliers for semiconductor is likely to continue for the next 3-5 years.
The research firm noted that industry capacity utilization has fluctuated from 50–55% in FY2015 to sub-50% in FY2011 and 55–60% in FY2012.
“As to capex, the total investment outlay of the industry is estimated at 28,000-33,000 crores during FY 2012-2012-2023; incremental investment will be mainly for new product / platforms and emission / safety compliance. PLI Scheme Investment can be accelerated on the basis of the incentive structure under. VW Group is expected to invest W6,000 crore in FY15, mainly towards product development.
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