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The automobile industry is looking to the Government’s strategic focus on mobility in Budget 2024, to help in continuing with the overall growth momentum for the sector with domestic wholesales of passenger vehicles in India maintaining a steady upward momentum, logging dispatches of 3,93,074 units in January 2024 and a growth of 14 per cent year-on-year. This is the highest ever sales in the month according to SIAM. Uttar Pradesh posted the highest vehicle sales in the Oct-Dec Q3FY24, followed by Maharashtra, Gujarat and Tamil Nadu, a SIAM survey shows. According to rating agency ICRA, aided by a preference for personal mobility and stable semiconductor supplies, PV industry volumes are estimated to reach an all-time high of 4.1 million units in FY2024, representing a growth of 6-9 per cent over FY2023.

Two-wheelers surged 26 per cent yoy in January 2024, with sales of 14,95,183 units, while three-wheeler sales grew by 9 per cent at 53,537 units. The total production of passenger vehicles, three-wheelers, two-wheelers and quadricycle in January 2024 was 23,28,329 units. Vinod Aggarwal, President, SIAM credits the resilience in PV sales to positive consumer sentiments and the two-wheeler segment’s good growth in January to rural market’s steady recovery. “Three-wheeler segment has also performed better,” notes Aggarwal.

Though the commercial vehicle sector did not grow in January 2024, the SIAM president sees a likely good offtake in the next 2 months of this financial year. Aggarwal factors into this industry optimism, the Government’s strategic focus on strengthening the electric vehicle ecosystem, especially the charging infra and public transport mobility in Budget 2024. “Passenger vehicles and three-wheelers continue to post their highest ever sales till date, in FY 24, for the period April to January,” says Rajesh Menon, Director General, SIAM. As per the SIAM report, Maharashtra posted highest Passenger Vehicle Sales in Q3-FY-24 in the country, followed by Uttar Pradesh, Gujarat and Karnataka. Uttar Pradesh also posted highest two wheelers sales in Q3-FY-24 in the country, followed by Maharashtra and Madhya Pradesh. Maharashtra also posted the highest CV sales in Q3-FY-24 in the country, followed by Uttar Pradesh, Gujarat and Karnataka.

On the retail front too, the PV segment achieved a new all-time high in January, with showrooms dispatching 3,93,250 vehicles and surpassing the previous record set in November 2023, according to the Federation of Automobile Dealers Associations (FADA). The last month saw strong growth across all vehicle categories, with the overall auto retail market expanding by 15 per cent, led by 15 per cent growth in 2W as demand remains steady, fuelled by continued strength in the rural market. This segment is likely to benefit from the government’s good crop production estimates and continued support for the rural economy. There was 37 per cent increase in 3W sales, 13 per cent in PVs, 21 per cent in tractors. However, CV retail sales were at a modest 0.1 per cent.

The dealers’ body is banking on the Government’s optimistic crop production estimates and continued support measures which are expected to boost the rural economy, potentially leading to even higher tractor demand and increased sales of entry-level 2Ws in rural areas. “Despite supply shortages, increased interest in electric vehicles highlights evolving consumer preferences within this segment,” says FADA president Manish Raj Singhania.

While dealers anticipate growth, FADA accepts the need to take stock of prevailing challenges that require close navigation. Persistent supply bottlenecks for specific high-demand models present a risk factor for consistent growth across 2W, CV and PV segments, highlighting the need for OEM optimization of production lines. At the same time, fluctuating market liquidity and the potential for tighter financing in the CV sector require a focus on consumer financing solutions to support overall sales, notes Singhania.
The concern reflects in the ICRA report which suggests automotive sector growth momentum to moderate in FY2025 after robust growth trends across segments in FY2023, aided by a low base, recovery in economic activities and increased mobility.

The pace of growth has moderated in FY2024, and the trend is expected to continue in FY2025 as well, suggests ICRA with growth trends across segments expected to remain at varied levels. However, OEMs are expected to continue with investments towards development of EVs platforms, as electrification gathers pace besides continued focus towards introducing new vehicles and capacity expansion plans.

There are silver linings to the story, notes Shamsher Dewan, Senior Vice President & Group Head – Corporate Ratings, ICRA. This is visible in the EV segment wherein due to mitigating range anxiety and offer of superior mileage, EV penetration is improving at a healthy pace, aided by enhanced customer acceptance. “The Government’s thrust on the development of the EV ecosystem continued in the Union Budget and the continuation of FAME II subsidies post-March 2024 with allocation of Rs 2,670 crore for FY2024-25) is also likely to support adoption and raises hopes of continuation of subsidy support going forward, according to Dewan.

Spurred by Government support in the form of subsidies, enhanced awareness, and increasing product launches, the electric vehicle (EV) segment has seen a material upturn in prospects over the past two years. Given the healthy subsidies available in the electric two-wheeler (e2w) segment, it accounted for the bulk of the total EV sales (excluding the e-rickshaw segment) till date. Even as hybrids are viewed as an intermediate step towards acceptance of EVs in the passenger vehicle segment, mitigating range anxiety and offering superior mileage, EV penetration is improving at a healthy pace, aided by enhanced customer acceptance. Amid the ongoing electrification transition, OEMs are expected to incur significant investments in the development of ground-up electric vehicle platforms and enhance manufacturing capacities.

The Government’s thrust on the development of the EV ecosystem continued in the Union Budget, with an enhanced focus on improving the charging infrastructure, is expected to help reduce range anxiety and promote EV adoption. The continuation of FAME II subsidies post-March 2024 (allocation of Rs. 2,670 crore for FY2024-25) is also likely to support adoption and raises hopes of continuation of subsidy support going forward.
The budgeted FAME II outlay for FY2025 represents the residual allocation under the scheme, which forms part of the Rs. 10,000 crore initial allocation; timely rollout of new subsidy scheme remains key in accelerating electrification transition.”



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