Production constraints, chip availability issues, El Nino, expensive auto loans, product price hikes and general inflation are expected to keep growth under check for the automotive and tractor segments in next financial year even as they close FY23 with record volumes.
The high base of the current year will also make the FY24 growth numbers look muted. However, as next year is also a pre-election year, market watchers are predicting growth for specific segments like two-wheelers though it won’t be a pan-India growth.
Speaking to FE, Shashank Srivastava, senior executive officer, marketing and sales, Maruti Suzuki India, said, “Some red flags might impact demand in FY24. El Nino would affect the rural demand and buyer sentiment. Auto loan rates have gone up between 180 to 250 basis points. Consumers will also respond to price hikes by manufacturers.”
In rural markets, passenger vehicles, comprising cars, SUVs and vans, make up more than 27-28% of the total industry’s volumes. Any impact on crop produce and commodities can likely lead to inflationary pressure on the spending power of buyers, said industry experts.
Maruti Suzuki, the country’s largest carmaker, said on Thursday that it will hike product prices in April, making it twice in four months. This will have a domino effect on the industry where similar hikes will be done by other automakers.
“The industry growth is expected to be in the range of 5-7% in FY24 which would mean volumes of 4.05-4.1 million. This is on the back of expected sales of 3.89 million this year (FY23), a growth of 26% over 3.07 million (of FY22),” Srivastava added.
Tata Motors, India’s third-largest carmaker, admitted to Nomura about the stress on demand which has started to reflect in the PV segment, depicted by rising inventories at the dealer’s end. Tata Motors will also be constrained on capacity since its new capacity will likely come on stream only a year later.
About 10% of the planned output by Maruti Suzuki was lost to shortages in supplies of semiconductors. During the December quarter, the company lost production of 46,000-47,000 cars due to semiconductor shortages. “The chip shortage impact continues. It appears that March (output) loss will be much higher than January and February. The problem will persist in a few more quarters,” Srivastava added.
Mahindra & Mahindra and Hyundai, the other two big carmakers, are also operating at peak capacity and will be supply constrained in FY24.
However, with general elections due to be held in FY25, the Centre is expected to push for some mega projects, especially targeting the infrastructure and agriculture sectors. This is expected to bring some respite from the El Nino crisis, believe market experts.
Yogesh Mathur, operating officer – sales and marketing, Honda Motorcycle and Scooter India, said, “In Uttar Pradesh, 100cc has a share of 60% and the state is seeing significant spending in the infrastructure segment. Likewise, the government’s spending at the national level is also going to be very good. This would augur well for budget two-wheeler models.”
Crisil is expecting domestic tractor sales volumes growth halving to 4-6% in FY24 from a high base, created by a compounded average growth rate of 10% since FY20 on the back of successive normal monsoons.
