The automotive industry anticipates growth of six to nine per cent in FY2024, according to rating agency Icra, which attributes it to consistent industry demand. However, the sector is still on the lookout for possible supply chain hiccups and the effects of rising ownership costs on retail.
In December 2023, the domestic wholesale volumes of the automobile industry demonstrated resilience, maintaining strength at 2.9 lakh units, showcasing a nine year-over-year (YoY) growth of approximately four per cent. While this signifies a positive trend, the off-take witnessed a sequential decline due to original equipment manufacturers (OEMs) scaling back production towards the end of the calendar year.
The industry’s performance in the past few months was buoyed by inventory build-up for the festive season.
Further, the report stated that the retail sales, on the other hand, remained at healthy levels, registering a commendable three per cent YoY growth in December 2023. The recently concluded festive season witnessed a YoY growth of around six per cent, despite facing a high base.
However, despite robust retail figures, the industry grappled with elevated inventory levels ranging between 55-58 days by the end of December 2023, according to estimates from the Federation of Automobile Dealers Association (FADA).
Despite operating at high-capacity utilisation levels, original equipment manufacturers are grappling with semiconductor chip shortages, impacting their production capacities Maruti Suzuki India (MSIL) has persistently communicated a shortage of electronic components, constraining its production to a certain extent.
The report additionally analysed the export volumes for December 2023, which showed stability and a notable sequential increase of almost 12 per cent. However, given the lack of US dollars in some African markets and the impending inflationary pressures that may affect demand.
