Domestic auto sales to remain flat in FY22, forecasts ICRA

Domestic auto sales in India will remain flat in the current financial year, claims research agency ICRA. The agency also claims that the slow auto sales in FY22 will be because of muted demand for two-wheelers and supply chain constraints. This will be the third consecutive year when the auto sales in the Indian auto market will be slow.

The two-wheeler industry witnessed a challenging Fy22, recording subdued demand across categories, due to the increased cost of ownership resulting from increased fuel prices as well as price hikes undertaken by manufacturers owing to rising input costs. Demand from the rural and semi-urban sector, which accounts for a significant chunk of the motorcycles sales, remained dampened in FY22. Not only the 200 cc and above segments, but entry-level categories too witnessed dampened demand.

The forecast claims that the two-wheeler segment could record a sales decline of up to six per cent YoY in FY22 compared to previous estimates that projected up to 14 per cent growth. The passenger vehicle segment too would record a lower growth rate of up to 12 per cent YoY in the current fiscal compared to the agency's previous estimate of up to 18 per cent.

ICRA also claimed that domestic auto sales volume is likely to either be flat or decline to the extent of four per cent YoY as compared to its previous expectation of 12-15 per cent YoY growth. This change from the previous estimate would largely be driven by a tepid demand for two-wheelers, which account for more than 80 per cent of the total industry volumes.

Also, reduced disposable income of consumers of entry-level vehicles, weak demand from the rural sector, as well as deferral of re-opening of colleges and offices amid the third wave of Covid-19 pandemic too are influencing the slump in demand.

There are other factors too that are playing key roles in this dampened sales picture. These include lost production due to semi-conductor shortages, especially in the passenger vehicle segment.

ICRA also claims that the fourth quarter of the current financial year is likely to be at par or better than the previous quarter, on account of slowly easing of concerns regarding chip shortages and good harvest income. However, it is likely to be offset by dampened consumer sentiments amid the third covid wave.

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